Club Membership Fees Paid By ICICI Bank For Employees Are To Be Treated As Business Expenditure: ITAT

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has observed that club membership fees for employees are to be treated as business expenditures of a company under Section 37 of the Income Tax Act.

The Bench of Amit Shukla (Judicial Member) and Padmavathy S. (Accountant Member) has upheld the decision of the CIT (A) and deleted the disallowance made by the AO by relying on its own order for Ay 2006-07 in the assessee’s own case.

The appellant/assessee is in the business of banking and related activities. The AO noticed from the Tax Audit Report that the assessee has incurred expenses towards club entrance fees and subscriptions to the extent of Rs. 1,13,85,062.

The assessee submitted that the membership fees paid to the club are allowable as business expenses. Since it is incurred to promote business interest, The assessee relied on the decision of the Bombay High Court in the case of Otis Elevators Co. (India) Ltd.

The AO, however, did not accept the submissions of the assessee and proceeded to treat the membership fees as capital in nature for the reason that the payment made is towards initial payments for entrance that pertain to several years and therefore held it as capital expenditure.

The CIT(A) deleted the disallowance made by the AO by relying on its own order for FY 2006–07 in the assessee’s own case, in which it was held that club membership fees for employees are to be treated as business expenditures of a company.

The tribunal upheld the decision of the CIT (A).

Counsel For Appellant: Aarti Vissanji

Counsel For Respondent: Himanshu Sharma

Case Title: ICICI Bank Ltd Versus The Deputy Commissioner of Income-tax, Circle-3(1)

Case No.: I.T.A. No.4248/Mum/2014

Click Here To Read The Order