TaxTMI 
TaxTMI 
2024 (9) TMI 1107
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....he impugned order was emanated from order of the CPC, Bangaluru (in brevity "the AO') passed under Section 143(1) of the Act, date of order 25^th December 2018. 02. The assessee has taken following grounds: - "1. On the facts and under the circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance made by the AO under section 37(1) of the Income tax Act, 1961 of Rs. 25,49,449/- paid towards membership and subscription fees which were revenue expenditure incurred by the appellant for the sales promotion of the business carried on by the appellant. Therefore, treating it as capital expenditure and personal in nature and affirming the disallowance of the aforesaid business expenditure is bad in law." ....
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....the reply of show cause was filed related to adjustment under Section 143(1) of the Act. The assessee fully relied on the order of Hon'ble Gujarat High Court in the case of PCIT Vs. Bayer Vapi (P.) Ltd. (2019) 106 taxmann.com 395 (Gujarat). The relevant paragraph is duly inserted as below:- "4.4 The Tribunal relied upon the decision of this Court in case of Gujarat State Export Corpn Lad [1995] 80 Taxman 568/[1994] 209 ITR 649, wherein the payment of fees to the Sports Club of Gujarat Limited has been examined and it was held that if the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefits of the business, it is properly attributable to capital and is of the nature of capi....
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....ure. 4.5 In view of above settled legal position, it cannot be said that the Tribunal has committed any error of law in allowing membership fees of Rs 22,000/- paid to club by the Chairman and the Managing Director as revenue expenditure." 05. The learned Authorized Representative further relied on the order of Hon'ble High Court of Bombay in the case of Swiss Re Services India (P.) Ltd. Vs. DCIT (2023) 156 taxmann.com 56 (Bombay). The relevant paragraph is duly inserted as below:- "14. Similarly, the Hon'ble Delhi High Court in CIT v. Samtel Color Ltd. (2009) 180 taxmann.com 82 (2010 326 ITR 425 held that admission fees paid to the club towards corporate membership is wholly and exclusively for business purpose....
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....poligment of the Division Bench of this Court in CIT v. J.K. Synthetics ITR Nos. 139/1988 & 202/1989. The true test for qualification of expenditure under section 37 of the Act is that it should be incurred wholly and exclusively for the purposes of business and the expenditure should not be towards capital account. In the instant case, as discussed above, the admission fee paid towards corporate membership 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. 5.3 To support the Revenue's contention that the impugned expen....
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..... Such expenditure only facilitates the smooth and efficient running of the business enterprise and does not add to the profit earning apparatus of the business enterprise. Therefore, Rule issued on 30th July 2014 is made absolute. The impugned notice dated 29th March 2010 is quashed and set aside." 06. The learned Departmental Representative argued and fully relied on the order of the revenue authorities. 07. We heard the rival contentions and considered the documents available on record. The assessee is a proprietor and running business in his own hand. The adjustment was made of the membership fees of the club under Section 143(1) of the Act during the processing of return. The assessee was duly asked about the adjustment and reply....