MAHINDRA LIFESPACE DEVELOPERS LTD,MUMBAI vs. ACIT CIR 6(3), MUMBAI

The present appeal has been filed by the assessee against the order dated 24.12.2008 passed by the Commissioner of Income Tax (Appeals)-VI, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2005-06. In fact, the appeal has already been heard and decided by virtue of order dated 19.10.2016 but the issues no. 7 & 8 in were not adjudicated, therefore, the assessee filed the Miscellaneous Application Bearing No.155/M/2017 and by considering the Miscellaneous application, the bench recalled the order to the extent

In brief, the facts have already been described while deciding the present appeal by virtue of order dated 19.10.2016, therefore, there is no need to repeat the same. The following issues which are at the nos. of 7 & 8 are required to be adjudicated. “7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in confirming disallowance of Rs.34,04,138/- as per the provision of section 40A(2)(a)&(b).

On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming disallowance of club membership expenses of Rs.1,50,000/- as capital expenditure.” ISSUE NO. 7:- 3. Under this issue the assessee has challenged the confirmation of disallowance of Rs.34,04,138/- as per the provision of Section 40A(2)(a) & (b) of the Act. The contention of the assessee is that the assessee purchased the 22 acres of land in consideration of Rs.8.80 crores. The assessee submitted the details of stamp duty paid in respect of 21.15 acres. The AO misunderstood that the consideration paid for Rs.21.15 acres as the consideration was paid for 22 acres, therefore, the Assessing Officer disallowed the excess consideration u/s 40A(2)(b) of the Act. The action of the AO was upheld by the CIT(A). The contention of the Ld. Representative of the assessee is ITA. No.1899/M/2009 A.Y.2005-06 that the documents were not furnished before the AO and before the CIT(A). The assessee wanted to furnish the lease-deed dated 31.03.2006 for 21.15 acre and lease-deed dated 18.06.2008 for 0.85 acre which lies at page no. 1 to 33 of the paper book. The assessee wanted to produce these documents before the AO as additional evidence. Since the evidence seems to be relevant to adjudicate the matter of controversy, therefore, we are of the view that the issue is required to be examined and verified at the end of the Assessing Officer in the interest of justice, therefore, we admit the additional evidence on record and set aside the finding of the CIT(A) on this issue and restored the matter before the AO to consider the issue afresh in the light of the evidence adduced by the assessee. Before passing the order, it is incumbent upon the AO to provide an opportunity of being heard to the assessee in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO 8:- 4. Under this issue the assessee has challenged the confirmation of the disallowance of club membership expenses to the tune of Rs.1,50,000/-. The AO disallowed the claim of the assessee by holding that the expenditure was personal in nature and also capital in nature. The CIT(A) confirmed the same. The assessee paid the expenses towards facility of the club to the tune of Rs.25,457/- which ITA. No.1899/M/2009 A.Y.2005-06 was not disputed by Assessing Officer. The assessee paid to the tune of Rs.15,00,000/- for 10 years and amortized the claim to the extent of 1/10th in year i.e. an amount of Rs.1,50,000/-. It is to be seen whether the club facilities have been used for business purpose or not. However, at the time of argument, the Ld. Representative of the assessee has placed reliance upon the law settled in case of United Glass Mfg. Co. Ltd. (Civil Appeal No.6449/2012) and the decision of Mumbai Tribunal in the case of Bayer Crop Science (ITA. 7978/M/2010). The payment to the club is not in dispute and so far as the claim to the extent of 1,50,000/- in the year under consideration is also not in dispute but it is required to be seen whether the said amount was paid for business purpose or not. The law relied by the assessee also speaks about the allowance of the claim when the assessee book the club facility for business purpose, therefore, in the said circumstances, we are of the view that it is required to be examined by the AO that facility was being used by business purpose or not. Therefore, the finding of the CIT(A) is hereby ordered to be set aside and the issue is hereby restored to the AO to examine the matter afresh in view of the said above observation in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue. Accordingly, this issue is decided in favour of the assessee against the revenue.