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TMI Blog1985 (9) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer included Rs. 25,050 which represented the entrance fees received from the new members. The Income-tax Officer found that the entrance fees had been directly capitalised in the balance-sheet. A copy of the order of the Income-tax Officer has been annexed and marked as annexure A forming part of the statement of the case. On appeal before the Appellate Assistant Commissioner, he took the view that the entrance fees received from the new members of the club were not a recurring or revenue receipt which could be brought to tax. This, according to him, had to be paid once and for all by a new member in order to win the right to participate in the activities of the club and a regular monthly subscription had to be paid as cost of participation. The Appellate Assistant Commissioner noted that the initial admission fee conferred the right of membership but did not entitle the members to participate without paying monthly subscription. The Appellate Assistant Commissioner, therefore, held that this fee was in the nature of a share capital of the company and was a capital receipt in the hands of the club. The Appellate Assistant Commissioner, therefore, deleted the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the conclusion that the income of the club including members' subscription and entrance fees is liable to income-tax and he determined the total income at Rs. 31,960 which included the net income as shown by the assessee besides other income and included the entrance fee of Rs. 25,050 as the income of the assessee although it had been directly capitalised in the balance-sheet. The Appellate Assistant Commissioner also came to a finding that the income of the club was not exempt on the basis of mutuality. This point was not raised before the Tribunal and thus now it is the admitted case that the income of the club is not exempt from taxation on the ground of mutuality. In such circumstances, it has only to be seen whether the amount of Rs. 25,050 received as entrance fees from the members by the club is revenue receipt or capital receipt. Mr. B. P. Rajgarhia for the Revenue has relied on the case of the Liverpool Corn Trade Association Limited v. Monks (1926) 10 TC 442 (KB), which is a decision of the High Court of justice (King's Bench Division). In this case, the appellant-association was incorporated under the Companies Act as a limited company with the objects, inter alia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in addition to the subscription payable by each member for his membership. Every member who wished to have the name of any company included in the quotations list so that its shares or stock may be placed on the stock market, had to make an application in that behalf with a fee of Rs. 1,000. The assessee received during the accounting year Rs. 60,750 as entrance fees and Rs. 15,687 as subscriptions in respect of the authorised assistants and a sum of Rs. 16,000 as application fees from the members for including new companies in the quotations list. In those circumstances, it was held that each of the aforesaid sums of money accrued to the assessee on account of its performing specific services for its members, that these sums were remuneration definitely related to distinct services performed by the assessee for its members or such of them as availed themselves of such services and the said sums were, accordingly, assessable to income-tax under section 10(6) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the 1922 Act"), as profits and gains derived from carrying on business. It was also held in this decision that the words " performing specific services " in secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxability; and, therefore, the fact that the appellant company showed the admission fees as capital in its books was not decisive on the question of their taxability; that the amounts received as admission fees from the authorised assistants fell within the principle of the decision of the Supreme Court in CIT v. Calcutta Stock Exchange Association Ltd. [1959] 36 ITR 222 and were taxable; and that as the body of trading members who paid the entrance fees and the shareholders among whom the profits of the company were distributed were not identical and the element of mutuality was lacking, the company carried on a business whose profits were taxable and, therefore, the admission fees received from the members were taxable in its hands. It appears from this decision at pages 496 and 497 that the total income of the assessee for the year 1947-48 was Rs. 29,363 out of which a sum of Rs. 15,975 shown as admission fees was deducted and the income returned was Rs. 13,388. In the profit and loss account of that year, members' admission fees were shown as Rs. 9,000 and on account of the authorised assistants' admission fees Rs. 6,975. The Income-tax Officer who made the assessment for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s collected was a capital receipt and not a revenue receipt, at any rate it was a casual and non-recurring receipt not arising from business contemplated by section 4(3)(vii) of the 1922 Act and was not assessable to income-tax. In this case, reference was made to the decision of the Supreme Court reported in CIT v. Calcutta Stock Exchange Association Ltd. [1959] 36 ITR 222, but reference was made only to the amount of Rs. 16,000 which was realised in consideration of putting the names of certain companies on the quotations list, but no reference was made to Rs. 60,750 as entrance fees from the members which was received as entrance fees for the authorised assistants. In this case, no reference was made to the decision in Delhi Stock Exchange Association Ltd v. CIT [1961] 41 ITR 495, where admission fees were received from the members as entrance fees although certain amounts were also received from the members' authorised assistants. In view of this Supreme Court decision in [1961] 41 ITR 495, the decision of the Mysore High Court Pangal Nayak Bank Ltd. v. CIT [1964] 52 ITR 915 cannot be followed. Mr. K. N. Jain has also relied on the case of CIT v. W. I. A. A. Club Limited [198 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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