2015 (11) TMI 1609 - AT - Income Tax

Reopening of assessment - taxability of membership fees received - Held that - The return for assessment year 2003-04 was accepted u/s 143(1) of the Act in a routine manner and no opinion was formed. Nothing was brought in to the notice that on which ground the notice u/s 148 is bad in law. Assessing Officer had a reason to believe that there was an escaped assessment. The Assessing Officer was of the view that an amount of entrance fees to the extent of 80% was to be taxable in view of the judgement of Hon ble Bombay High Court. Therefore, we found no ground to interfere with the finding of the learned CIT(A) upholding the reopening u/s. 148 of the Act in his order in question dated 14.10.2011. CIT(A) merely followed his processed order who reliance upon the judgement of Hon ble Bombay High Court for the A.Y.1964-65(1979 (1) TMI 5 - BOMBAY High Court). Requirement of splitting up of the entrance fee collected from life members in the ratio 20 80 is not the ratio of the cited judgement. To that extent, the decision of the learned CIT(A) is in order. Considering the above learned DR has not brought anything on record to show how the impugned order of learned CIT(A) decided on the strength of Bombay High Court judgement is not fair. We find the order of learned CIT(A) does not call for any interference. Thus, the ground raised by the revenue is dismissed.

Summary

Issues Involved:
1. Taxability of member fees received by the assessee club.
2. Condonation of delay in filing cross objection.
3. Validity of reopening the assessment under section 148 of the Income Tax Act.
4. Treatment of entrance fees received from life members as revenue or capital receipts.

Issue 1: Taxability of Member Fees:
The appeal was filed by the revenue against the order of the Commissioner of Income Tax (Appeals) regarding the taxability of member fees received by the assessee club for the assessment year 2003-04. The Assessing Officer treated 80% of life membership fees as taxable income based on a decision of the Hon'ble High Court, Mumbai. The assessee contended that the fees were capital in nature. The Commissioner upheld the Assessing Officer's decision, leading to the assessee's appeal before the Tribunal. After considering arguments, the Tribunal found no grounds to interfere with the Commissioner's decision, thereby dismissing the appeal.

Issue 2: Condonation of Delay:
The assessee filed a cross objection, which was challenged by the revenue due to a 60-day delay. The assessee sought condonation of the delay, citing valid reasons in an affidavit. The Tribunal, considering the reasons provided in the affidavit, condoned the delay in the interest of justice. The cross objection raised the issue of the validity of reopening the assessment under section 148 of the Income Tax Act, contending that there was no valid reason for the reassessment. The Tribunal found that the Assessing Officer had sufficient grounds to believe there was an escaped assessment, upholding the reopening.

Issue 3: Treatment of Entrance Fees:
The main issue revolved around the treatment of entrance fees received from life members as either revenue or capital receipts. The revenue argued for taxability based on a Bombay High Court judgment, but failed to provide the judgment to the Tribunal. The assessee cited a different judgment in their favor for a different assessment year. The Tribunal, after reviewing the judgments, concluded that the entrance fees should not be split in a 20:80 ratio as done by the Assessing Officer. The Tribunal allowed the appeal of the assessee, following the precedent set by the Bombay High Court, and dismissed the revenue's appeal.

In conclusion, the Tribunal dismissed the appeal of the revenue and the cross objection of the assessee, upholding the taxability of the member fees and the treatment of entrance fees as decided based on relevant legal precedents.