Tribunal rules in favor of assessee on club and PF/ESI contributions

The tribunal ruled in favor of the assessee on both issues. The disallowance of club expenditure was overturned based on consistency, as the assessee had consistently incurred such expenses for business purposes. The disallowance of PF & ESI contribution was set aside since the contributions were made before the income tax return filing due date, and the tribunal held that the amendment was not applicable to the assessment year in question. The tribunal emphasized the prospective nature of the Finance Act 2021 amendment, applying from AY 2021-22 onwards.

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Issues:
1. Disallowance of club expenditure claimed by the assessee.
2. Disallowance made in respect of PF & ESI in respect employee's contribution.

Issue 1: Disallowance of Club Expenditure
The appeal was against the disallowance of club expenditure claimed by the assessee in its return of income. The CPC disallowed the expenditure without issuing any notice, which the Ld. AR argued was not permissible under the law. The Ld. CIT(A) confirmed the disallowance based on the auditor's report flagging the expenditure as personal. However, the Ld. AR contended that the expenditure was incurred for the business purpose and should be allowed. The tribunal found that the assessee had consistently incurred such expenditure for business purposes, and the department had allowed it in previous years. Applying the rule of consistency, the tribunal allowed the claim of the assessee and directed the deletion of the addition.

Issue 2: Disallowance of PF & ESI Contribution
The second ground of appeal was against the disallowance made in respect of PF & ESI contribution in employee's contribution. The Ld. AR argued that since the assessee had remitted the contribution before filing the return of income, no disallowance was warranted. The CIT(A) referred to an amendment brought in by the Finance Act 2021, considering it retrospective, which the Ld. AR argued was only prospective. The tribunal cited a previous case where it was held that the amendment was prospective and would apply from AY 2021-22 onwards. As the assessee had remitted the dues before the due date of filing the return, the tribunal allowed the appeal, directing the AO to delete the addition and holding that the amendment was not applicable to the assessment year under consideration.

In conclusion, the tribunal allowed both grounds of appeal, ruling in favor of the assessee in both instances. The disallowance of club expenditure was overturned based on the rule of consistency, and the disallowance of PF & ESI contribution was set aside as the contribution was made before the due date of filing the return of income. The tribunal emphasized the prospective nature of the amendment brought in by the Finance Act 2021 and its applicability from AY 2021-22 onwards.

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