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Club membership fees allowed prorated but max in 10 years

Written By Admin on Saturday, 19 May 2012 | Saturday, May 19, 2012

- Taxmann

Assessee paid Rs. 15 lakh to a club for acquiring its membership for 15 years and claim it as revenue expenditure. AO denied the assessee's claim on ground that membership fees, resulted in enduring benefit to assessee and was thus capital in nature.

The Tribunal held that in view of nature of expense and benefit derived, club membership could be construed as an 'intangible asset', and said expense had to be written off in proportion to its 'life term' and if 'life term' extended beyond ten years it had to be restricted to ten years, as per AS 26. Therefore, following 'matching concept', 'materiality concept' and AS 26, amount of Rs. 15 lakh claimed as expense towards corporate membership had to be apportioned in ten years proportionately from date of obtaining membership. - DCIT v. G. CORP. (P.) LTD. [2012] 21 taxmann.com 304 (Bangalore - Trib.)
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