9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (4) TMI 1433 - AT - Income TaxReceipts by way of entrance fees and membership fees - capital receipts or revenue receipts - whether these receipts are refundable when the member surrender its membership or ceases to be member - HELD THAT - Issue requires verification of contentions of the assessee dehors records including bye laws, application for becoming members, minutes of meetings etc. The decision of Citizen Co-operative Society Limited v. ACIT 2018 (1) TMI 290 - SUPREME COURT OF INDIA is relevant. End of justice will be met if the issues in these appeals are restored to the file of the A.O for fresh adjudication after considering various clauses of bye laws concerning different types of membership and rights attached thereto, application forms for making members and other terms and conditions governing various types of membership including entitlements on becoming member , refund of entrance fees and membership fee on cessation of being member of the assessee, minutes of meetings etc. AO is directed to give proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law.
Issues Involved:
1. Classification of Entrance Fee and Membership Fee as Capital Receipts or Revenue Receipts. Detailed Analysis: Issue 1: Classification of Entrance Fee and Membership Fee as Capital Receipts or Revenue Receipts Facts of the Case: The assessee, a co-operative society engaged in banking, contended that Entrance Fee and Membership Fee should be treated as capital receipts. The fees were collected as per the bank's bye-laws and credited to the Statutory Reserve account, arguing that these fees conferred valuable rights to members, such as participation in AGMs and voting rights. Assessment Proceedings: The Assessing Officer (AO) treated these receipts as revenue in nature and included them in the taxable income of the assessee. The AO's decision was based on the observation that these fees were collected in the normal course of business and were not refundable. First Appellate Proceedings: The CIT(A) upheld the AO's decision, following the precedent set in the assessee's own case for previous assessment years (2009-10 and 2010-11). The CIT(A) noted that the fees were in the nature of charges for application forms and processing, and thus, were revenue receipts. Arguments by the Assessee: The assessee argued that the fees should be considered capital receipts, citing the valuable rights conferred upon members. They referenced the ITAT's previous decision for AY 2007-08 and 2008-09, where the matter was remitted back to the AO for fresh adjudication. The assessee also relied on judgments from the Hon'ble Bombay High Court to support their stance. Arguments by the Department: The Department argued that the fees were revenue receipts and should be taxed accordingly. They relied on the appellate order passed by the CIT(A). Tribunal's Findings: The Tribunal observed that the assessee's contention required a detailed analysis of the bye-laws and the nature of the membership. It was noted that the AO had not yet framed a denovo assessment for AY 2007-08 and 2008-09 despite the Tribunal's directions. The Tribunal emphasized the need to verify whether the fees were refundable upon cessation of membership and to examine the terms and conditions attached to different types of memberships. Decision: The Tribunal restored the issue to the file of the AO for fresh adjudication. The AO was directed to consider various clauses of the bye-laws, application forms, minutes of meetings, and other relevant documents to determine whether the fees were capital or revenue receipts. The AO was instructed to provide the assessee with a proper opportunity to present evidence and explanations. The Tribunal also directed that the denovo assessment be completed within the time allowed by law. Conclusion: The appeals for both AY 2012-13 and 2013-14 were allowed for statistical purposes, with directions for the AO to conduct a fresh assessment considering all relevant factors and evidence. Order Pronounced: The order was pronounced in the open court on 22.04.2019.
|
