M/S. S.P. JAISWAL ESTATES PVT. LTD.,KOLKATA vs. D.C.I.T., CC - 2(4), KOLKATA, KOLKATA

Shri Sujoy Sen, Advocate appeared on behalf of the assessee and Shri Arun Kumar Meena, Addl. CIT, Sr. DR appeared on behalf of the revenue.

This appeal of the assessee is time barred by 768 days. A separate condonation of delay petition has been placed in file. Considering the averments made in the said application and in the interests of justice, we condone the delay and admit the appeal for hearing.

It was submitted by the Ld. AR that the assessee is a company, filed its return of income along with audit report for the regular assessment year. The intimation u/s. 143(1) came to be issued by the CPC, Bengaluru wherein club subscription and expenditure had been disallowed. It was the submission that an application u/s. 154 came to be filed by the assessee and in the 154 rectification the CPC, Bengaluru allowed the club expenditure of Rs.4,30,061/- but upheld the disallowance of Rs.1,15,844/- representing membership subscription. It was the submission that on appeal before the Ld. CIT(A), the Ld. CIT(A) confirmed the intimation u/s. 143(1) by holding that the adjustment permissible in 143(1) included the disallowance of expenditure incurred in audit report but not taken into account in computing the total income in the return. It was the submission that in the 154 application, the CPC having partly allowed the expenditure itself showed that the issue was a debatable one and the same should not be disallowed in an intimation u/s. 143(1) of the Act. It was further submitted that the CPC having allowed the club expenditure obviously should have appreciated that without the membership the expenditure could not have been incurred by the assessee and should have allowed the claim of expenditure of Rs.1,15,844/-. It was the prayer that the addition as confirmed by the Ld. CIT(A) may be deleted.

In reply, the Ld. Sr. DR submitted that the Ld. CIT(A) has taken into consideration the fact that the disallowance has been made out of the expenditure indicated in the audit report but not taken into account the returned income. The disallowance as made in the intimation itself is valid and the same is liable to be upheld.

We have considered the rival submissions. A perusal of the facts in the present case clearly shows that the CPC passed the order u/s. 143(1) disallowing the club expenditure. The CPC itself has passed the order u/s. 154 allowing part of the expenditure. Thus, clearly the CPC has accepted that the issue on which the disallowance has been made is a debatable issue. The CPC having allowed the club expenditure should have understood that without membership subscription there is no question of expenditure. This being so, we are of the view that the disallowance as confirmed by the Ld. CIT(A) is also unsustainable and the same stands deleted.

In the result, the appeal of the assessee stands allowed.