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TMI Blog2011 (8) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... iled its return of income admitting total loss of ₹ 20,850/- on 27.10.2003. The assessee has been receiving Life Membership Fee and in this year this amount was ₹ 21,01,000/-. This amount is not refundable to the members even after the termination of life period of the members. But the Club has not offered this amount as income of the year, therefore, notice u/s 148 dated 28.3.2008 was issued. In response, the assessee has requested to treat the return filed originally as the return to have been filed in response to this notice. On a request made by the Club, the Assessing Officer supplied copy of reasons. Thereafter, a notice u/s 143(2), dated 23.5.2008 was issued, and served on the assessee. The Assessing Officer conveyed his intention to tax this amount of `21,01,000/- treating it as its income, the fee being non-refundable Life Membership Fee and thus a revenue receipt of the year. This is precisely the issue involved in each of the years. The assessee-club has received certain amount towards Life Membership Fee in each year but has not offered the same as its income of that year. Obviously, the amount of Life Membership Fee differs in each year. Thus, except for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover by citing a different reason amounts to a change of opinion and such revision cannot be sustained. 6. The CIT (Appeals) ought to have seen that the officer was wrong in treating the amount received by the appellant from its members towards the corpus fund as revenue in nature when in fact the same is capital in nature. 7. The CIT (Appeals) failed to understand that the amount received by the appellant from the members towards the corpus fund (life membership fund) is for the purpose of enhancing its corporate identity and creating of capital assets. This amount has no nexus with any facilities enjoyed by the members. 8. The CIT (Appeals) ought to have seen that the amount towards corpus fund is only a one time payment from each member and is non-recurring in nature. 9. The CIT (Appeals) erred in ignoring the fact that the appellant receives monthly/annual subscription from its members for the services/facilities offered by the appellant. It is only this receipt that is recurring in nature. 10. The CIT (Appeals) ought to have seen that the officer was wrong in proceeding on the footing that the liability ceases to exist after the terminati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt by the club is a return for vesting a right of membership in the member and therefore, entrance fee would clearly be in the nature of a capital receipt only. 17. Hence, the authorities below have erred in treating the amount of Rs. 29,97,275/- received by the appellant towards its corpus fund as income and therefore, the computation of total income of Rs. 27,01,725/- for the assessment year 2005-06 is liable to be set aside. 4. We have carefully heard the rival submissions and have given our anxious thought to the facts and evidence available on record. Before we proceed to decide the main issue as to what is the nature of this receipt, it was noticed that these appeals are barred by limitation by 51 days in each case. A requisite condonation petition has been properly filed for each year with a prayer to condone this delay of 51 days which was apparently caused due to acting on the advice given by the Legal Consultant of the Club. It was stated the he had advised to the assessee to file writ petition before the Hon'ble Supreme Court under Article 32 of the Constitution of India. However, the Hon'ble Supreme Court dismissed the petition on the reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to this, the case of the Revenue is that the entrance fee which is called by the assessee as Membership Fund is non-refundable and is also non-transferable. Thus, Life Membership Fee can neither be treated as a liability in the Balance Sheet nor it can be treated as a capital receipt. But by relying on the decision of Hon'ble Patna High Court in the cases of CIT vs Beldih Club, 161 ITR 861 and CIT vs United Club, 161 ITR 853, wherein it has been held that the entrance fee received by the assessee is not a capital receipt but a revenue receipt and is liable to tax, the Assessing Officer has finally concluded that this receipt has to be taxed in the hands of the Club in the respective years as a revenue receipt. 6. After cogitating in depth the rival stands, the answer to the question raised in these appeals is not very simple and direct. Instead of jumping to the judicial pronouncements, we have to first cull out the correct facts of this case. There is no doubt that the assessee is a Private Limited Company and in such cases, one has to dive deep to discern the exact nature of the activities being carried on. Sometimes, the common place experience is that by using the ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue nature and is chargeable to tax in the hands of the club. 8. On the other hand, the ld.AR has relied, rather heavily, on the decision of Hon'ble Bombay High Court rendered in the case of CIT vs W.I.A.A. Club Ltd, 136 ITR 569. In that case it has been held that the entrance fee itself had two portions one relatable to acquiring the right for availing the services and facilities extended by the club and the other towards annual subscription. In these circumstances, the first part has been treated as a capital receipt and the second part as revenue receipt. If this decision is applied to the facts of the given case, it would become a very difficult situation for the assessee itself. It is a clear cut case of the assessee-company that at the entrance level it charges a cumulative amount towards corpus fund of the club which is utilized in raising infrastructure and thereafter to avail facilities of the club, the member is required to make monthly/annual subscription. In a way, the facts of the Hon'ble Bombay High Court and the given facts are not resembling with each other. So, the decision of the Hon'ble Bombay High Court (supra) would not apply to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mutuality. The ld.AR has tried to dissuade us from reaching a finding that this is a revenue receipt with reference to certain observations/narrations made in these decisions by stating them out of context. As we have already stated that the decision of Hon'ble Bombay High Court is not exactly on similar facts. The Hon'ble Bombay High Court has not discussed or did not have the occasion to have the benefit of the aforementioned Hon'ble Supreme Court s decisions. In so far as the decision of ITAT, Ahmedabad Bench in the case of ACIT vs Karnavati Club Ltd, 4 ITR (Trib) 174 is concerned, the Hon'ble Tribunal has followed the decision of the Co-ordinate Bench in assessee s own case for earlier years and it was not brought before us the exact reasoning given in that earlier decision and the fate of the same before the Hon'ble Gujarat High Court. So, exact reasoning to arrive at the conclusion was not available, it is not possible to adopt this decision when there is a Hon'ble Supreme Court decision on this very issue. The cumulative effect of above reasoning and our in depth investigation done into the aspect of this issue is that the impugned receipt has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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