×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal in ITA No.3539/Mum/2016 for A.Y.2003-04 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-12, Mumbai in appeal No.CIT(A)-12/IT 6/DCIT 6(3)(1)/2009-10 dated 29/02/2016 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 27/02/2006 by the ld. Dy. Commissioner of Income-Tax 5(2), (hereinafter referred to as ld. AO).
2. The first issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance of payment made towards club membership in the sum of Rs 6,61,000/- in the facts and circumstances of the case.
2.1. We have heard the rival submissions. It is not in dispute that the assessee had incurred a sum of Rs 6,61,000/- towards corporate membership of the Managing Director (MD) of the assessee company as a one time payment. Admittedly the membership is in the name of the assessee company wherein the MD is permitted to use the facilities of the club. We find that the details of the same were duly furnished before the ld AO which are enclosed in page 195 of the Paper Book and again before the ld CITA which are enclosed in Pages 15 to 17, 26 to 28, 204 to 205, 208 and 211 of the Paper Book filed before us.We find that this issue is decided in favour of the assessee by the co-ordinate bench of Kolkata Tribunal in the case of Ankit Metal & Power Ltd vs Addl CIT in ITA No. 1233 & 1479/Kol/2014 dated 6.9.2017wherein it was held as under:-
“5.2. With regard to revenue's appeal, we find from the paper book of the assessee that no fresh evidences were filed by the assessee before the ld CITA and hence there is no violation of Rule 46A of the IT Rules. We find that on merits, the issue is covered by the decision of Hon'ble Delhi High Court in the case of CIT vs Samtel Colour Limited reported in (2010) 326 ITR 425 (Del) and Hon'ble Supreme Court in the case of CIT vs United Glass Manufacturing Company Ltd in Civil Appeal No. 30146/2008 dated 13.9.2012 (SC), wherein it was held that the subscription and admission fee paid towards corporate membership to club was an expenditure incurred wholly and exclusively for the purposes of the business of the assessee and not towards capital account as it only facilitated the smooth and efficient running of a business enterprise and did not add to the profit-earning apparatus of a business enterprise. Accordingly, the Ground No. 3 raised by the revenue is dismissed.”
2.2. We find that the issue is also covered by the decision of Hon’ble Jurisdictional High Court in the case of Otis Elevator Co. (India) Ltd vs CIT reported in (1992) 195 ITR 682 (Bom). Respectfully following the said decisions, we hold that the expenses incurred for corporate membership of club in the sum of Rs 6,61,000/- is incurred wholly and exclusively for the purpose of business of the assessee company and is squarely allowable as deduction. Accordingly, the Ground No.1 raised by the assessee is allowed.
3. The next issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the disallowance of interest paid on borrowings in the sum of Rs 37,85,915/- in the facts and circumstances of the case.
3.1. We have heard the rival submissions. We find that the assessee is engaged in the business of IT Enabled Transactio Processing Services and had filed its return of income for the Asst Year 2003-04 on 28.11.2003 declaring total loss of Rs 11,86,90,280/-. The ld AO observed that the assessee had deb ted a sum of Rs 60,03,000/- on account of interestexpenses. The ld AO observed that assessee had unsecured loan of Rs 70,00,00,000/- in its Balance Sheet on which interest was paid. The assessee had made investments in the following subsidiary and mutual funds :-
Customer Assets India Pvt Ltd - Rs 95,95,23,000/-
Prudential ICICI Liquid Plan - Rs 15,14,55,000/-
Prudential ICICI Flexible Income Plan - Rs 7,92,82,000/-
Birla Sun Life Units - Rs 7,10,81,000/-
3.2. The ld AO felt that these investments had nothing to do with the business of the assessee activity of the assessee. He observed that on