ITAT: Payment Made For Acquiring Membership In A Social Club Cannot Be Allowed As Business Expenditure

The Mumbai Bench of the Income Tax Appellate Tribunal, ITAT in the case Balrajsingh Jagjit singh Versus ADIT observed and has stated that the payments made for acquiring membership in a social club could not be allowed as business expenditure where there being no such evidence in order to prove that membership in the social club was acquired for entertaining customers by the assessee.
The bench comprising of Judicial Member, Vikas Awasthy and the Accountant Member, Om Prakash Kant in the case observed and has upheld the adjustment as stated under Section 143(1) of an individual’s Club Membership Fees as the capital expenditure.
In the present case, the appellant or the assessee being an individual and has filed the return of income and the same is being processed by the Central Processing Centre, Bangalore, CPC. Therefore, the CPC made an upward adjustment for an amount of Rs. 10,76,720 to the income returned.
An appeal was made by the assessee before the CIT (A), wherein it has been claimed by the said assessee that the amount paid for the entry fee of the membership of Mumbai Cricket Association, Bandra, was for the benefit of the employees and for entertaining the customers of its business. Therefore, the bench stated that the said expenditure is allowable.
However, the CIT (A) in the case observed and has rejected the contention of the assessee, wherein the bench observed that the membership fee paid to the club is admittedly a one-time membership fee which is being paid to a Club, MA Recreation Centre, thus, which is capital in nature.
It has also been contended by the said department that any of the expenses for entertaining the business customers during club visits could have been allowed as business expenditures subject to verification. Moreover, the one-time entrance fee for acquiring the club membership by individual members cannot be treated as an business expenditure.
The ITAT in the case observed and has noted that the membership fees to clubs could be business expenditures in the case of corporate membership, which being not in the case of individual club membership.
Accordingly, the Tribunal held that as per Section 143(1)(a), the CPC is justified in making adjusting.
The counsel, Rajesh S. Kothari appeared for the Appellant.
The counsel, Kamble Minal Mohan represented the respondent.