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Income Tax Appellate Tribunal, BANGALORE BENCHES “B”, BANGALORE
Before: Shri Chandra Poojari, AM & Shri George George K, JM
Before Shri Chandra Poojari, AM & Shri George George K, JM M/s.Gensuite Software Systems & The Commissioner of Income Services Private Limited Tax (Appeals) – 3 v. Bangalore. No.32, 2nd Main, 60 Feet Road AECS Layout, RMV 2nd Stage Bengaluru – 560 094. PAN : AAECG1738N. (Appellant) (Respondent) Appellant by : Sri.Ramakrishna, CA Respondent by : Sri.Ananda H., Addl.CIT-DR Date of Pronouncement : 03.01.2022 Date of Hearing : 29.12.2021 O R D E R
Per George George K, JM
This appeal at the instance of the assessee is directed against the CIT(A)’s order dated 31.08.2020. The relevant assessment year is 2018-2019.
The grounds raised read as follows:-
“1. The Intimation received Under Section 143(1) from the Deputy Commissioner of Income Tax-CPC Bangalore dated 15- 11-2019 disallowing Rs. 4,00,000/- being the expenditure of club entrance fee and the same is confirmed by the Humble CIT-Appeal-3 by his order dated 31-08-2020 is not only bad in law and also unjustified after the necessary explanation provided.
2. The appellant prays that the addition made under the head "Club expenditure" of Rs.4,00,000/- paid by account payee cheque to Bangalore club as entrance fee, which is paid for only providing entry into club and not for personal consumption of individuals to consider as personal expenditure and disallow Under Section 37 of the Income tax act.
M/s.Gensuite Software Systems & Services Pvt.Ltd.
The Appellant Commissioner also confirmed the addition on the ground that the same has been disclosed in the Tax Audit report in the Form 3CD, Which is a statement of details required to be complied and the CIT -Appeal has erroneously concluded that any disclosure in Form 3CD under Column 21 (a) are intended to be disallowed under section 37 of the Income Tax Act. This is an erroneous assumption concluded by the CIT Appeal. He ought to have observed that the Form says only "Disclose" and not disallow such expenditure incurred. The Appellant, for allowance of expenditure, has relied on Jurisdictional High Court (2012) 349 ITR 610 (Kar) - CIT Vs. Infosvs Technologies Ltd.Also in the case of (2019) 416 ITR 546 (Ker) CIT Vs. Apollo Tvres Ltd.has concluded in favour of the Appellant.
For these and any other additional Grounds that may be urged at the time of hearing either orally or in writing and further the appellant reserves its right to amend and revise the grounds of appeal
.”
3. Brief facts of the case are as follows: For the assessment year 2018-2019, the return of income was filed on 28.11.2019. The return of income was processed u/s 143(1) of the I.T.Act by the CPC on 15.11.2019. In the intimation issued u/s 143(1) of the I.T.Act, the CPC had made a disallowance of Rs.4 lakh claimed as membership fees of club.
4. Aggrieved, the assessee filed an appeal to the first appellate authority. The CIT(A) confirmed the view taken by the CPC. The relevant finding of the CIT(A) reads as follows:-
“6.2 The appellant has cited decisions in 416 ITR 546 Ker CIT v. Apollo Tyres Ltd. and in the case of 2012 349 ITR 610 Kar CIT v. Infosys Technologies Ltd. The decision of Apollo Tyres Ltd. could not be traced with the citation mentioned. In the case ;of Infosys Technologies Ltd, the assessee-company claimed amount paid towards subscription for acquisition of corporate membership in club as revenue expenditure but the Assessing Officer disallowed the same as capital expenditure. The Hon’ble Karnataka HC held that subscription amount paid by a company for obtaining corporate membership in a M/s.Gensuite Software Systems & Services Pvt.Ltd. club is revenue expenditure. But in the case at hand the AO has disallowed the membership fee as personal expenses and hence the decision relied upon by the appellant will not be applicable in this case.” 5. Aggrieved by the order of the CIT(A), the assessee has filed this appeal before the Tribunal. The learned Counsel for the assessee relied on the grounds raised.
The learned Departmental Representative strongly supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. The Hon’ble jurisdictional High Court in the case of CIT & Anr. v. Infosys Technologies Ltd. reported in (2012) 349 ITR 598 (Karn.) had held that the amount paid by the assessee to obtain membership in a club is a revenue expenditure. In the instant case also, the sum of Rs.4 lakh has been paid by the assessee to obtain the club membership. Therefore, following the dictum laid down by the Hon’ble jurisdictional High Court in the case of CIT & Anr. v. Infosys Technologies Ltd. (supra), we hold the same is revenue expenditure. It is ordered accordingly.