XCEL VISION TECHNOLOGIES, MUMBAI v. ITO WD 8(3)(4), MUMBAI

ITA 1060/MUM/2009 | 2005-2006
Pronouncement Date: 14-01-2011 | Result: Dismissed

Appeal Details

RSA Number 106019914 RSA 2009
Assessee PAN OFJAN2011S
Bench Mumbai
Appeal Number ITA 1060/MUM/2009
Duration Of Justice 1 year(s) 10 month(s) 28 day(s)
Appellant XCEL VISION TECHNOLOGIES, MUMBAI
Respondent ITO WD 8(3)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 14-01-2011
Date Of Final Hearing 20-12-2010
Next Hearing Date 20-12-2010
Assessment Year 2005-2006
Appeal Filed On 16-02-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI BEFORE SHRI J SUDHAKAR REDDY ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 1060/MUM/2009 (ASSESSMENT YEARS: 2005-06) M/S XCEL VISION TECHNOLOGIES 304-M VIJAY INDL ESTATE LINK ROAD CHINCHOLI BUNDER MALAD(W) MUMBAI-400064 PAN:AABCC1992K .. APPELLANT VS INCOME TAX OFFICER WARD 8(3)(4) AAYAKAR BHAVAN MUMBAI-400020 RESPONDENT APPELLANT BY : MS.UMA MAHADEVKAR RESPONDENT BY : SHRI VIJAY SHANKAR O R D E R PER VIJAY PAL RAO JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10.11.2008 OF THE LEARNED CIT(A)-XXIX MUMBAI FOR THE ASSESSMENT YEAR 2005-06. 2. ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL READS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS ERRED IN CONFIRMING ADDITI ON O F RS.7 66 500/- BEING MEMBERSHIP AND SUBSCRIPTION AS A CAPITAL EXPENDITURE ITA NO. 1060/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 3. THE ASSESSEE DEBITED AN AMOUNT OF RS.7 66 500/- UNDER THE HEAD MARKETING EXPENSES TOWARDS THE MEMBERSH IP AND SUBSCRIPTION. THE AO NOTICED THAT THE MEMBERSHIP F EE OF RS.7 50 000 PAID TO M/S KHANNA HOTELS PVT LTD FOR ACQUIRING CLUB MEMBERSHIP. HOWEVER RS.16 500/- WAS PAID AS A N ADVANCE SUBSCRIPTION FOR THE YEAR 2005-06. THE ASS ESSEE CONTENDED BEFORE THE AO THAT THE MEMBERSHIP FEE AN D SUBSCRIPTION PAID TO M/S KHANNA HOTEL PVT LTD FOR HELPING THE PROMOTION OF THE BUSINESS OF THE ASSESSEE AND CLAIM ED A REVENUE EXPENSES INCURRED IN DUE COURSE OF BUSINESS . THE AO WAS OF THE VIEW THAT THE ASSESSEE COMPANY SPENT A SUM OF RS.7 66 500/- TOWARDS ACQUIRING MEMBERSHIP OF THE C LUB FOR ITS DIRECTOR AND ITS FAMILY MEMBERS AND NOT DERIVED ANY BUSINESS BENEFIT. HE HAS FURTHER OBSERVED THAT THE ASSESSE E COULD NOT HAVE DONE ANY MARKETING DURING THE FY 2004-05 ON A CCOUNT OF THE DIRECTOR BEING MEMBER OF THE CLUB. ACCORDIN GLY HE HAS DISALLOWED THE EXPENSES AS NOT INCURRED FOR BUSINES S OF THE ASSESSEE. FURTHER THE AO HAS ALSO NOTICED THAT THE CHEQUES GIVEN FOR MEMBERSHIP FEE AND SUBSCRIPTION WERE REA LIZED ON 5.04.2005 EVEN THE CHEQUES OF RS.2 50 000 WAS ISS UED ON 1.04.2005 AND THEREFORE THERE WAS NO MEMBERSHIP UP TO 31.3.2005. ITA NO. 1060/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 4. ON APPEAL THE CIT(A) HAS CONFIRMED THE DISALL OWANCE MADE BY THE AO BY FOLLOWING THE DECISION OF THE HO N. JURISDICTIONAL HIGH COURT IN THE CASE OF TRAMATONE CONNECTORS OEN LTD V.S DCIT REPORTED IN (2006) 157 TAXMAN 116 . 