LANDBASE INDIA LIMITED.,GURGAON vs. ACIT, CIRCLE-15(1), NEW DELHI

O R D E R PER PRASHANT MAHARISHI, A. M.

has created a service facility for its members and it produces revenue for the assessee. It is not always necessary that each plant should produce certain other tangible goods. Further, in case of the assessee in certain assessment years under section 143 (3) of the income tax act the claim of the depreciation holding the golf course as plant has been accepted by revenue and in subsequent years in assessment year 2006 - 07 to 2009 - 10 also the claim of the assessee is accepted. In fact the claim of depreciation on golf course as a plant stands accepted in assessment year 98 - 99 to assessment year 2000 - 01, 2002 - 03 and 2006 - 07 to 2009 -10. Even otherwise, coordinate bench in case of Deputy Commissioner of Income Tax vs. JP greens Ltd in ITA number 3545-3547/Del/2009 , on identical facts and circumstances considered golf course as plant and depreciation at the rate of 25% was allowed holding that assessing officer himself has allowed depreciation at that rate in past in that particular case. The decision relied upon by the learned CIT DR that Toll Road does not qualify as a plant for higher rate of depreciation as held by the honourable Delhi High Court in 52 taxmann.com 21 (Delhi) in the Moradabad Toll Road Co Ltd vs. Asst Commissioner of income tax was decided as „road‟ was specifically considered as part of building in the part A of appendix 1 of The Income tax Rules 1962. Thus, the fact of that case is distinguishable. Further, it was not stated before us that revenue has not accepted the decision of the coordinate bench in DCIT vs. JP greens Ltd where golf course was held to be plant. Therefore, it stands concluded that golf course is a plant looking to the nature of business of the assessee. Further, the judicial precedents relied upon by the parties also only lays down the proposition established by the higher judicial forum supports the above view. In view of this, ground number 1 of the appeal of the assessee is allowed reversing the views of the lower authorities, holding that golf course is a plant on which assessee is entitled to the depreciation at the rate of 25% under the income tax act.”

is with respect to the addition of Rs. 1300016/- on account of security deposit and membership fees. The assessee received the above sum from the members and claims it to be a capital receipt. The ld AO considered the same as revenue receipt and thus charges to tax. The assessee-preferred appeal before the ld CIT (A) who also vide para No. 8 dismissed the appeal of the assessee therefore; assessee is in appeal before us.

9. We have heard the rival parties and found that identical issue has been considered by the coordinate bench in assessee‟s own case for earlier years. The coordinate bench in its above order for Assessment Year 2005-06 has dealt with this issue in para NO. 38 onwards as under :- “38. We have carefully considered the rival contention and perused the orders of the lower authorities on the issue. The learned CIT - A has decided the whole issue as per paragraph number 7.1 - 7.7 of his order. Undisputedly the assessee is running a golf course and making the revenue collection by way of refundable security deposit and membership fees from the members. This indicates that the assets are fully operation and the members are deriving a benefit from the use of the assets. As such, it is not in dispute that appellant is carrying on the business of running of golf course. Facts shows that the assessee has received certain security deposits and membership fees collected by the appellant from the members along with the borrowed funds were utilized for the creation of the fixed assets by the assessee. The learned CIT - A following the decision of the honourable Supreme Court income Calcutta stock exchange Association Ltd and Delhi stock exchange Association Ltd held that the security deposit received from the members are not capital receipt but are revenue receipts and are taxable as income of the appellant. He further held that nature of such security deposit is whether refundable or non-refundable is immaterial. He further noted that though the assessee has offered the golf course membership fees of INR 3 5288416/- as income in subsequent years such deferment of income is not relevant on the facts and circumstances of the case of the appellant Page | 4 as the membership fees received by the assessee is also assessable as income for the assessment year in which it is received. He further noted that it is a fact that unless the security deposits and membership fees were paid by the members, the appellant would not have granted the membership of the golf club to those members. He therefore held that both this sum of the security deposit as well as the membership fee has correctly been charged by the learned assessing officer as income of the assessee. The learned CIT - A with respect to the entrance fees and membership fees has followed the decision of the honourable Supreme Court in case of Calcutta stock exchange Association Ltd 36 ITR 222 and Delhi stock exchange Association Ltd 41 ITR 495 wherein it has been held that entrance fee/membership fees received from the members is an income.

39. On careful analysis of the order of the learned CIT - A, according to us he has wrongly applied the decision of the Calcutta stock exchange Ltd and Delhi stock exchange Ltd. In Calcutta stock exchange Ltd the issue of the monthly fees received by the assessee. Therefore, it cannot be said that if the fees received which is pertaining to the year itself it cannot be said not to be the income of the assessee. In the case of the assessee, assessee has received advance membership fees for which the services were to be rendered in subsequent years and assessee has already offered such income in the subsequent years on accrual basis. It is not the case of the revenue that assessee has not offered golf course membership fees income in the year to which it pertains to. It is also not the case of the revenue that assessee provides all the services to the members in the year in which the membership fee is received, and in subsequent years, no services were rendered. The membership fees are chargeable to tax under the provisions of the business income. The assessee follows undisputedly, mercantile/accrual system of accounting. Therefore, income/expenses of the assessee are also required to be recorded as income only based on accrual system. Thus, whenever the Income accrues to the assessee irrespective of the time of receipt of such income is taxable as business income. Under the mercantile system of accounting, the assessee has an option to account for any income either Page | 5 on accrual or after accrual, on the basis of method of accounting regularly followed by it. So far as the issue of the entrance fee and membership fees received by the assessee, we are of the opinion that it should be accounted for as income only when it accrues to the assessee. Merely because the income, which is pertaining to subsequent years, is received by the assessee in earlier years does not become the income of the earlier years under section 5 of the income tax act in case of either business income or u/s 28. Hence, according to us, the membership fee income of the assessee should be chargeable to tax in the year to which it pertains. Therefore, we reverse the finding of the learned CIT - A in holding that that a sum of INR 3 5288416 received as golf course membership fee is chargeable to tax as income. As such, it is the claim of the assessee that subsequently such income has already been offered for taxation therefore for the year to which it pertains. Therefore, we direct the learned assessing officer to tax the above income of INR 3 5288416 as Income for the impugned assessment year to which it pertains to. Therefore, if the assessee has offered the income, to the year to which it pertains to, the addition is required to be deleted. However, it is not known that how much income is pertaining to which year, therefore, we direct the assessee to show before the assessing officer about the taxability of this income in the subsequent years on accrual basis. The learned assessing officer may verify the same and if the income has been offered in subsequent years on accrual basis, the addition deserves to be deleted in this year.

Commissioner of income tax vs. Gulmohar Green Golf and country club Ltd 392 ITR 601 (2017) (Gujarat) wherein it was been held that the security deposit recovered from the members at the time of their enrolment as a member is refundable on occurrence of the contingency mentioned in the rules and regulation and bylaws, therefore it is required to be treated as a deposit, thus, a capital receipt. Therefore, it was held that it is not an income of the assessee. As in the case of the assessee also the security deposit is refundable hence respectfully following the decision of the honourable Gujarat High Court in 392 ITR 601, we also hold that the sum of refundable security deposit received from the members of the assessee is a capital receipt and cannot be charged to tax as income. Accordingly, we direct the learned assessing officer to delete the addition to the extent of refundable deposit received from the members. Accordingly, ground number 2 and 3 of the appeal of the assessee is partly allowed.”