Capital Gain and Amortisation on Club Membership

Dear Vikki

Club membership has very limited tax treatment...

If the member is doing some business and pays the membership fees from his business accounts

and the same would be considered as personal expenditure and accordingly will be disallowed u/s 37

however if the same is paid for employees of the company ( ie a corporate membership fees) then the same would be allowable as business expense vide judgement- CIT v. Samtel Color Ltd. (2010) 326 ITR 425 (Delhi)

Further if the amount is paid in the name of company and the name of company is registered in the membership register of the club then it is different senario... in such case same would be allowable as revenue expenditure u/s 37 and not to be capitalized in books of accounts (Its my view)

Hence the cannot be amortized or depreciated for two reasons-

1-its not an asset so AS 6 and AS 26 are not applicable

2-In accounts the concept of deferred revenue no more exist

Now when the membership is sold the same may be taxable under the head IFOS (again my view)

Question of Amortisation or Depreciation come only incase of Intangible assets or Fixed Assets :)

Club membership is not of such a character :)

It shall be taxed under Other sources