AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 788
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....ss on unexplained forex contracts. 3. That whether on the facts and circumstances of the case the Ld. CIT(A) has justified in law as well as on the facts in directing the A.O. to delete the addition of Rs. 54,23,955/- is without any basis and in contravention to the CBDT's instruction no.03/1010 dated 23.03.2010." 3. The brief facts of the case are that the assessee is a listed company with stock exchange and engaged in the business of trading and export of tea. The assessee declared its total income of Rs. 98,55,307/- through online return on 24.09.2009. The notices under section 143(2) and 142(1) of the Act issued for scrutiny. 4. During the course of assessment proceedings the AO found that the assessee has paid Rs. 2,12,617/- for membership subscriptions for its staff in N.C. Planters Club. The AO was of the view that the said expenditure is not incidental to the business expenditure and added to the total income of the assessee. 5. Ld. CIT(A) deleted the addition by relying on orders in CITvs- Samtel Colour Ltd. and DCIT -vs- Bank of America Securities (India) (P) Ltd. of Delhi and Bombay Tribunals. 6. The ld. DR relied on AO's order regarding the ground no.1 and ld. A....
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....37 of the Act was the correct approach. This is more so in view of the Tribunal's findings that it was the assessee which nominated the employee who would avail the benefit of the corporate membership given to the assessee. 12. In the instant case, the subscription paid towards membership for a period of five years and the same is being paid annually, thus, in the light of aforesaid decision, is an expenditure incurred wholly and exclusively for the purposes of business and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprise. Applying the principle laid down above, we hold that subscription amount paid towards membership in N.L.Planters club for a period of five years is an expenditure incurred wholly and exclusively for the purposes of business of the assessee. 13. The MUMBAI 'B' BENCH of ITAT in the case of DEPUTY COMMISSIONER OF INCOME TAX vs. BANK OF AMERICA SECURITIES (INDIA) (P) LTD reported in (2011) 136 TTJ 0441, the facts involved therein was that the assessee has made payment of entrance fee to a club namely Bombay Gymkhana amounting to Rs.....
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....itates smooth and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprise and accordingly we are inclined to uphold the finding of the learned CIT(A) in deleting the disallowance of Rs. 16 lacs made by the AO. The grounds taken by the Revenue are, therefore, rejected. 14. In the present case, the assessee contended that the subscription paid annually towards membership of the said club for a period of five years and it is not bringing into existence an asset or advantage for the enduring benefit of the business of assessee or to its staff to treat the same as capital expenditure. The club membership, it only facilitates smooth and efficient running of a business of the assessee. Therefore, we hold that the facts and circumstances of the aforesaid case law are applicable to the present case and the club subscription fee paid for staff is an allowable expenditure. 15. In the light of above, respectably following the above, we dismiss the ground no-1 raised by the appellant Revenue. 16. Ground no.2 is against the deletion of addition of Rs. 54,23,955/- made by the AO. The AO was of the view that the marked to market loss....
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....ompanies are under mandate to account for marked to market losses in their books despite the fact that the contract has not yet matured as at the time of balance sheet. Further, the assessee being a company following the Accounting Standards issued by ICAI which are specified accounting standard as per Companies Act. In this regard, the CIT(A) derived support from the order of Special Bench "C" of Mumbai ITAT in the case of DCIT-vs- Bank of Bahrain & Kuwait wherein it held that "loss incurred on account of revaluation of contract on last day of accounting period before date of maturity of forward contract is an allowable deduction. 20. A similar issue was dealt by the ITAT, MUMBAI 'C' SPECIAL BENCH DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) vs. BANK OF BAHRAIN & KUWAIT reported in 41 SOT 0290 supra as relied by the CIT-A where the facts are that the assessee is a non- resident company carrying on banking business in India. It enters into forward contracts with its clients to buy or sell foreign exchange at an agreed price on a future date. On the date of maturity, the contract is executed which may result in the profits or losses to the assessee. 21. During th....
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....rch 24. The Special Bench, in view of the decisions supra answered the reference in favour of assessee the relevant observation is at para-58 of which reproduced as under: 58. In view of the above discussion, we allow the assessee's appeal for the following reasons : (i) A binding obligation accrued against the assessee the minute it entered into forward foreign exchange contracts. (ii) A consistent method of accounting followed by assessee cannot be disregarded only on the ground that a better method could be adopted. (iii) The assessee has consistently followed the same method of accounting in regard to recognition of profit or loss both, in respect of forward foreign exchange contract as per the rate prevailing on 31st March. (iv) A liability is said to have crystallised when a pending obligation on the balance sheet date is determinable with reasonable certainity. The considerations for accounting the income are entirely on different footing. (v) As per AS-11, when the transaction is not settled in the same accounting period as that in which it occurred, the exchange difference arises over more than one accounting period. (vi) The forward foreign exchange c....