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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAVISH SOOD
PAN No. AABCR8519H (Revenue) (Assessee) Assessee by : Shri Salil Kapoor, A.R Revenue by : Shri Mahendra Ahuja. Sr. D.R Date of Hearing : 23/11/2021 Date of pronouncement : 24/01/2022 ORDER PER RAVISH SOOD, J.M:
The present appeal filed by the revenue is directed against the order passed by the CIT(A)-14, Mumbai, dated 27.06.2019, which in turn arises from the order passed by the A.O u/s 143(3) of the Income Tax Act, 1961 (for short ‘Act’), dated 26.12.2018 for A.Y.2016-17. The revenue has assailed the impugned order on the following solitary ground before us:
“Whether on the facts and circumstances of the case and in law the Hon’ble CIT(A) was justified in treating the entrance fees amounting to Rs.3,99,00,00/- received from its members a s capital receipts as against revenue receipts ignoring the facts that facilities that are made available to the members are done in normal course of its business as the assessee is engaged in the business of race course ?”
Briefly stated, the assessee company which is engaged in the business of conducting of horse races, turf club house and providing hospitality to its members and their guests had e-filed its return of income for A.Y. 2016-17 on 17.10.2016, declaring an income of Rs. nil. The return of income filed by the ACIT -8(1)(1) Vs. M/s Royal Western Turf Club Ltd.
assessee company was processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was selected for complete scrutiny assessment u/s 143(2) of the Act.
Controversy involved in the present appeal lies in a narrow compass, i.e, as to whether or not the entrance fees of Rs.3.99 crores received by the assessee company at the time of granting membership of the club is in the nature of a capital receipt, as claimed by the assessee, or a revenue receipt as assessed by the department. Shorn of unnecessary details, the assessee company during the year under consideration was in receipt of entrance fees at the time of granting of different categories of membership, viz. life membership, club membership, service membership, temporary service membership and membership to the locals at Pune, which amount was credited in the general reserve of its balance sheet. Holding a conviction that the aforesaid amount of entrance fees was in the nature of a revenue receipt, the A.O in the course of the assessment proceedings called upon the assessee to put forth an explanation as to why the same may not be brought to tax. In reply, it was the claim of the assessee that as the entrance fees was a one time payment that was charged to a person for admission to a particular category of membership and, the membership by itself did not vest the member to get any return in form of any services but only a right to avail the services provided by club on payment of appropriate charges, therefore, the same was in the nature of a capital receipt in its hands. In order to support his aforesaid claim it was submitted by the assessee that a view to the contrary taken by the department in the preceding years had been dislodged by the appellate forums and the receipt of entrance fees had been held as being in the nature of a capital receipt. Also, in order to drive home his aforesaid claim the assessee had drawn support from the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Diners Business Service Pvt. Ltd., 262 ITR 1 (Bom). However, the A.O was not ACIT -8(1)(1) Vs. M/s Royal Western Turf Club Ltd.
persuaded to subscribe to the aforesaid claim of the assessee. Observing, that the one-time payment made by the members by way of entrance fees was for availing special facilities that were made available to them by the club in the normal course of its business, the A.O was of the view that the receipts in question could not be held as a capital receipt and was clearly exigible to tax as revenue receipts in the hands of the assessee company. Backed by his aforesaid deliberations, the A.O vide his order u/s 143(3), dated 26.12.2018 after, inter alia, treating the entrance fees of Rs.3.99 crores as being in the nature of a revenue receipt in the hands of the assessee, therein, scaled down its loss to an amount of Rs.(-)19,19,02,030/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). Observing, that the issue in hand, i.e, as to whether the entrance fees received by the assessee company was in the nature of a capital receipt, as claimed by the assessee, or a revenue receipt as assessed by the department, the CIT(A) noticed that the same was squarely covered in favour of the assessee by the order of the Tribunal in the assessee’s own case for A.Y. 2007-08 to A.Y. 2009- 10 in 4235 and 6336/Mum/2012, dated 27.07.2016, and also the orders of his predecessor. Accordingly, the CIT(A) respectfully following the view taken by the Tribunal directed the A.O to treat the amount of entrance fees of Rs.3.99 crores as a capital receipt. For the sake of clarity the observations of the CIT(A) qua the issue in question are culled out as under:
“I have considered the submission made by the appellant and the reasons recorded by the A.O. So far as the first ground of appeal is concerned, the issue under consideration is covered in favour of the assessee by the decision dated 27.07.2016 of the jurisdictional Tribunal in the appellant’s own case for A.Y. 2007-08 to 2009-10 in 4235 and 6336/Mum/2012. This issue is also decided in favour of the appellant by CIT(A) for A.Ys. 2007-08 to 2012-13. Respectfully following the same, the action of the AO in treating the entrance fees received by the appellant from life members, club and stand members, service members and local members of the club as revenue receipt is set aside and the A.O is directed to treat the same as the capital receipt in the hands of the appellant. Accordingly, addition of Rs.3,99,00,000/- made by the A.O is directed to be deleted. This ground of appeal is therefore allowed.”
ACIT -8(1)(1) Vs. M/s Royal Western Turf Club Ltd.
