Club and Entrance Fees Disallowance u/s 37: ITAT Upholds CIT(A)'s Order Allowing Expenditure for MRF as Reasonable for Business [Read Order]
The AO had disallowed the claim, but CIT(A) permitted considering the company’s high turnover and regular profits
Club and Entrance Fees Disallowance
Club and Entrance Fees Disallowance
The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax (Appeals)[CIT(A)]’s order allowing MRF’s expenditure on club and entrance fees as reasonable for business under section 37 of Income Tax Act,1961.
The Revenue-appellant, challenged the order dated 31.01.2025 passed by CIT(A) for the Assessment Years (AY) 2013-14, 2015-16, and 2016-17. In this case, MRF Ltd., respondent-assessee,was engaged in manufacturing and selling automobile tyres, tubes, flaps, and other rubber products.
It filed its return for AY 2013-14 on 28.11.2013, declaring income of ₹790.92 crore. The case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS ), and the income was assessed at ₹861.76 crore on 29.12.2016 u/s 143(3) of the Act.
The Assessing Officer (AO) reopened the assessment by issuing a notice u/s 148 on 23.04.2019. After considering objections, the AO reassessed the income on 03.12.2019 u/s 147/143(3) at ₹837.18 crore by making additions for litigation provisions, depreciation on retention money, additional depreciation on retention money, and club expenses.
The assessee challenged the reassessment before the CIT(A), who granted partial relief. The Revenue appealed against the CIT(A) order before the tribunal for AYs 2013-14, 2015-16, and 2016-17.
The issue is regarding the assessee claiming club entrance fees, which the AO disallowed as not being for business purposes under section 37 of the Act.
The two member bench comprising Aby T Varkey (Judicial Member ) and Jagadish (Accountant Member) noted that the CIT(A) allowed the club and entrance fees as reasonable, following its earlier decision and considering the company’s high turnover and regular profits, and since the Departmental Representative could not show any change in facts or law, the tribunal confirmed the order and dismissed the Revenue’s appeal.
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