AI Drafter 
TaxTMI 
TaxTMI 
2020 (4) TMI 550
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....see. I.T.A.No.6/2011 was admitted by a bench of this Court by an order dated 09.02.2011 on the following substantial question of law: 1. Whether in the facts and circumstances of the case and the grounds urged, the Tribunal was right or justified in holding that club membership fee of Rs. 11,29,520/- paid by appellant was in the nature of capital expenditure and therefore not deductable as revenue expenditure? 2. Whether in the facts and circumstances of the case and the grounds urged, the Tribunal was right or justified in setting aside the Commissioner's order deleting the disallowance of Rs. 23,490/- as expenditure incurred for earning exempt income? 3. Whether Income Tax Appellate Tribunal erred in law in sett....
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.... reference, facts from I.T.A.No.6/2011 are being referred to. 4. Appellant is a company engaged in the business of manufacture and sale of air and gas compressors, rock and water well drilling equipment, pit pressures etc. The appellant filed its return of income for assessment year 2000-01 on 30.11.2000 declaring total income of Rs. 58,06,47,260/-. The return was initially processed under Section 143(2) and 142(1) by the Deputy Commissioner of Income Tax but thereafter, the notices were issued under Section 143(2) and 142(1) of the Act. On receipt of the aforesaid notice, the appellant filed a response by way of written submissions and sought personal hearing. The assessing officer passed an order on 19.03.2003 under Section 143(3) of t....
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....t income and adhoc disallowance of Rs. 10 Lakhs relatable to expenditure for entertainment, business, meals, gifts fees for association etc. However, the Commissioner rejected the appeal to the extent of disallowance of EDP expenses and reduction of 90% of the income rendered and sundry income from profits of business for the purpose of computation of deduction under Section 80HHC. Accordingly, the appeal was partly allowed. Being aggrieved, the revenue filed an appeal before the Income Tax Appellate Tribunal. The Tribunal by an order dated 30.08.2010; set aside the order passed by the appellate authority and allowed the appeal preferred by the revenue. In the aforesaid factual background, this appeal has been filed. 7. Learned counsel f....
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.... evidence. It is further submitted that such disallowance cannot be made on adhoc basis. In support of aforesaid submission, reliance has been placed on decision of Supreme Court in 'CIT VS. WALCHAND & CO. (P) LTD.,' (1967) 65 ITR 381 (SC). Lastly, it is urged that sub-Section (3) of Section 80HHC provides the manner, in which deduction has to be computed. Learned counsel for the appellant has also invited our attention to explanation contained to Section 80HHC (4C) and has submitted that profit of business means the profit of business as computed under the head "profits of business" or "profession" as reduced by 90% of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of Section 28 or of any receipts by way of broker....
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....that it is a capital expenditure. However, the Commissioner of Income Tax (Appeals) by an order held that in earlier years, it has been held by the Commissioner of Income Tax (Appeals) that club membership are to be allowed in deduction and accordingly, the aforesaid deduction was permitted. However, the Tribunal followed the decision in case of 'FRAMATONE CONNECTOR OEN LTD. VS. DCIT', (2007) 294 ITR 599 and held the same to be a capital expenditure. However, the Tribunal failed to take into account the fact that its order passed in CIT AND ANOTHER VS. INFOSYS TECHNOLOGIES LTD., by which it had held that the club membership expenditure was in the nature of revenue expenditure was upheld by division bench of this court vide dated 21.10.2011,....
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.... Rs. 10,000/- out of the expenditure incurred for entertainment, business, meals, gifts fees for association etc. and in disallowing Rs. 5,000/- on estimation basis. The Supreme Court in the case of WALCHAND supra has held that the Tribunal has to record the satisfaction that the expenditure was laid out or expendid wholly and exclusively for the purpose of business of the assessee and there is no reason why the full amount should not have been allowed. In the instant case, no such satisfaction has been recorded by the authorities. Therefore, the third substantial question of law is also answered in favour of the assessee. 12. The Commissioner of Income Tax (Appeals) as well as the Tribunal have reduced 90% of Rs. 3,05,11,720/- being inc....