Punjab National Bank Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi, in a recent ruling for Assessment Year 2018-19, has sided with Punjab National Bank (PNB) regarding the disallowance of club subscription fees totaling Rs. 12,62,175. The bank had appealed against the decision of the CIT(A)/NFAC, which upheld the Assessing Officer’s disallowance.
The dispute centered on whether the club fees, paid for memberships including Mayar Health Resorts Ltd. and Taj, were incurred “wholly and exclusively for the purpose of business” under Section 37 of the Income Tax Act, 1961. The Assessing Officer had disallowed the expense without providing specific reasons, while the bank contended the memberships were utilized for business meetings with clients.
The CIT(A)/NFAC had affirmed the disallowance, stating the bank failed to provide substantial documentation proving the business necessity of these expenses. However, the ITAT noted that the onus was on the assessee to prove the expenditure’s business purpose.
The Tribunal ultimately found merit in PNB’s appeal, citing the Supreme Court’s decision in CIT Vs. United Glass Mfg. Co. Ltd. (2012) 28 taxmann.com 429 (SC). This judicial precedent, according to the ITAT, has already settled the issue, affirming that such club membership claims are allowable as regular business expenditure.
