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TMI Blog2022 (4) TMI 1388X X X X Extracts X X X X X X X X Extracts X X X X ..... Anil R. Shah, A.R. For the Revenue : Shri James Kurian, CIT-D.R. ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Pr. Commissioner of Income Tax-4, Ahmedabad vide order dated 13/03/2020 passed for the assessment year 2015-16. 2. The assessee has raised following grounds of appeal:- The Principal Commissioner of Income Tax-4, Ahmedabad (herein after referred as CIT) has erred both in Law and on facts in passing order u/s. 263 dated 13-3-2020 on the following amongst the other Grounds. I. On Legality: (1) CIT has erred in holding that order u/s. 143(3) dated 21-12-17 is erroneous and prejudicial to the interest of the revenue and has further erred in setting aside the same with a direction to carry out further inquiries from details and documents in order to examine taxability of ₹ 8,63,92,930/- being entrance fees received from the members treating the same to be a revenue receipt and taxable income of the Appellant. (2) It is submitted that the CIT has passed the order without giving a chance of personal hearing to the Appellant and has further erred in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order so passed, the A.O. made an addition of ₹ 2,10,73,529/- being the total of various incomes treated as non-mutuality income and also disallowed a sum of ₹ 7,89,314/-claimed against the incomes chargeable under the head Income from other sources . Thereafter, the appeal filed by the assessee before the CIT(A)-8, Ahmedabad stood fully allowed in favour of the assessee vide order dated 15.10.2019. 3.1 Ld. Pr. CIT issued notice u/s order passed u/s 263 of the Act to the assessee on the ground that during the year under consideration, the assessee had received entrance fees of ₹ 8,63,92,930/- which had been capitalized in the balance sheet. At the time of assessment, there were several decisions which had held that entrance fees received by the assessee-club at the time of entrance of new members is a receipt of revenue nature and chargeable to tax in the hands of the club viz. the Supreme Court decision in the case of Delhi Stock Exchange Ltd. Vs. CIT(1959) 36 ITR 222(Supreme Court) . However, the A.O. did not take note of the above-referred decision and did not tax the amount of ₹ 8,63,92,930/- as taxable receipts. Thus, the assessment order passed u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iption fee and activity fees for participating in the activities offered by the club which are treated as revenue receipts against which the expenditure has also been incurred and debited in the profit . loss account. The assessee also relied on the following decisions:- (a) ACIT Vs. Karnavati Club Ltd.(2010) 4 ITR (T) 724 (b) ACIT Vs. W.I.A.A. Club Ltd.(1979) 2 Taxman 57. (c) CIT Vs. Dinners Business Services (Pvt.) Ltd. (200) 132 Taxman. 758 (d) ACIT, Circle-2 Vs. Royal Western India Turf Club Ltd.(2017) 88 Taxman.com 567. 3.3 Ld. Pr. CIT however, rejected the assessee s contentions on the grounds firstly, that the careful perusal of the entire case-records revealed that the A.O. did not raise specific query with regard to crediting of the amount of ₹ 8,63,92,099/- as capital receipts either through a written communication or through an order-sheet entry. Thus, there is an omission on the part of the A.O. for carrying out necessary inquiries or verification of the issue as mentioned above. Secondly, the very basis of resorting to the revisionary proceedings u/s 263 of the Act is the decision of the Hon'ble Supreme Court of India in the case of Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges 4 and 122 of the paper book in support of his contention. On merits of the case, the ld. counsel for the assessee submitted that in respect of the order of assessment sought to be revised, the ld. CIT(A) has granted full relief and accepted the assessee s view that the assessee is entitled to benefit of non-taxation of certain receipts on the principles of mutuality. The ld. counsel for the assessee submitted that the entrance fee is a one-time fee which is non-refundable to the member during his tenure of membership, hence is a capital receipt. The ld. counsel for the assessee submitted that the assessee s case is squarely covered by the decision of ACIT vs. Karnavati Club 4 ITR (T) 174, CIT vs. W.I.A.A. Club Ltd. 2 taxmann 57 and CIT vs. Diners Business Services 132 taxmann 758 which have held that entrance fee charged by assessee-club as a one-time fee for enrolment as members of 'executive centre', which was not refundable, was a capital receipt. The Ld. Counsel for the assessee submitted that the same were discussed with Pr. CIT, who has not given any cogent reasons for disregarding the same. Ld. Counsel for the assessee further submitted that the Pr.CIT has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that the assessee placed reliance on several cases in 263 proceedings before ld. Pr. Ld. CIT(A) (ACIT vs. Karnavati Club 4 ITR (T) 174, CIT vs. W.I.A.A. Club Ltd. 2 taxmann 57 and CIT vs. Diners Business Services 132 taxmann 758) However, the Pr.CIT has not given any reason as to how these cases are distinguishable from assessee s facts. 