Income tax treatment of membership fees received in advance: The ...

Tax treatment of membership fees, interest on plot installments, disallowances & TDS on credit card charges.

Case Laws     Income Tax

August 17, 2024

Income tax treatment of membership fees received in advance: The membership fees comprise a non-refundable portion and an advance amount for availing discounted services. The non-refundable portion is taxable upfront, while the advance amount is taxable on a deferred basis over the service period, unless there is evidence of a different revenue recognition pattern. The assessee's methodology of offering the entire amount to tax has been accepted by the Revenue authorities in previous years. Disallowance u/s 14A: No disallowance is required u/s 14A in the absence of any exempt income earned by the assessee. Interest paid on plot installments: The interest expenditure incurred on acquisition of a capital asset is not allowable as a deduction under the proviso to Section 36(1)(iii). The interest cost should be added to the cost of the land acquired. Ad-hoc disallowance of expenses: No ad-hoc disallowance of expenses, such as 5% of business promotion, traveling, and telephone expenses, is permissible without providing a rationale for such disallowance. TDS on credit card transaction charges: As per Notification No. 56/2012 and the Delhi High Court's decision in JDS Apparels Pvt. Ltd., no TDS is required to be deducted u/s 194H on transaction charges levied by banks on credit card payments received from customers.

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