Club membership fees

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xien

74 Points Posted on 07 July 2015

Our is pvt ltd company. and is planning to take corporate club membership for its directors.

Club can be categorized under sports, health/fitness, and networking for business.

Fees is Rs 5 lakhs for 10 years.

Question is:

Can the company spend this amount and claim it as expenditure.

Is it one time expense of to be capitalized and depreceate over the years?

Under what category this expense needs to be put.

Does it need to be mentioned separately while filing company returns or in audit reports?

Does any portion of it will come under director own income?

regards,

Replies (2)

Guest

Posted on 07 July 2015

1) In the case of PUNJAB & HARYANA HIGH COURT AT CHANDIGARH it was held that corporate club membership fees are not capital expenditure and the membership of club was obtained for business purposes in as much as it facilitated interaction with business associates etc.(so both allowable as expenditure and revenue expenditure)

Date of Decision: 24.01.2013 ITA No.366 of 2008 The Commissioner of Income Tax, Patiala Versus M/s Groz Beckert Asia Limited

desions against: Commissioner of Income Tax – I, Ludhiana Vs. M/s Majestic Auto Limited, Ludhiana

2) club fees should be reported in tax audit form 3CD

3) If club fees are not having any connection with business of the company and are purely personal to the directors, then they should be considered as taxable perquisites to the director and TDS should be deducted accordingly. For the director, it will be taxable.

conclusion:The corporate membership of the club should be useful for advancement of business.for eg meetings with customers, suppliers, service providers, to discuss business matters. AO might still decide to disallow a certain %.