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TMI Blog2015 (8) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of law: "(1) Whether in the facts and under the circumstances of the case, the ITAT was right in holding that even though the appellant has not commenced its commercial activities, the receipt on account of membership fees is income earned by the appellant?" 2. The assessee filed its return of income for the assessment year 1997-98 as nil. The Assessment Officer vide his order u/s. 143(3) of the Act dated 24.03.2000 assessed the total income of the appellant as Rs. 4,90,500/-. The assessee challenged the said assessment order by filing appeal before CIT(A) and CIT(A) vide order dated 09.02.2001 partly allowed the appeal. The assessee as well as the revenue challenged the said order before the Tribunal partly allowed the appeal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal lacks merits and therefore deserves to be dismissed. He submitted that if the say of the assessee is accepted then for the relevant year, the assessee shall be liable to be taxed for the proportionate amount. 5. We have heard learned advocates for both the sides and perused the orders passed by the Tribunal. It is pertinent to note that the assessee - company which was established with the object of providing recreation facilities to its members by way of water park had taken membership fees from the members accordingly. The assessee however did not resume the water park till the end of the year. The Assessing Officer treated this amount as revenue receipt. The CIT(A) confirmed the said entry. 6. The Tribunal has observed in para 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is therefore not the income of the assessee. In Godhra Electricity Co. Ltd. v. Commissioner of Income Tax, [1997] 225 ITR 746 (SC) this Court reiterated the view taken in Shoorji Vallabhdas and Morvi Industries. Godhra Electricity is rather instructive. In that case, it was noted that the High Court held that the assessee would be obliged to pay tax when the profit became actually due and that income could not be said to have accrued when it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrual takes place, on the conduct of the parties subsequent to the year of closing an income which has accrued cannot be made 'no income'" This Court then considered the facts of the case and came to the conclusion (in Godhra Electricity) that no real income had accrued to the assessee in respect of the enhanced charges for a variety of reasons. One of the reasons so considered was a letter addressed by the Under Secretary to the Government of Gujarat, to the assessee whereby the assessee was 'advised' to maintain status quo in respect of enhanced charges for at least six months. This Court took the view that though the letter had no legal binding effect but "one has to look at things from a practical point of view." (See R.B. Jodha Mal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue. " [Emphasis Supplied] 6.2 Similarly in the case of Bilahari Investment P. Ltd (supra) the Apex Court has held that since from the various statements produced, the entire exercise arising out of the change of method from the completed contract method to deferred revenue expenditure was revenue neutral, the completed contract method was not required to be substituted by the percentage of completion method. 7. Considering the aforesaid observations of the Tribunal as well as the decisions relied upon by learned advocate for the assessee, we are of the opinion that the Tribunal has committed an e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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