PRICEWATERHOUSECOOPERS SERVICE DELIVERY CENTER (KOLKATA) PRIVATE LIMITED,KOLKATA vs. ACIT, CIRCLE - 2(2), KOLKATA, KOLKATA

Ground no. 1 of the assessee is against the action of AO and Ld. DRP in disallowing a sum of Rs.22,08,908/- on account of entrance fees paid to Calcutta Cricket & Football Club.

Briefly stated facts as noted by the AO are as under: “It is seen from Form No.3CD that the assessee was engaged in the business activity of consulting/ support services in various fields including assurance, tax and advisory services. The assessee never explained as to how the contribution made to the clubs is linked to its business activity, rather has relied on different case laws. Even the assessee never explained as to how the citations match with its business activity. Mere citing of the case laws is not sufficient to explain the expenditure. It is duty of the assessee to establish to link of the expenditure with its business activity. As the assessee failed to discharge its onus, the expenditure is disallowed. Moreover, it is noted from the nomenclature of the expenditure that it is not a payment like subscription but an expenditure which has been paid for one time. In Pricewaterhouse Coopers Service Delivery Center (Kolkata) Pvt. Ltd., AY 2013-14 view of the above, the expenditure of Rs.22,80,908/ - is treated as capital expenditure and disallowed.

Aggrieved, the assessee preferred an appeal before the Ld. DRP, which was pleased to uphold the order of AO as under: "No interference is required with the findings of the A.O.". Hence the disallowance of Rs 22,80,908/- towards Expenditure incurred at clubs stands.”

Aggrieved by the decision of ld. DRP, the assessee is before us.

We have heard both the parties and perused the material available on record. Before us, the Ld. AR for the assessee submitted that the issue is covered in favour of the assessee company by the order of this Tribunal in its own case for AY 2012-13 [ITANo. 51/Kol/2017]. In this regard he also submitted that the captioned expenditure is incurred to run the business more efficiently. According to him, the membership of the club gives an opportunity to the directors and other employees of the company to get together with their business associates, conduct meetings and discussions with them which goes on to enhance the business prospects of the assessee company. It was brought to our notice that the Assessee since is engaged in the business of providing accounting, taxation and assurance services to its client numerous meetings have to be held and for that various executives from various customers/client has to visit the assessee company on regular basis and, therefore, the membership in the club provides an excellent platform for the directors and employees to get together with the delegates/clients which is necessary for the enhancement of business of the assessee, which, according to Ld. AR, is necessary for smooth running of the business. Hence, it was submitted that the expenditure incurred for club membership constitutes revenue expenditure. On the other hand, the Ld DR relied on the orders of the lower authorities. We note that the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for AY 2012-13 dated 15.12.2017 wherein the Tribunal vide para 8 while allowing the assessee’s appeal has observed as under:

In the result, the appeal of assessee is partly allowed.