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TMI Blog2015 (11) TMI 1890X X X X Extracts X X X X X X X X Extracts X X X X ..... above stated membership contribution. The Revenue's sole substantive ground in its cross appeal assail correctness of the spreading over exercise hereinabove. 3. The assessee-company is engaged in the business of conveyance of industrial effluent and maintenance of channel. It received membership contribution from its new members for life time a sum of Rs. 2,09,76,612/- in lieu of offering effluent disposal facility. The Assessing Officer taxed the entire sum in the impugned assessment year of receipt by following his line of action adopted in assessment year 2001-02, 2004-05 to 2008-09 thereby rejecting assessee's accounting treatment treating the same as a capital receipt on the ground that it was yet to perform its part of obligation. The same was accordingly adjusted the brought forward sum resulting in the impugned addition of Rs. 39 lacs. 4. The assessee preferred appeal. The CIT(A) has dealt with the issue as under:- "4. I have considered appellant's submissions but do not find them to be acceptable. Appellant company, a co-operative venture looking after disposal of effluent discharges by member industries provides 15 km long channel up to Gulf of Cambay to the memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-refundable and were received in the course of normal business activity of the appellant. Nomenclature given by the appellant, i.e. capital contributions to such one time payments is immaterial. Appellant's contention that the so called capital contributions received from the members were capital receipt is, therefore not acceptable and is already rejected by the Hon'ble ITAT also. In AYs 2001-02, 04-05 & 05-06, ITAT by following decision of ITAT's Special Bench in the case of Mahindra Holidays and Resort (I) Ltd (2010), 131 TTTJ (Chennai) (SB) and by referring to AS-9, accepted appellant's offer to tax, on deferred basis one time contributions received from members. Since AY 08-09, appellant, unlike preceding years where one time contributions were offered as income on deferred basis over a period of 5 years started not offering one time contributions as income at all. Appellant did not even include l/5th portions of one time contributions received in preceding four years as its taxable income for AY 2008-09 as well as AY 2009-10. One time contributions received from members are undoubtedly of revenue nature as held by the Hon. ITAT, Ahmedabad in appellant's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve already given copy in our earlier submission. Be as it may, the appellant company held this entire amount of Rs, 39, 00, 000/- as amount received as capital contribution. The entire capital contribution, being of capital nature, has been included in the current liabilities as the same has been received from the member with specific direction that it should be spent on capital project envisaged by the company. As per USER"S AGREEMENT on page no 3 specify that CAPITAL CONTRIBUTION means contribution towards capital expenditure incurred/to be incurred by ECPL for its activities. Leaving this aspect aside, the moot question that arises is whether the receipt of capital contribution is an income of the assessee? This appeal is, therefore, against the taxability of the entire capital receipt as revenue receipt as has been done by the Ld. Assessing Officer in one year. It is a clearly established principle that in determining a receipt as capital receipt or revenue receipt one must have regard to the nature and quality of the receipt. Every receipt cannot be described as income much less profit as commonly understood. The connection between quality of the receipt and its sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any and it becomes owner of the entire sum only when the service obligation is fully discharged for the entire period of membership as per agreement. Relying on the SC decision in the case of E.D. Sassoon & co ltd, the SB observed that the following two condition are necessary to say that income has accrued to or earned by a taxpayer^) the taxpayer must have come into existence and the taxpayer must have acquired a right to received the payment. In the present case, a debt is created in favour of the taxpayer immediately on execution of the contract. However, it cannot be said that the taxpayer has fully contributed to its accruing by rendering services which will be done over a number of years. Moreover the assessee company allows to the members to utilize its capital facilities for the period of 99 years for discharge of agreed quantities of effluent. In other words, Assessee Company has to perform its part of obligation for next 99 years and to keep the capital set up intact and allow the use thereof by the members. This is akin to hiring the capital structure of the assessee company for the next 99 years by making one time hiring charges. Since the assessee company has to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant, such sum taxable in AY 2009-10 is Rs.17,25,648/-. Assessment for AY 2009-10 is accordingly directed to be enhanced by Rs.17,25,648/-. Penalty proceedings u/s 271(1)(c) r.w.s. 274 for furnishing inaccurate particulars of income are also initiated in respect of income enhanced." 5. We have heard both the parties and perused the case file. It emanates from the case file that a co-ordinate bench of a tribunal in similar cross appeals ITA Nos. 1945/Ahd/2011 and 1948/Ahd/2011 for assessment year 2008-09 decided on 24-07-2015 remits back the issue of assessment of assessee's above stated capital receipt contribution back to the assessing authority for reworking as per earlier order in assessment year 2001-02. It further observes that the receipts received during the relevant accounting period are to be spread over for a period of five years instead of assessing the same in one assessment year. The second issue of enhancement stands decided against assessee. We follow suit in these facts and want of distinction being pointed out in the above stated decision. The assessee's first ground accordingly is remitted back to Assessing Officer. Second substantive ground fails accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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