1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL(L) NO.2968 OF 2009 The Commissioner of Income Tax ..Appellant. V/s. M/s. Principal PNB Asset Management Co. Pvt. Lt. ..Respondent. Mr. Vimal Gupta for appellant. None for respondent. CORAM : DR. D.Y.CHANDRACHUD AND J.P.DEVADHAR, JJ. DATED : 4TH FEBRUARY, 2010 P.C. :- 1. Office objections are overruled. Registry is directed to register the appeal. 2. The question which is urged in the appeal by the revenue against the order of the ITAT dated 20th July, 2009, pertaining to assessment year 2004-05, is whether the Tribunal was justified in deleting the disallowance made by the Assessing Officer of the payment of Rs.15 lacs as entrance fees for membership of the Cricket Club of India. The Assessing Officer disallowed the claim of the assessee to treat the payment as business expenditure on the ground that the entrance fees was a one time payment and provided a benefit of an enduring nature to the assessee. The Assessing 2 Officer consequently held those expenses to be of a capital nature. 3. In appeal, the CIT(A) accepted the plea of the assessee that the expenditure essentially yielded benefit to the assessee in enabling it to improve business relations and of building better contacts. Consequently, it is held to be liable to be treated as business expenditure. The CIT (A) relied upon the judgment of this Court in Otis Elevator Co. (India) Ltd. V/s. Commissioner of Income Tax [(1992) 60 Taxman 215 (Bom)] and upon the decision of the Tribunal in the case of Sterlite Industries (India) 102 TTJ 53. The Tribunal, while adverting to its judgment held that the case was covered in favour of the assessee by the decision of the Tribunal in the assessee’s own case in ACIT V/s PNB Asset Management Co. Pvt. Ltd. in ITA No.2348/M/06 for assessment year 2002-03 and ITA No.5545/M/06 for assessment year 2003-04, decided on 12-12-2008. The Tribunal has as also relied upon the judgment of the Supreme Court in Empire Jute Co. Ltd. V/s. CIT [124 ITR 1 (S.C.)], wherein the Supreme Court has held that:- “ There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may nonetheless, be on revenue account and the test of enduring benefit many break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in the test. What is material to consider is the nature of advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. “ 3 4. The Tribunal held that expenditure on account of entrance fees is incurred by the assessee for better conduct of its business as the facilities provided by the club help in furthering business contacts and business relationships. That expenditure has, therefore, been held to be eligible on the ground of commercial expediency, there being no benefit of a capital nature. 5. In Otis Elevator (supra), the Division Bench of this Court noted that the AAC had categorically found that payments of club fees were made with a view to enable the assessee to improve business relations and prospects. The Division Bench held that the Tribunal, without recording a contrary finding on this aspect of the matter, was not justified in reversing the finding of the AAC and consequently, the payment must be allowed as business expenditure. 6. In the case at hand, the ITAT has observed that in the absence of any distinguishing feature brought on record by the revenue, the expenditure towards payment of club fees, was on account of commercial expediency and was allowable as revenue expenditure. We find that the view which has been taken by the Tribunal is consistent with the judgment of this Court in Otis Elevator (supra). 7. On behalf of the revenue, a distinction was sought to be made from the judgment in Otis Elevator on the ground that the payment in the present case was for an entrance fee, presumably meaning thereby, a one 4 time entrance fee. The fact that payment is made for obtaining the benefit of entrance to the club upon payment of a one time fee would not render the payment to be of a capital nature. The fact that payment is made in a lump- sum is not conclusive of whether it provides an enduring benefit of capital nature. The finding which is recorded by the Tribunal is that this essentially was a payment made on grounds of commercial expediency to enable the assessee to have the benefit of club facilities to further its business contacts and to foster business relationships. This view is borne out by the record. Hence, no substantial question of law would arise. The appeal is accordingly dismissed. (J.P.DEVADHAR, J.) (DR. D.Y.CHANDRACHUD, J.)