Delhi High Court
The Commissioner Of Income Tax vs Nestle India Ltd. on 25 April, 2007
Equivalent citations: 2008 296 ITR 682 Delhi
Author: M B Lokur
Bench: M B Lokur, V Gupta
JUDGMENT
Madan B. Lokur, J.
1. The Revenue is aggrieved by an order dated 24th March, 2006 passed by the Income Tax Appellate Tribunal, Delhi Bench 'G', New Delhi in ITA No. 2039/Del/99 and 4909/Del/99 relevant for the assessment years 1995-96 and 1996-97.
2. The only issue that arises in this appeal, as noted in our order dated 9th October, 2006, is whether an opinion should have been expressed by the Tribunal that the question of membership of Madras Gymkhana Club taken by the assessed was with a view to promote its business.
3. We find from a perusal of the assessment order that a membership fee of Rs. 2 lakhs was paid by the assessed to the Madras Gymkhana Club. In so far as expenses incurred by the assessed towards food etc. are concerned, they were subject to disallowance under Section 37(2) of the Income Tax Act, 1961.
4. As regards the amount of Rs. 2 lakhs paid towards membership fee of the club is concerned, the Assessing Officer permitted a disallowance of Rs. 1 lakh that is 50% of Rs. 2 lakhs under Section 37(2) of the Act. It is submitted, and rightly so by learned Counsel for the assessed, that this postulates that the expense incurred by the assessed was for business purposes otherwise even Rs. 1 lakh would not have been allowed as a deduction by the Assessing Officer.
5. In appeal, the Commissioner of Income Tax (Appeals) accepted the view taken by the Assessing Officer but before the Tribunal the view taken on the basis of certain decisions, was that admission fee is not in the nature of entertainment but is an allowable business expenditure. It is because of this conclusion that the Revenue is before us.
6. Learned Counsel for the Revenue has drawn our attention to Commissioner of Income Tax v. Sundaram Industries Ltd. to contend that there should be a specific finding whether the expenditure incurred was for business purposes or for entertainment purposes. It is submitted that there is no specific finding given by the Tribunal. We, however, notice that the Madras High Court has also observed that each case has to be seen on its own merits.
7. We have also seen Otis Elevator Co. (India) Ltd. v. Commissioner of Income Tax , where it appears that the Appellate Assistant Commissioner had given a categorical finding that payments made by the assessed towards club membership fee was to promote its business.
8. It is true that in so far as the present case is concerned, there is no specific finding that the payment was made by the assessed for improving its business but since the Assessing Officer has allowed a deduction of 50% of Rs. 2 lakhs (that is Rs. 1 lakh) under Section 37(2) of the Act, 1961, we are of the opinion, he did so on the basis that the expenditure incurred was for business purposes otherwise the entire amount would have been disallowed by the Assessing Officer. Consequently, even though there is no explicit finding to that effect, but there is an implicit acknowledgement that the expense incurred by the assessed was for business purposes.
9. Therefore, we are of the opinion that there is no error in the view taken by the Tribunal in concluding that the expenses incurred by the assessed towards membership fee was for business purposes and that the assessed was entitled to a deduction as claimed.
10. No substantial question of law arises.
11. Dismissed.
