ICICI Bank Ltd Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that club membership fees for employees are to be treated as business expenditure of a company under section 37 of the Income Tax Act.
Facts-
The assessee is engaged in the business of banking and related activities. The case was selected for scrutiny and the statutory notices were duly served on the assessee. A reference was made to the Transfer Pricing Officer (TPO) in order to compute the Arm’s Length Price (ALP) of the transactions the assessee had with its Associated Enterprise (AE). The TPO made an adjustment of Rs.1,06,30,175 towards ITES markup under charged and Rs.17,59,344 towards Business Support markup under charged. Besides the TP adjustments, the assessing officer made other additions towards corporate tax computing the assessed income under normal provisions at Rs.39,69,74,66,800 and book profits u/s. 115JB of the Act at Rs.58,10,92,52,652. On further appeal the CIT(A) gave partial relief to the assessee. Both the assessee and the revenue are in appeal against the order of CIT(A).
Conclusion-
It is an undisputed fact acknowledged by the assessing officer that the assessee had its own funds which are more than the investment and, it is a settled position that when own funds are more than the investments there cannot be any disallowance towards interest. As already mentioned, the assessee has made a disallowance o 1% on the exempt income excluding long term capital gain on which STT is paid, which, in our considered view, is reasonable towards administrative expenses. Accordingly, we hold that no disallowance is warranted and the addition made by the Assessing Officer is deleted.
With regard to the pass through cost for which the TPO has added a margin of 11.59, we notice that from the nature of expenses that these costs are incurred on behalf of the AE and the same is allocated to the AE, using allocation key. Therefore, we are of the considered view that since the costs are pass-through costs and no value addition is made by the company by paying the cost on behalf of the AE and claiming the reimbursement there is no requirement of a mark up. Accordingly, we delete the adjustment made in this regard.
Coordinate Bench in assessee’s own case has held that club membership fees for employees are to be treated as business expenditure of a company under section 37 of the Act.
FULL TEXT OF THE CESTAT MUMBAI ORDER
These cross appeals filed by the assessee and the Revenue are against the order of the Commissioner of Income-tax (Appeals)-15, Mumbai dated 24/03/2014 for Assessment Year 2007-08.
2. The issues contended by the assessee and the revenue through various grounds of appeal are as below:-
Assessee
