Vipul Ltd vs DCIT

The present appeal filed by the assessee for the assessment year 2015-16 is directed against the order of Ld. CIT(A)-9, New Delhi dated 23.10.2018. The assessee has raised following grounds of appeal:-

The ld.CIT(A) has erred in law and facts of the case in confirming the action of Ld.AO in disallowing club expenses amounting to Rs.5,17,804/- alleging the same as personal nature expenses and brushing aside the justification and explanation given by the appellant, which is highly arbitrary, unjustified, uncalled for and bad in law.

The appellant craves the right to add, amend or modify any ground of appeal.”

The only effective ground raised by the assessee in this appeal is against confirming the disallowance of Rs.5,17,804/- in respect of club expenses.

FACTS OF THE CASE

Facts giving rise to the present appeal are that the assessee filed its return of income declaring loss of Rs.6,88,60,924/- on 28.09.2015 through electronic mode. The case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (“the Act”) was framed vide order dated 30.12.2017. The Assessing Officer (“AO”) while framing the assessment, made various disallowances/additions in respect of interest of wealth tax of Rs.2,280/-; disallowance by invoking the provision of section 14A of the Act of Rs.57,41,258/-; TDS on interest of Rs.11,12,767/- and expenditure treated of personal nature amounting to Rs.5,17,804/-.

Aggrieved against the assessment order, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions and material placed before him, partly allowed the appeal of the assessee. Thereby, Ld.CIT(A) sustained the disallowance of club expenditure of Rs.5,17,804/-.

Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal.

Ld. Sr. DR opposed these submissions and supported the order of Assessing authorities.

At the outset, Ld. Counsel for the assessee submitted that identical disallowance related to the club expenses was made by the AO in the Assessment Year (“AY”) and the matter was decided by the Co-ordinate Bench of this Tribunal in ITA No.1856/Del/2020 (AY 2017-18) in assessee’s own case vide order dated 29.07.2022 thereby, restricting the disallowance to the extent of Rs.50,000/- out of total disallowance of Rs.1,90,529/- that roughly comes to 25%. He submitted that facts are identical therefore, in this year as well, similar direction may be given.

We have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the facts that the facts are identical as were in ITA No.1856/Del/2020 (AY 2017-18) [supra]. The Revenue has not brought to our notice any change into facts and circumstances or any other binding precedents. We find that the Co-ordinate Bench of this Tribunal in ITA No.1856/Del/2020 (AY 2017-18) [supra] has decided the issue by observing as under:-

“In regard to ground no. 2 it can be observed that as far as the subscription fee to Clubs is concerned the nature of business activity of the assessee company is such that for procurement of business the Managing Director may have to attend the clients and entertain them occasionally at clubs. However, the four clubs to which the payments have been made are all ‘Golf Clubs’ and how only their membership would benefit the company is not ascertainable. Thus, there is every possibility that the expenditure incurred on subscription or food and beverage, with these Golf Clubs, have traits of personal benefits to the Managing Director, as well. Thus, there is justification to restrict, the disallowance proportionally to Rs. 50,000/-on total disallowance of Rs. 1,90,529/-. Accordingly the ground is decided partly in favour of the assessee/appellant.”

For the same reasoning and for the sake of consistency as we find that facts are identical and similar, we hereby restrict the disallowance to the extent of 25% out of total expenditure incurred by the assessee in respect of Delhi Golf Club Ltd., DLF Golf Resorts Ltd. and Panchshila Club. The AO shall allow deduction of rest of expenditure. Thus, Ground No.1 raised by the assessee is partly allowed.

In the result, the appeal of the assessee is partly allowed.