2011 (10) TMI 767

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..... rounds raised by the Revenue in the present appeal read as below : 2) The learned CIT(A) has erred in deleting the addition made on account of entrance fees received from corporate members and service members following the decision of the Hon ble High Court and Hon ble ITAT in the assessee s own case for earlier years. 2.1) The learned CIT(A) ought to have seen that the assessing officer has held that the principle of mutuality applies only in the case of receipts from members as reiterated by the Hon ble Supreme Court but the receipt from non-members as entrance fees are assessable to tax. 2.2) It is submitted that the question of taxability of receipts particularly in the nature of entrance fees from non-members was not decided .....

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..... received from non-members alone is taxable or not as against the entire entrance fees irrespective of membership category decided for the A.Y. 2003-04. 2. We considered the appeal. The real issue involved in the present appeal is that whether the entrance fees collected from non-voting members like corporate members and service members could be treated as capital in nature and thereby not liable for taxation. The assessee holds that as in the nature of voting members, the entrance fees collected from non-voting members per take the character of capital receipt which directly go to enrich the corpus fund of the assessee club. It is the case of the Revenue that there is a fundamental distinction between the rights and privileges of voting .....

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..... if any. But non-voting members do not have such a right. This is because the entrance fees of the voting members directly go to the corpus of the assessee club. Treating the entrance fee paid by the voting members as capital receipt is matched with the right of the voting members to claim the share in the residual available at the time dissolution. Therefore, there is a nexus between the capital payment of entrance fee and the ultimate right enjoyed by a voting member. Such a nexus is not available in the case of nonvoting members, as they do not have any ultimate right. They have no right for the corpus for the assessee club and when there is no such right, the entrance fee paid by them cannot be credited to the corpus fund of the assesse .....

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