The Tax Publishers2013 TaxPub(DT) 0795 (P&H-HC) : (2013) 052 (I) ITCL 0392 : (2013) 351 ITR 0196 : (2013) 257 CTR 0001 : (2013) 214 TAXMAN 0205 : (2013) 084 DTR 0001

INCOME TAX ACT, 1961

--Capital or revenue expenditure--Corporation member ship fee Paid to golf club--Assessee obtained corporate membership of Golf Club, on payment of Rs.6 lakhs. Rs. 16,945 was paid towards services and facilities used during the relevant assessment year. The assessing officer declined such expenses for the reason that the same are personal expenses of the Managing Director and other employees and, thus, added back to the income of the assessee. In appeal before the Commissioner (Appeals), said disallowance was set aside holding that club membership is in the nature of an advantage in the commercial sense and not in the capital field. Tribunal, affirmed the findings recorded by the Commissioner (Appeals). Held: Was justified. By subscribing to the membership of a club, no capital asset is created or comes into existence. By such membership, a privilege to use facilities of a club alone, are conferred on the assessee and that too for a limited period. Such expenses are for running the business with a view to produce the benefits to the assessee. Consequently, it cannot be treated as capital asset.

In the present case, the nature of the expenditure incurred by the assessee cannot be said to be a capital expenditure. The second test culled down in is that expenditure should bring into existence an asset or an advantage for the enduring benefit of a trade. In the present case, the corporate membership of Rs.6 lacs was for a limited period of 5 years. The corporate membership was obtained for running the business with a view to produce profit. Such membership does not bring into existence an asset or an advantage for the enduring benefit of the business. It is an expenditure incurred for the period of membership and is not long lasting. By subscribing to the membership of a club, no capital asset is created or comes into existence. By such membership, a privilege to use facilities of a club alone, are conferred on the assessee and that too for a limited period. Such expenses are for running the business with a view to produce the benefits to the assessee. Consequently, it cannot be treated as capital asset. [Para 16]

Income Tax Act, 1961 Section 37(1)

IN THE Punjab And Haryana High Court

Hemant Gupta, Ritu Bahri & Gurmeet Singh Sandhawalia, J.J.

CIT v. Groz Beckert Asia Ltd.

ITA No. 366 of 2008

24 January, 2013 

In favour of assessee

Appellant by : Savita Saxena

Respondent by : C. S. Aggarwal and Ms. Radhika Suri

ORDER

Hemant Gupta, J.

A Division Bench of this Court vide its order dated 31-10-2012 referred the following Question No.5.1 to the Larger Bench in view of the doubt expressed about the correctness of the view of a Division Bench of this Court titled CIT v. Majestic Auto Ltd. (ITA No.448 of 2007 decided on 11-9-2008) :

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