Relief to PNB: ITAT Allows Rs.12.62 Lakh Club Membership Fee as Business Expense u/s 37 of ITA [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) allowed the appeal of Punjab National Bank against the disallowance of Rs. 12.62 lakh paid as club membership fees, ruling the expenses as deductible business expenditure under Section 37 of the Income Tax Act,1961.

Punjab National Bank,appellant-assessee, appealed against the order passed by the Commissioner of Income Tax(Appeals) [CIT(A)] dated 30.08 .2024 for the AY 2018-19.

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The tribunal heard the arguments of both parties in detail and examined the case file. The appeal challenged the disallowance of club subscription fees paid for membership, totaling Rs. 12,62,175.

The CIT(A) had upheld the assessment’s decision to disallow the expense, noting that the Assessing Officer( AO) considered the fees paid to Mayar Health Resorts Ltd. and Taj not wholly and exclusively for business purposes. However, the AO did not provide specific reasons or detailed justification for the disallowance. The assessee contended that the clubs were used to hold business meetings with clients and that the expenses were incurred exclusively for business purposes.

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The two member bench comprising Satbeer Singh Godara (Judicial Member) and Naveen Chandra (Accountant Member) observed that although the AO failed to give precise reasons, the assessee also did not provide sufficient evidence to demonstrate that the club expenses were related to business. Despite this, the tribunal found no grounds to sustain the disallowance.

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Referring to the Supreme Court ruling in CIT vs. United Glass Mfg. Co. Ltd. (2012) which affirmed that such expenses qualify as regular business expenditure under section 37 of the Act, the ITAT ruled in favor of the assessee. Accordingly, the tribunal accepted the appeal’s ground and overturned the disallowance.

Therefore,the assessee’s appeal was allowed.

To Read the full text of the Order CLICK HERE

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