Club Admission Fees for Corporate Membership for business purposes: Revenue, Not Capital Expenditure
Case Law Details
Swiss Re Services India Pvt Ltd Vs DCIT (Bombay High Court)
Conclusion: Admission fees paid to a club towards corporate membership would be a revenue expenditure because it had been incurred wholly and exclusively for the purposes of business and not towards capital account. Such expenditure only facilitated the smooth and efficient running of the business enterprise and did not add to the profit earning apparatus of the business enterprise.
Held: Assessee-company was provided with reasons to believe there was an escape of income. The reasons to believe were the entrance and subscription fees to Willington Sports Club (WSC). It was the primary contention of the assessee that the expenditure, having been incurred wholly and exclusively for the business of the company, was revenue in nature, and it had been rightly claimed as a deduction. On the other hand, the department contended that such expenditure could not be termed revenue expenditure because it had an enduring effect and assessee was to get the benefits of membership for years to come. It was also argued that the same had been incurred to bring into existence an advantage of enduring benefit to the business, and it should therefore be appropriately attributable to capital and be like capital expenditure. It was held that expenditure incurred towards entrance fees and annual membership would be a revenue expenditure because it had been incurred wholly and exclusively for the purposes of business and not towards capital account. Such expenditure only facilitated the smooth and efficient running of the business enterprise and did not add to the profit earning apparatus of the business enterprise.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Rule is issued on 30th July 2014 and respondents were restrained from acting upon the impugned notice dated 29th March 2010.
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