9911796707
TMI Blog2017 (9) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... me for the year under consideration?" 2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating non-refundable one-time entrance fee as capital receipt instead of treating the same as revenue receipt?" 3. At the outset, the learned Counsel for the assessee filed copy of Tribunal's order for earlier years in assessee's own case for AY 2004-05 to 2008-09 wherein exactly same issue of club entry fee has been set aside by the Tribunal to the file of the AO in ITA No. 7905/Mum/2011 for the AY 2008-09 dated 26-09-2016 which reads as under: - "We have gone through the entire background of the case and also delved upon the various important case laws on the issue in hand, we have observed that the assessee is not governed by the doctrine of mutuality which is settled and undisputed position between the rival parties in the instant case. The assessee is a company and shareholders in their capacity as shareholders are distinct from members of the club who are entitled to avail the facilities and amenities offered by the club and hence complete identity between shareholders of the company and members of the club is lacking. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e club which has no proximity to services being performed to its members and is merely a price paid for obtaining membership of the club which is capital receipts not exigible to tax, and secondly for the consolidated annual subscription included in the life membership fees which is revenue receipt which is exigible to tax being charged for making available services by the club which are only available to members of the club on obtaining membership of the club. In the instant case , there are two components of the amount paid by the members at the time of seeking admission for becoming member of the club being club membership enrollment fund, one is a refundable deposits which , in our considered view, has close proximity to payment being made for obtaining the membership of the club and being capital receipts is not exigible to tax, and second component is towards non-refundable one time entrance fee paid by the members on being admitted to membership which has close nexus and proximity with the payments being made for services being performed by the assessee to its members being made available to members immediately on obtaining the membership of the club and also the assessee be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch business. The business was more like that in Liverpool Corn Trade Association v. Monks [1926] 2 KB 110. In that case an association was formed with the object of promoting the interest of corn trade with a share capital upon which the association was empowered to declare a dividend. The association provided a corn exchange market, newsroom and facilities for carrying on business and membership was confined to persons engaged in the corn trade and every member was required to be a shareholder and had to pay an entrance fee. The association also charged the members and every person making use of facilities a subscription which varied according to the use made by them. The bulk of the receipts of the association was derived from entrance fees and subscriptions. It was, therefore, contended that the association did not carry on a trade and that it was a mutual association and entrance fees and subscriptions should be disregarded in computing assessment of the assessable profits. It was held that it was not a mutual association whose transactions were incapable of producing a profit; that it carried on a trade and the entrance fee paid by members ought to be included in the associati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Hon'ble Supreme Court in the case of Calcutta Stock Exchange Association Limited(supra), decision of Hon'ble Supreme Court in the case of Delhi Stock Exchange Association Limited, decision of Hon'ble Patna High Court in the case of United Clubs(supra) , decision of Hon'ble Bombay High Court in the case of Shree Nirmal Commercial Limited(supra) which was later reiterated in Full Bench decision of Hon'ble Bombay High Court in the case of Shree Nirmal Commercial Limited (supra) and which was recently affirmed by Hon'ble Supreme Court in the decision of G.S. Homes and Hotels Private Limited(supra) which also supports' our decision that non-refundable entrance fee of Rs. 31,34,037/- received by the assessee in the instant case based on factual matrix of the case is chargeable to tax as revenue receipts in the hand of the assessee .We order accordingly. (b) Advance Membership fee- The assessee received Rs. 4,18,96,537/- as advance membership fee for 25 years from its members. The assessee is also receiving annual charges from its members and also charges are collected from members additionally for use of various amenities/facilities by its members such as food , beverages, swimming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matching revenue been received from the members of the club. It is equally true that the assessee is also collecting annual charges w.e.f. 01-01-2005 from members apart from membership fee and also collecting charges for usage of various services such as swimming coaching, squash coaching food, beverages ,banquet, gym and health club, commission etc. by the members which are separately collected by the assessee from its members based on actual usage of such facilities/amenities which will also enable the assessee to have regular stream of revenue in the years to come to enable it to incur expenditure for maintaining the facilities/amenities in the years to come. But, this is also undisputed position between the rival parties that the advance membership fee is collected by the assessee from its members for a period of 25 years in advance. The learned CIT(A) had based on decision of Special Bench of Chennai Tribunal in the case of Mahendra Holidays and Resorts India Limited(supra) has brought to tax 60% of advance membership fee collected for 25 years in the year of receipt. It is also true that some members may leave the club after a brief stay despite paying membership fee for 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
