Nijhawan Travel Services Pvt. Limited Vs ACIT (ITAT Delhi)
ITAT Delhi held that disallowance of club expenditure on the basis of nomenclature of the expenditure without demonstrating it as non-business expenditure not sustainable in law. Accordingly, the club expenditure is allowed as business expenditure.
Facts- The assessee, engaged in the business of operating retail shops of Adidas, Benetton and other branded goods, leasing of service apartments, sale of properties, travel business, car hiring, etc., filed its Income Tax Return (hereinafter, the ‘ITR’) declaring loss of Rs. (-) 70,20,831/- as per the normal provisions of the Income Tax Act, 1961 (hereinafter, the ‘Act’) and loss of Rs.(-) 41,08328/- under section 115JB of the Act. The case was picked up for scrutiny. Consequentially, the assessment was completed at a loss of Rs. (-) 42,33,447/-by making various disallowances.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that AO had not demonstrated the club expenditure as non-business expenditure. It seemed that the AO had disallowed this expenditure of Rs.6,205/- by nomenclature of the expenditure only. We do not see any justification therein. Therefore, the same is allowed as business expenditure.
Held that the expenditure of US $ 39,000/- was allowed in the preceding AY as per the claim but not the exchange rate fluctuation in the relevant year though the same was crystalized/materialized in the relevant year. The AO has not raised any doubt on the claim of expenditure of US $ 39,000/- in the preceding year. However, the encashment of said cheque, which happened in the relevant year resulting further expenditure due to the exchange rate difference of Rs.3,66,911/- was not allowed on the reasoning that it pertained to the prior period. In view of the facts as mentioned above, we are of the considered view that this expenditure is held to have crystalized in the relevant year and thus, it has to be allowed as business expenditure. We therefore, delete the disallowance of Rs.3,66,911/- on this score.
