TaxTMI 
TaxTMI 
2023 (7) TMI 463
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.... assessee also meets at Mumbai Cricket Association in view of shortage of space at the office. b. The assessee used the premises of Mumbai Cricket Association for meeting its customers on regular basis. c. The expenses are incurred as licence for using the facility of the Association. d. There is no enduring benefit availed by the assessee. e. The expense incurred is not a capital expenditure. f. The licence fee is not transferable and available only till the life of the proprietor of the business. g. The expenses incurred is commensurate with the assessee's turnover for the year. 2. The learned Hon'ble Commissioner of Income-tax (A) erred in confirming the disallowance of Associateship fees of Rs. 10,76,720 made by the PC while passing an intimation u/s. 143(1) of the Income-tax Act, 1961 though it is not an adjustment as prescribed u/s. 143(1)(a) of the Act and it is a debatable issue on the facts and circumstances of the case and in law. 2. Briefly stated, facts of the case are that the assessee , an individual, filed return of income for the year under consideration which has been processed by the Ce....
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....red during the previous year. The expenditure should have been incurred wholly or exclusively for the purpose of the business or profession. The business should be commenced. 5.2 In this case, the membership fee paid to the club is admittedly a onetime membership fee paid to a Club, MA Recreation Centre, which is capital in nature. Therefore, the disallowance made by the AO-CPC is in order and confirmed. Ground number 1 is dismissed." 4. Before us, the Ld. Counsel of the assessee filed a paper book containing pages 1 to 117 including a copy of the return of income and tax audit report in prescribed form, i.e. form No. 3CD of Income-tax Rules, and submitted that the club membership fee cannot be disallowed or prima facie adjusted while passing intimation u/s 143(1)(a) , because firstly, it is not an adjustment prescribed under section 143(1)(a) of the Act, secondly, the disallowance of club membership fee as capital expenditure u/s 37(1) of the Act isa debatable issue ,therefore, the Ld. CPC is not justified in making adjustment invoking section 143(1)(a) of the Act. The learned counsel in support of the contention, relied on the decision of Tribunal in....
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....he Tax Auditor in the audit report i.e. form No. 3CD, has not been taken into account by the assessee while computing the total income in the return. The ld. CPC has also invoked section 143(1)(a)(ii) holding the same as incorrect claim by the assessee. The CPC has also held this adjustment as an arithmetic error u/s 143(1)(a)(iv) of the Act. 6.1 The relevant provisions of section 143(1)(a) of the Act referred by the Ld CPC are reproduced for ready reference: (a) the total income or loss shall be computed after making the following adjustments, namely:- (i) any arithmetical error in the return; (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return; (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure or increase in income] indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under "[section 10AA or under any of the provisions of Chapter....
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.... under Schedule BP: computation of income from business or provision, of return of income, the assessee reported the amounts debited to the profit and loss account as expenditure disallowable u/s 37 amounting to Rs. 986/- only. This amount has been taken from clause 7 of Part A-OI of the return of income. The relevant clause 7 of Part A-OI is reproduced as under: 6.4 On perusal of the above information, which was submitted by the assessee along with the return of income, it is evident that in the tax audit report, the auditor has included the amount club membership fee of Rs.10,76,720/-, being entries fees and subscription in the nature of not allowable expenditure. In the clause 21(a) of the proforma of tax audit report, there are separate rows for club membership subscription fee ( i.e. entrance fee) and expenses incurred for utilising the club services. The tax auditor has not proposed any disallowance for expenses incurred for utilising club services, whereas he has inferred amount for acquiring membership of the club as not in the nature of amount allowable under section 37 (1) of the Act. However, in the return of income, the assessee has not included said amount of member....
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....d whether the club membership entry fee is a capital expenditure or not, the Tribunal in the case of Deloitte Touche Tohmatsu India P Ltd (supra), relied on the decision of the Hon'ble Supreme Court in the case of United Glass Mfg Co. Ltd (supra), wherein it is held that club membership fees for employees incurred by the assessee is business expenses under section 37 of the Act. In the instant case membership fee expenses have been incurred for acquisition of membership for assessee individual and not for employees. The membership entry fee paid by the assessee is not for corporate membership. Further, the Tribunal in the case of Dy. Commissioner of Income-tax Banc of America (supra) held as under: "13. Respectfully following the above decisions of the Hon'ble Jurisdictional High Court and the Tribunal in the assessee's own case and for the reasons as mentioned in para 5.3 in the case of Samtel Colour Ltd. supra, we are of the view that admission fees paid towards corporate membership of the club is an expenditure incurred wholly and exclusively for the purpose of business and not towards capital account as it only facilitates smooth and efficient running of a busi....
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....s High Court in the case of L Jairam Parwani vs DCIT reported in (2018) 93 taxmann.com 291 (Madras) held that payment made for acquiring membership in a social club could not be allowed as business expenditure , more so, when there was no evidence to prove that membership of Social club was acquired for entertaining customers by the assessee. Therefore, the Ld. CPC is justified in making adjustment u/s 143(1)(a) the Act. The ground Nos. 1 and 2 of the appeal of the assessee are accordingly dismissed. 7. In the result, appeal of the assessee is dismissed. Order pronounced in the open Court on 07/06/2023. ============= Document 1 7 Amounts debited to the profit and loss account, to the extent disallowable under section 37 Expenditure of capital nature (37(1)] 7a b Expenditure of personal nature (37(1) 7b 0 Ñ Expenditure laid out or expended wholly and exclusively NOT for the purpose of business or profession (37(1) 7c d Expenditure on advertisement in any souvenir, brochure, tract, pamphlet or the like. published by a political party(37(28)] 7d Expenditure by way of penalty or fine for violation of any law for the t....