CIT vs. DLF COMMERCIAL DEVELOPERS LTD

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ITA - 180 / 2012HC Delhi30 March 20121 pages
For Petitioner: NP SAHNI
AI SummaryDismissed

What did the High Court hold?

The Tribunal correctly applied the principle that upfront, non-refundable fees for services spread over a fixed period should be treated as deferred income, not immediately taxable.

What were the facts?

The assessee received a non-refundable upfront membership fee for club facilities, which had a fixed tenure. The Tribunal held that this upfront fee secured the use of facilities for a specified period.

What were the issues?

Whether non-refundable upfront membership fees for club facilities with a fixed tenure constitute immediately taxable income or deferred income.

Which sections of the Income-tax Act were involved?

Not explicitly mentioned, but relates to the concept of income and its recognition.

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IN THE HIGH COURT OF DELHI AT NEW DELHI . . . ITA 180/2012 . . . CIT ..... Appellant . Through Mr. N P Sahni, sr. standing counsel . . . versus . . . DLF COMMERCIAL DEVELOPERS LTD ..... Respondent . Through Mr. Amit Sachdeva, Adv. . . . CORAM: . HON'BLE MR. JUSTICE SANJIV KHANNA . HON'BLE MR. JUSTICE R.V.EASWAR . . . O R D E R . 30.03.2012 . . . We have examined the contention raised by the appellant-Revenue in . this appeal, which pertains to assessment year 2006-07 and arises out the order dated 8.7.2011 passed by the Income Tax Appellate Tribunal in the case of DLF Commercial Developers Ltd. It is interesting to note that the Revenue in the grounds of appeal has pleaded that the concept of deferred income is alien to the Income Tax Act, 1961. . The Tribunal in the impugned order has referred to the factual matrix and that the tenure membership of a club was granted to the persons/individual. The membership fee consisted of two parts. Non- refundable fee, which was paid upfront and then periodical monthly payments. Membership fee paid upfront was not refundable. The Tribunal referring to the nature and character of payment and terms of membership, has come to the conclusion that there was a fixed tenure or a period during which the said members were permitted and allowed to enjoy the benefits and facilities. As regards the non-refundable upfront payment it was observed and held that it entailed and secured use of facilities for the period specified. The assessee, therefore, had to provide and incur expenses for providing the said facilities. The Tribunal has followed the decision of this Court in CIT Vs. Dinesh Kumar Goel (2011) 331 ITR 10. In the said case, this High Court has referred to the concept of income, and the principles of accountancy. In the said case, the respondent-assessee was running a coaching institute and was receiving upfront fee for providing coaching, which was spread over one year or two years. . Keeping in view the factual position, Tribunal has rightly appreciated and applied the law as elucidated in the case of Dinesh Kumar Goel (supra). We do not think any substantial question of law arises. . The appeal is dismissed. No costs. . . . SANJIV KHANNA, J . . . . . . . R.V.EASWAR, J . MARCH 30, 2012 . vld . . . $ 10, 12, 14 to 17 . . .

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