7.1 We shall first briefly discuss the applicability of the cases cited by Ld. Counsel for the assessee to the assessee s set of facts. We note that in the case of ACIT vs. Karnavati Club 4 ITR (T) 174 , the only issue involved was whether entrance fees received by the assessee club are capital receipt and not revenue receipt . While deciding in favour of the assessee, the jurisdictional Ahmedabad ITAT observed as below: 12. The issue is directly covered in favour of the assessee by the aforementioned decision of the hon'ble Bombay High Court in the case of CIT v. Diners Business Services (P.) Ltd. [2003] 263 ITR 1 , as in the said case, the entrance fee was charged by the assessee for enrolment of its customers as members of 'executive centre'. The entrance fee was a one-time fee and only members were eligible to ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxability of members' admission fees in hands of assessee as revenue receipts on the ground that since body of trading members and shareholders were not identical, the element of mutuality was lacking . However, we note that in the in the case of State of West Bengal v. Calcutta Club Ltd [2019] 110 taxmann.com 47 (SC) , the Hon'ble Supreme Court has that upheld that the doctrine of mutuality is applicable to both unincorporated and incorporated Member Clubs, while holding that sales tax could not have been levied on such clubs for supply of food and drinks to permanent members. Further, the Ld. CIT(A), in appeal against the assessment order which is sought to have revised in order passed u/s 263 of the Act proceedings, has granted relief to the assessee on the principles of mutuality. The Hon'ble ITAT in the assessee s own case for AY 1966-67 has held that the principles of mutuality applies to surplus arising to the Club, which would be otherwise taxable under the head profits and gains from business and profession . It would also be apt to refer to the decision of ITAT in the case of DCIT v. Bengal Rowing Club [1994] 48 ITD 512 (Calcutta) , where the ITAT discu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it was neither a trade nor professional association. On this finding of fact, the contention advanced on behalf of the revenue was expressly repelled by the Delhi High Court. At pages 116 and 117 of the report, the High Court held as under: The learned counsel for the revenue had referred to section 10(6) of the Indian Income-tax Act, 1922, but this has no application to the present case. As held by the Supreme Court in Royal Western India Turf Club case. section 10(6) has no application, for the assessee is not a trade or professional or other similar association within the meaning of that subsection. Trade association is not the same thing as a trading association. A trade association may be an association of tradesmen to protect their common interest. The assessee, as found by the Tribunal in the statement of the case, is not such an association; nor is it a professional association. The said section, therefore, does not apply to the case of the assessee. The cases of Calcutta Stock Exchange Association and of the Delhi Stock Exchange Association are entirely different, as the said associations are not members' clubs. The receipts sought to be charged in both c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment has taken place in which such Entrance membership has not been brought to tax as revenue receipts. We note that in the case of ACIT v. Royal Western India Turf Club Ltd. [2017] 88 taxmann.com 567 (Mumbai - Trib.) the facts were that in earlier years, in the case of assessee, the entrance fee was accepted as capital receipt and it goes to balance sheet as reserve account. The ITAT held that where one-time entrance fees received by assessee, race club, from its members had been treated as capital receipts in earlier years, on basis of principle of consistency, such fees would be treated as capital receipt unless and until contrary facts are brought on record by revenue. The ITAT observed as below while passing the order: 2.5 The sum and substance of the aforesaid judicial pronouncements is that on the basis of principle of judicial discipline, consistency has to be followed and once in a particular year, if any view is taken, in the absence of any contrary material, no contrary view is to be taken as finality to the litigation is also a principle which has to be followed. Before us, no contrary facts or any adverse material was brought on record by the Revenue, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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