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July 2014

Business expenditure: Revenue or capital: Section 37: Corporate club membership fees paid by the assessee is revenue expenditure: Deduction allowable as business expenditure:

By K.B.Bhujle Advocate
Reading Time 1 mins
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CIT vs. M/s. Jindal Iron and Steel Co. Ltd. (Bom): ITA No. 1567 of 2011 dated 18-03-2014:

The Assessing Officer disallowed the club expenditure of Rs. 16,15,934/- treating the same as capital expenditure. The Tribunal allowed the claim and deleted the addition.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“i) T he Tribunal has held by relying on the documents and record produced by the respondent assessee that the club membership is a corporate membership. The company has obtained the membership in this case for its directors and to promote the business interests of the company and as they would get in touch and come in contact with business personalities. In such circumstances, following the order passed by this court in the case of Otis Elevator Company (India) Ltd. vs. CIT; 195 ITR 682 (Bom), the Tribunal has reversed the finding and conclusion of the Assessing Officer and the CIT(A).

ii) Such finding of fact and consistent with the material produced therefore does not merit any interference in our jurisdiction u/s. 260A of the Income-tax Act, 1961. The appeal is therefore dismissed.”

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