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We have heard the ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. As observed by us hereinabove, the revenue has sought our indulgence for adjudicating, as to whether or not the CIT(A) is right in law and the facts of the case in concluding that the entrance fees received by the assessee company at the time of granting the membership is in the nature of a capital receipt. As is discernible from the order of the CIT(A), it is a matter of an admitted fact that the aforesaid issue had earlier came up before the coordinate benches of the Tribunal in the assessee’s own case for A.Y. 2007-08 to A.Y. 2009-10 in 4235 & 6336/Mum/2012, wherein it was observed by the Tribunal that the entrance fees received by the assessee company at the time of granting of membership to life members, club members, service members, temporary service members and local members was in the nature of a ‘capital receipt’. As is discernible from the order of the CIT(A), we find that the Tribunal while disposing off the appeal in the case of the assessee for A.Y. 2007-08 to A.Y. 2009-10, vide its order dated 27.07.2016 had held that the entrance fees received by the assessee company was in the nature of a capital receipt, as claimed by the assessee, and not in the nature of a revenue receipt as assessed by the department, as under:
“2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is in the business of conducting horse races and also providing hospitality services to its members and their guests. The assessee declared nil income after carry forward losses of Rs.2,04,85,610/-. The assessment was completed u/s 144 of the Act assessing the income at Rs.19,75,86,345/- on 29/12/2009 after set off of carry forward losses of Rs.12,22,09,693/-. The Id. Assessing Officer added Rs.2,92,13,500/- (entrance fee) by holding the same as revenue in nature. On appeal, before the Id. CIT(A), the impugned addition was treated as capital in nature. The Revenue is aggrieved and is in appeal before this Tribunal.
ACIT -8(1)(1) Vs. M/s Royal Western Turf Club Ltd.
2.3. If the observation made in the assessment order, conclusion drawn in the impugned order, assertion made by the Id. Respective counsel and the material facts available on record, if kept in juxtaposition and analyzed, there is no dispute to the fact that right from practically the date of incorporation i.e. 1925 onwards, the entrance fee from the members was treated as capital in nature. As explained by the Id. Counsel that majority of the orders were passed u/s 143(3) of the Act. We have noted the facts of Assessment Year 2005-06, the order passed by the Id. Commissioner of Income Tax (Appeals), wherein, vide ground no. 2(page-2 onwards), entrance fee, received from its members held that the onetime entrance fees, received from its members is in the nature of lifetime membership fees, hence it cannot be treated as annual subscription as the same is collected once in lifetime, therefore, it is a capital receipt. The Hon'ble jurisdictional High Court in CIT vs. Diners Business Services Pvt. Ltd. 263 ITR 1 (Bom.) held that any sum paid by a member to acquire the rights of a club is a capital receipt. We further note that for Assessment Year 2003-04, while framing the assessment u/s 143(3) of the Act and also for Assessment Year 2001-02, identically the claim of the assessee was allowed. No contrary material was brought to our notice. It is also noted that even revisional jurisdiction u/s 263 was invoked by the Department and finally the entrance fees was treated as capital receipt, therefore, we find force in the contention of the assessee. 2.4. If this issue is analyzed on the principle of consistency, we note that in earlier years, identically the claim of the assessee was decided in favour of the assessee by accepting the entrance fees as capital receipt, therefore, we are of the view that unless and until contrary facts are brought on record by the Revenue, no U-turn is permissible. The learned Assessing Officer is bound by rule of consistency. The following cases support the case of the assessee:- i. Parshuram Pottery Works Ltd. vs ITO106 ITR 1 (SC) ii. Security Printers 264 ITR 276(Del.) iii. CIT vs Neo Polypack Pvt. Ltd. 245 ITR 492 (Del.) iv. CWT vs Allied Finance Pvt. Ltd. 289 ITR 318 (Del.) iv. Berger Paints India Ltd. vs CIT 266 ITR 99 (SC) v. DCIT vs United Vanaspati (275ITR124) (AT) (Chandigarh ITAT) vi. Union of India vs Kumudini N. Dalai 249 ITR 219 (SC) vii. Union of India vs Satish Pannalal Shah 249 ITR 221 ix. B.F.Varghese vs State of Kerala 72 ITR 726 (Ker.) x. CIT vs Narendra Doshi 254 ITR 606 (SC) xi. CIT vs Shivsagar Estate 257 ITR 59 (SC) xii. Pradip Ramanlal Seth vs UOI204 ITR 866 (Guj.) xiii. Radhaswamy Satsang vs CIT 193 ITR 321 (SC) xiv. Aggarwal warehousing & Leasing Ltd. 257 ITR 235 (MP)
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, therefore, on the principle of consistency also, the assessee is having a good case in its favour, thus, considering the totality of facts, we find no infirmity in the order of the Ld. Commissioner of Income Tax (Appeal).”
ACIT -8(1)(1) Vs. M/s Royal Western Turf Club Ltd.
As the facts and the issue involved in the case of the assessee for the year under consideration remains the same as were there before the Tribunal in the preceding years, therefore, finding no reason to take a different view we respectfully follow the same. Accordingly, finding no infirmity in the view taken by the CIT(A) who had rightly held that the entrance fees received by the assessee company is in the nature of a capital receipt, we uphold his order. The Ground of appeal No. 1 raised by the revenue is dismissed.
Resultantly, the appeal filed by the revenue is dismissed.
Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board. Sd/- Sd/- (Rajesh Kumar) (Ravish Sood) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 24.01.2022 PS: Rohit Copy of the Order forwarded to :
1. 1. The Appellant 2. The Respondent.
3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy//
(Sr. Private Secretary) ITAT, Mumbai