5. BEFORE US THE LEARNED AR OF THE ASSESSEE HAS SUBMITTED THAT THE CHEQUES REALIZED ON 05.04.2005 W AS ISSUED AND DELIVERED ON 31.3.2005. THUS THE LIABILITY WA S INCURRED ON 31.3.2005 AS THE ASSESSEE IS MAINTAINING THE BO OKS OF ACCOUNT ON MERCANTILE BASIS. SHE HAS FURTHER CONTE NDED THAT THE MEMBERSHIP WAS GRANTED ON 31.3.2005 AND THEREFO RE THE EXPENDITURE WAS INCURRED DURING THE FINANCIAL YEAR ENDING ON 31.3.2005. THE LEARNED AR HAS FURTHER CONTENDED THA T THE MEMBERSHIP OF THE CLUB CANNOT BE IN THE NAME OF THE COMPANY AND IN ANY CASE IT HAS TO BE IN THE NAME OF THE D IRECTOR OF THE COMPANY. EVEN OTHERWISE IF THE EXPENDITURE IS T REATED A PERSONAL EXPENDITURE OF THE DIRECTOR THEN IT HAS TO BE ALLOWABLE EXPENDITURE IN THE HANDS OF THE COMPANY AS PERQUISI TES. THE LD. AR HAS FURTHER SUBMITTED THAT THE CLUB-MEMBERSH IP WAS TAKEN FOR THE BUSINESS PROMOTION OF THE ASSESSEE. S INCE IT WAS A CORPORATE MEMBERSHIP THE FEES PAID BY THE ASSESS EE IS FOR ITS MEMBER DIRECTOR THEREFORE IT IS AN ALLOWABLE EXPENDITURE SHE HAS RELIED UPON THE DECISION OF THE HON.DELHI HIGH COURT IN THE CASE OF CIT V/S ENGINEERS INDIA LTD REPORT ED IN 239 ITR ITA NO. 1060/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 237 (DEL) AND SUBMITTED THAT THE HON. HIGH COURT HA S HELD THAT THE INITIAL MEMBERSHIP FEE PAID BY THE ASSESSEE HA S TO BE ALLOWED AS REVENUE EXPENDITURE AND NOT AS CAPITAL EXPENDITURE. SHE HAS ALSO RELIED UPON THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE EX PORT CORPORATION V/S CIT REPORTED IN 209 ITR 649 AND THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF OTI S ELEVATOR (INDIA) CO. V/S CIT REPORTED IN 195 ITR 682. 6. ON THE OTHER HAND THE LEARNED DR HAS SUBMITTED THAT THIS IS NOT CORPORATE MEMBERSHIP BUT THE MEMBERSHI P IS IN THE NAME OF THE DIRECTOR AND THE FAMILY MEMBER OF THE DIRECTOR OF THE ASSESSEE COMPANY. THE EXPENSES IS PERSONAL IN NATURE AND NOT FOR THE PURPOSES OF BUSINESS OF THE ASSESSE E. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. AS IT IS EVIDENCE FROM THE RECORD THAT THE MEMBERSHIP OF THE CLUB WAS TAKEN IN THE NAME OF MR. KIRAN ARO SKAR AS A FAMILY MEMBERSHIP AND NOT AS CORPORATE MEMBERSHIP. THE ASSESSEE HAS NOT BROUGHT BEFORE US ANY RECORD TO SH OW THAT THE MEMBERSHIP IN THE NAME OF SHRI KIRAN AROSKAR IS IN HIS CAPACITY AS A DIRECTOR OF THE COMPANY AND NOT AS AN INDIVIDUAL. THERE WAS NO SUCH CONDITION IN THE MEMBERSHIP THAT THIS ITA NO. 1060/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 MEMBERSHIP WILL NOT CONTINUE IN THE NAME OF SHRI KI RAN AROSKAR IF HE CEASES TO BE A DIRECTOR OF THE COMPAN Y. WE FURTHER NOTE THAT THE PAYMENT HAS BEEN MADE IN THE NAME OF M/S KHANNA HOTEL PVT LTD AND NOT IN THE NAME OF ANY CLUB AS SUCH THE EXPENDITURE IS NOT ALLOWABLE AS BUSINESS EXPENDITURE. THE EXPENDITURE HAS TO BE LAID OUT W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. IN TH E CASE IN HAND THE MEMBERSHIP IS NOT FOR THE OTHER EMPLOYEES OF THE ASSESSEE BUT ONLY IN THE NAME OF THE DIRECTOR A ND ITS FAMILY MEMBERS. THEREFORE THE ASSESSEE HAS FAILED TO MAD E OUT THE CASE THAT THE EXPENDITURES HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE AS SESSEE. THE DECISIONS RELIED UPON BY THE ASSESSEE ARE NOT A PPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE ASSESSEE HAS NOT BROUGHT ANY THING ON RECORD TO SH OW AS TO HOW THE MEMBERSHIP IS BENEFICIAL TO THE BUSINESS OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION WE DO NO T FIND ANY MERIT IN THE APPEAL FILED BY THE ASSESSEE. THEREF ORE WE CONFIRM THE ORDER OF THE CIT(A). 8. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS DISMISSED. . ITA NO. 1060/MUM/2009 (ASSESSMENT YEARS: 2005-06) 6 ORDER PRONOUNCED IN THE OPEN COURT ON 14.01.2011 SD SD (J.SUDHAKAR REDDY) (V IJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ON THIS 14 TH DAY OF JAN 2011 SRL:6111 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI