AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2004 (1) TMI 46
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....ng Officer in respect of those two items, the assessee preferred appeal before the Commissioner of Income-tax (Appeals) and thereafter the matter finally came before the learned Income-tax Appellate Tribunal for decision. The learned Tribunal allowed Rs. 78,135 in favour of the assessee-company treating it as expenditure for business purposes. However, the claim in respect of the expenditure of Rs. 5,00,000 on this head was not allowed by the Tribunal. As such, being asked by the assessee the learned Tribunal referred the question before this court which is as follows: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in rejecting the claim of subscription paid to Borsola Gymkhana Club for repairs of club building, which was destroyed by fire, of Rs. 5,00,000 on the ground that the assessee was not the owner of the club building, although its employees are members of this club?" Another question was referred by the Tribunal on the facts that the Assessing Officer while making the assessment took the view that the assessee acquired certain new plant and machinery or deposited certain funds in the investment deposit account and he di....
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....ld not be allowed as the club building was not owned by the assessee-company. The learned advocate for the assessee-company argued that the learned Tribunal was not at all justified in rejecting this prayer for deduction of Rs. 5,00,000. It appears that as per the provisions of section 37 of the Income-tax Act in respect of such an expenditure this type of deduction is allowable. It appears from the facts, which have been considered by the Assessing Officer, the Commissioner of Income-tax (Appeals) as well as the learned Tribunal, that the assessee-company claimed that the payments were made in favour of the club for paying subscription of the assessee's employees who are members of the club and also in respect of the renovation and repairing of the said club building which had been damaged. In this respect, the learned advocate for the assessee cited various decisions in order to prove that those payments should be considered as business expenditure as per the provisions of the Income-tax Act and necessary deduction should be allowed. In the case reported in CIT v. Sundaram Industries Ltd. [1999] 240 ITR 335 (Mad), the Hon'ble Madras High Court was of the opinion that the expendit....
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....pany was not the owner of the said club. That there was a payment in that respect, there is no dispute before us. The Tribunal is the final fact-finding authority and unless its decision is challenged on the ground of perversity, there is no reason to disbelieve the said fact. In this respect we rely on the decision reported in CIT v. Manna Ramji and Co. [1972] 86 ITR 29 (SC); Aluminium Corporation of India Ltd. v. CIT [1972] 86 ITR 11 (SC). From those decisions it will appear clearly that the fact as stated by the Tribunal at the time of the reference, unless it is challenged on the ground of perversity, should be accepted to be true. So the fact remains that there was a subscription to the extent of Rs. 5,00,000 by the company for the renovation/repair of the club in question. It has been claimed that the employees of the company are the members of the club and as the company is situated in a remote place, that is the only source of recreation of its employees. Naturally, if the management pays some amount for the upliftment/running of the club in question in an effective way then it must be held that the said payment was made in the interest of the company so that its employees ....
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.... 255 ITR 273 (SC). If we look into this decision then it will appear that the Hon'ble Supreme Court was pleased to hold: "Therefore, in our opinion, the dividend income earned by the assessee-company from its investment in the U.T.I. should be included in computing the profits of eligible business under section 32AB of the Act". As such, it appears that this decision practically supports the contention of the assessee-company. In view of this decision of the hon'ble Supreme Court, we do not prefer to consider the decision as cited in CIT v. Warren Tea Ltd. [2001] 251 ITR 382 (Cal) and CIT v. Dinjoye Tea Estate (P.) Ltd. [1997] 224 ITR 263 (Gauhati). On the other hand, the learned advocate for the assessee-company cited a decision reported in CIT v. Tamil Nadu Mercantile Bank Ltd. [2002] 255 ITR 205 (Mad), wherein it has been decided that the computation of income is to be made under subsection (3) of section 32AB, i.e., under the Companies Act. In the decision reported in CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306, the hon'ble Supreme Court has held: "Though for the purpose of computation of the income, interest on securities is separately classified, income by way of i....