Veedol Corporation Limited Vs DCIT (ITAT Kolkata)
The assessee appealed against the order of the National Faceless Appeal Centre dated 01.07.2025 for Assessment Year 2017–18. The appeal involved three substantive issues adjudicated by the Income Tax Appellate Tribunal, Kolkata Bench.
The first issue concerned disallowance of club expenses. The Assessing Officer had disallowed ₹5,81,098 on the ground that club subscription charges were personal in nature. The appellate authority deleted ₹1,53,184 relating to subscription and entry fees but sustained 50% of the remaining ₹4,27,914 towards club services and facilities on an ad hoc basis, presuming possible personal use by directors or shareholders. The Tribunal observed that no specific query was raised during assessment and that the partial disallowance was made without justification. Relying on judicial precedents holding that corporate club expenses are allowable and that disallowances cannot be based on estimation or presumption, the Tribunal directed deletion of the entire addition.
The second issue related to disallowance under Section 14A read with Rule 8D amounting to ₹1,33,25,000. The assessee had earned dividend income, part of which was exempt. Although the assessee contended that no expenditure was incurred to earn exempt income, the Assessing Officer applied Rule 8D by considering total investments, including those that did not yield exempt income. The Tribunal noted that investments yielding and not yielding exempt income were both present and accepted the assessee’s alternative plea that disallowance, if any, should be restricted to investments that actually generated exempt income during the year. Following jurisdictional High Court and Tribunal decisions, the Tribunal restricted the disallowance to ₹59,40,500.
