2011 (7) TMI 1228 - AT - Income Tax

Summary

Issues involved:
The revenue appealed against the deletion of an addition of Rs. 3,66,25,722 made by the Assessing Officer for assessment year 2006-07.

Analysis of the Judgment:

Issue 1: Addition of Membership Fees
The Assessing Officer directed the assessee to explain why total membership fees received were not recognized as revenue receipts. The Assessing Officer relied on a decision of ITAT Chennai and added the balance amount of Rs. 3,66,25,722 to the total income of the assessee.

Issue 2: Appeal before CIT(A)
The assessee appealed before the CIT(A) and provided detailed explanations regarding the membership schemes of the Golf Club, arguing that the total receipts should not be recognized as revenue receipts at the time of receipt.

Issue 3: CIT(A) Decision
The CIT(A) considered the submissions of the assessee and noted the accounting policy followed by the appellant company regarding membership fees. The CIT(A) referred to a Special Bench decision of ITAT in the case of Mahindra Holidays and Resorts and deleted the addition based on the interpretation of revenue recognition.

Issue 4: Arguments and Precedents
The revenue and the assessee presented their arguments, with the assessee citing a decision of the Delhi High Court in a similar case. The High Court had allowed spreading of receipts over multiple years, supporting the assessee's position.

Issue 5: Judicial Analysis
The Tribunal analyzed the conflicting views of the revenue and the assessee regarding the recognition of membership fees as revenue. It referred to previous judgments and upheld the CIT(A)'s decision based on the principles of revenue recognition and the obligation to provide services against the advance payments.

Conclusion:
The Tribunal dismissed the appeal of the revenue, affirming the CIT(A)'s decision to delete the addition of membership fees based on the principles of revenue recognition and the obligation to provide services. The judgment was pronounced on 08.07.2011.