VESUVIUS INDIA LIMITED,KOLKATA vs. JCIT(OSD), CIRCLE-11(1), KOLKATA

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ITA 228/KOL/2023Status: DisposedITAT Kolkata30 November 2023AY 2016-175 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that corporate membership expenses are pure business expenditures allowable under Section 37 of the Income Tax Act. Since a company is a juridical person, there is no element of personal nature in such expenditures.

What were the facts?

The assessee debited club expenses in its profit and loss account for the assessment years 2016-17 and 2017-18. The Assessing Officer disallowed these expenses, which was confirmed by the CIT(Appeals). The assessee argued that these were corporate membership expenses and thus purely for business purposes.

What were the issues?

Whether club expenses incurred by a company for corporate memberships are allowable as business expenditure.

Which sections of the Income-tax Act were involved?

Section 37

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(6)Show list

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Income Tax Appellate Tribunal, ‘C’ BENCH, KOLKATA

Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Rajesh Kumar

Per Rajpal Yadav, Vice-President (KZ):- The present two appeals are directed at the instance of assessee against the separate orders of ld. Commissioner of & 229/KOL/2023 Assessment years: 2016-2017 & 2017-2018 Vesuvius India Limited Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 20.01.2023 and 23.01.2023 passed for A.Y. 2016-17 and 2017-18.

2.

The only issue involved in both the years are that the ld. CIT(Appeals) has erred in confirming the disallowance of Rs.9,05,214/- and Rs.21,11,225/- out of Club Expenses debited by the assessee.

3.

With the assistance of ld. Representatives, we have gone through the record carefully. The assessee has filed its return of income electronically declaring income of Rs.1,20,94,47,770/- and Rs.1,51,39,45,300/- in A.Y. 2016-17 and 2017-18 respectively. The assessee has debited club expenses in both the years. These expenditures have been disallowed to the assessee. The ld. Counsel for the assessee at the outset submitted that the issue regarding disallowance of club expenses was raised in earlier years and travelled upto the Hon’ble High Court in its own case. It has been always allowed to the assessee. He placed on record copy of the Hon’ble High Court’s decision in A.Y. 2001-02 as well as copy of the ITAT orders in A.Y. 2001-02, 2006-07, 2008-09 respectively. He thereafter made reference to a large numbers of papers and contended that these are Corporate Membership. The Company is a juridical person and there is no element of personal nature in such expenditure. Therefore, these expenses ought to have not been disallowed. & 229/KOL/2023 Assessment years: 2016-2017 & 2017-2018 Vesuvius India Limited 4. On the other hand, ld. D.R. contended that apart from subscriptions, there were expenditures debited on services, namely food and braveries. Such expenditures are not being allowable to the assessee.

5.

We have duly considered the rival contentions and gone through the record carefully. We find that in a most of decisions, all Hon’ble High Courts are unanimous on their approach that Corporate Membership expenses are pure business expenditure and allowable under section 37 of the Income Tax Act. A reference to the following decision, apart from the decision rendered in the case of assessee itself in earlier year can be made:- CIT -vs- United Glass Mfg. Co. Ltd. [20121 28 taxmann.com 429 (SC) [Club membership fees is a pure business expenditure, allowable u/s 37] Pricewaterhouse Coopers Pvt. Ltd. -vs.- ACIT (ITA No. 2034/Kol/2013 dated 18-05-2016) (Kol-Trib) [Following the decision of the Hon'ble Supreme Court in CIT -vs- United Glass Mfg. Co. Ltd. (supra), the jurisdictional ITAT has allowed subscription and entrance fees paid to various clubs as business expenditure]

1.

M/s MKT Tradex Ltd vs DCIT (ITA No.l044/Kol/2016 dated 14-02- 2018) [The purpose of incurring club expenditure is to have a suitable platform for meeting people and getting advantages of meeting many people at a time to maintain old contacts and also to make new contacts. The said expenses are incurred wholly and exclusively for the purpose of business and hence, revenue in nature] Similar view has been taken in the following judgments: Associated Engg. Products -vs.- ITO (1997) 63 ITD 105 & 229/KOL/2023 Assessment years: 2016-2017 & 2017-2018 Vesuvius India Limited Eveready Industries India Ltd. -vs.- DCIT (2001) 78 ITD 175 (Kol) ACIT -vs.- Britannia Industries Ltd. (Kol - Trib) (ITA No. 1789/Kol/2008) Date of order: 31-08-2010 ITO -vs.- Marcopolo Products Private Limited (2016) 159 ITD 266 (Kol - Trib); Star Paper Mills Limited vs DCIT (I.T.A. No.l27/Kol/2021) Date of order: 26-10-2021; Otis Elevator Co. (India) Ltd. -vs- CIT (1992) 195 ITR 682 (Bom); Gujarat State Export Corporation Ltd. -vs- CIT (1994) 209 ITR 649 (Gujarat); CIT -vs.- Sundaram Industries Ltd. (1999) 240 ITR 335 (Mad).

6.

As far as the expenditure incurred on services are concerned, whether they can be termed as expenditure in personal nature or not. It is to be appreciated that a Company is a juridical person and there is no element of personal nature in such a character of a taxable entity. Hence nothing can be disallowed out of Club Expenses. We allow both the appeals and delete the disallowances.

7.

In the result, both the appeals of the assessee are allowed. Order pronounced in the open Court on 30/11/2023.

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