This detailed analysis explores the legal proceedings of ITA No. 1151/DEL/2019 involving Vipul Ltd., the appellant, and the DCIT, New Delhi, the respondent. The case, filed on February 13, 2019, pertains to the assessment year 2015-16 and was resolved with a final tribunal order on October 7, 2022.
Vipul Ltd. filed its return of income for the assessment year 2015-16, declaring a loss of Rs.6,88,60,924/-. During the scrutiny assessment, the Assessing Officer (AO) disallowed various expenses, including club expenses amounting to Rs.5,17,804/-, which were alleged to be of personal nature.
The case was heard by the Income Tax Appellate Tribunal (ITAT), Delhi “F” Bench, with the bench comprising Shri Kul Bharat, Judicial Member, and Shri Pradip Kumar Kedia, Accountant Member. The appellant was represented by Shri Sidhant Arora, CA, while the respondent was represented by Shri Pankaj Khanna, Sr. DR.
The appellant contested the disallowance of club expenses, arguing that these expenses were incurred for business purposes. The appellant’s counsel cited a previous decision by the Co-ordinate Bench of the ITAT in a similar case (ITA No.1856/Del/2020 for AY 2017-18), where the disallowance was restricted to 25% of the total expenses.
The respondent supported the AO’s decision, asserting that the club expenses were personal in nature and should be disallowed entirely.
The tribunal reviewed the facts and submissions from both parties. It noted that similar disallowances were addressed in ITA No.1856/Del/2020, where the tribunal had restricted the disallowance to 25% of the total club expenses. The tribunal observed that the nature of Vipul Ltd.’s business might necessitate club memberships for business development and client engagement.
The tribunal decided to follow the precedent set in ITA No.1856/Del/2020, restricting the disallowance of club expenses to 25% of the total amount. The remaining 75% of the expenses were allowed as business expenses. This decision was based on the rationale that while some portion of the expenses might be personal, a significant part was likely incurred for business purposes.
The tribunal’s decision in ITA No. 1151/DEL/2019 underscores the importance of considering the nature of expenses and their relevance to business activities. The partial disallowance acknowledges that while some club expenses may have personal benefits, they also play a role in business operations.
Appellant: Vipul Ltd., New Delhi
Respondent: DCIT, New Delhi
Assessment Year: 2015-16
Case Filed On: February 13, 2019
Order Type: Final Tribunal Order
Date of Order: October 7, 2022
Date Pronounced: October 7, 2022
This case highlights the necessity for a nuanced approach when assessing the nature of expenses. It also emphasizes the importance of consistency in judicial decisions, as the tribunal referenced a similar case to ensure a fair and balanced judgment.
The order was pronounced in the open court on October 7, 2022, by Judicial Member Shri Kul Bharat and Accountant Member Shri Pradip Kumar Kedia. The decision reflects a balanced approach, considering both the business and potential personal nature of the club expenses incurred by Vipul Ltd.
Dispute Over Club Expenses in ITA No. 1151/DEL/2019 for Vipul Ltd.
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