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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI PAVAN KUMAR GADALE
19/01/2021 सुनवाई क� तार�ख / Date of Hearing घोषणा क� तार�ख /Date of Pronouncement 28/01/2021 आदेश / O R D E R PER PAVAN KUMAR GADALE: The revenue has filed the appeal against the order of the Commissioner of Income Tax (Appeals) - 14,Mumbai passed u/s. 143(3) and 250 of the Income Tax Act, 1961. The revenue has raised the following grounds of appeal: i. The Ld. CIT(A) erred in treating the entrance fees received from its members as capital receipt ignoring the fact that the facilities made available to the members are M/s. Royal Western India turf Club Ltd., Mumbai. - 2 - in the ordinary course of its business and hence were rightly taxed as a revenue receipt by the A.O ii. The Ld. CIT(A) erred in treating the infrastructure facilities received from its members as capital receipt ignoring the fact that the facilities made available to the members are in the ordinary course of its business
2. The Brief facts of the case are that, the assessee is engaged in conducting horse races and providing hospitality services to its members and guests. The assessee has filed the return of income on 26.09.2012 with a total loss of Rs.(-)2,95,35,944/- and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act were issued along with the questionnaire. In compliance, the Ld.AR of the assessee appeared from time to time and filed the details. The A.O on perusal of the financial statements found that the assessee has credited entrance fees of Rs. 16,18,93,250/-to the General reserves account and claimed as capital receipts. Whereas the A.O, is of the opinion that the amount received by the assessee as entrance fees from the life members, club and stand members, service members and local members of the turf club M/s. Royal Western India turf Club Ltd., Mumbai. - 3 - house has to be treated as revenue income. The assessee has filed the submissions on 05.02.2015 referred at page 2 para 4 of the assessment order. The A.O was not satisfied with the submissions as the assessee collects entrance fees, annual fees, and provide amenities and facilities to its members and non-members .Further the onetime payment made by the members for the special facilities was in the ordinary course of business and cannot be treated as capital receipt and made addition of Rs16,81,93,250/-.Similarly, the A.O found Rs. 65 lakhs was credited to capital reserve account and was treated as a capital receipt. The explanations of the assessee are that, these are the voluntary contributions received from the members towards infrastructure facilities for club members. But the A.O. observe that the assessee club was formed for the purpose of carrying on the business of conducting horse races in all its branches and establish clubs, four star hotels and other conveniences in connection with the property of the club. Therefore, the receipts received from the members towards infrastructure facility M/s. Royal Western India turf Club Ltd., Mumbai. - 4 - contributions are revenue receipts and made addition. The A.O also made addition in respect of annual subscriptions,as it was not offered for taxation on account of mutuality concept and assessed the total income of Rs. 14,87,12,101/- and passed order u/s 143(3) and 250 of the Act dated 16.03.2015.
Aggrieved by the order, the assessee has filed an appeal with the CIT(A). On the first disputed issue with respect to treatment of entrance fees received from the life members as capital receipts, where the A.O has treated as revenue receipt in the current year. And on the second disputed issue with respect to voluntary contributions received from members towards infrastructure facilities, the assessee considered as a capital receipts, whereas, the AO treated as revenue receipt and the annual subscription fees is treated as capital receipt and directly credited to the capital reserves. In the appellate proceedings, the Ld.CIT(A) considered the grounds of appeal and the submissions of the assessee referred at page 2 to 3 of the CIT(A) order.
M/s. Royal Western India turf Club Ltd., Mumbai. - 5 - The assessee’s case is similar to the earlier assessment years 2007-08 to 2009-10, where the Hon’ble Tribunal has dismissed the Revenue appeals. The Ld.CIT(A) relied on the assessee’s own case and treated the entrance fees received as a capital receipt and directed A.O delete the addition. In respect of voluntary contribution, received from its members towards the infrastructure facilities, the Ld.CIT(A) observed that the contributions received for specific purpose are to be treated as capital receipt and directed A.O. to delete the addition. On the third disputed issue of taxability of annual subscriptions, the CIT(A) find that in earlier years also the assessee has not pressed this ground of appeal and the same was dismissed and partly allowed the assesses appeal. Aggrieved by the order, the revenue has filed an appeal before the Tribunal.
The Ld. DR submitted that the CIT(A) has erred in granting the relief as the amount received towards entrance fees from its life members has to be treated as revenue receipt because it was collected for providing the facilities available to the members in M/s. Royal Western India turf Club Ltd., Mumbai. - 6 - the ordinary course of business. On the Second issue the Ld. CIT(A) has erred in treating the voluntary contribution received for the infrastructure facilities as capital receipts as the Club facilities were available to the members in the ordinary course of business and prayed for allowing the revenue appeal.
Contra, Ld. AR supported the orders of the Ld.CIT(A) and relied on the orders of the Hon’ble Tribunal in assessee’s own case for the earlier assessment years.
We heard the rival submissions and perused the material on record. Prima-facie, the revenue has challenged two issues with respect to treatment of entrance fees received by the assessee as capital receipt and the voluntary contribution received from the members for infrastructure facilities. On the first disputed issue, the Ld. AR substantiate his arguments referring to the paper book and submitted that in the assessee’s own case for A.Y 2007-08 to 2009-10 the coordinate Bench of this Tribunal has M/s. Royal Western India turf Club Ltd., Mumbai. - 7 - dismissed the revenue appeal and upheld the action of the CIT(A). We find the Ld.CIT(A) has relied on the submissions of the assessee and the decision of the coordinate bench of Hon’ble Tribunal in assessee’s own case for the A.Y 2007-08 to 2009-10. We considered it appropriate to refer to the observations of the Hon’ble Tribunal in revenue appeal in & 5570/Mum/2015. A.Y 2010-11and 2011-12 where the Hon’ble Tribunal has considered the earlier decision of the assessee own case for the A.Y 2007-08 and 2008-09 and dismissed the revenue appeal at page 2 para 5 to 6 which is read as under: “5. We have heard the rival contentions and also gone through the orders of the authorities below. We find that identical issue came up before the Tribunal in assessee’s own case for A.Ys. 2007-08 to 2008-09 and the Tribunal vide its order dated 27.07.2016 in ITA No. 6335, 4235 & 6336/Mum/2012 dismissed the appeal of the revenue observing as under: 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 ld. 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 M/s. Royal Western India turf Club Ltd., Mumbai. - 8 - the Ld. 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 ITO 106 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.) v. Berger Paints India Ltd. vs CIT 266 ITR 99 (SC) vi. DCIT vs United Vanaspati (275 ITR 124) AT) (Chandigarh ITAT) vii. Union of India vs Kumudini N. Dalai 249 ITR 219 (SC)
M/s. Royal Western India turf Club Ltd., Mumbai. - 9 - viii 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 UOI 204 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).
6. Respectfully following the decision of the Tribunal in the assessee’s own case, we dismiss the appeals of the Revenue for both the years under consideration.
In respect of the second disputed issue with regard to voluntary contribution from the members for infrastructure facilities. The contentions of the Ld.DR that the CIT(A) has erred in treating the same as revenue receipt and granted the relief. The Ld. AR submitted that the assessee has received the voluntary contribution from the two members and M/s. Royal Western India turf Club Ltd., Mumbai. - 10 - referred to paper book at page 119 and 120, where the confirmations in respect of voluntary contribution made by the two members for mutual benefit of members of the club are filed. Further, the Ld. AR emphasized that on such similar issue, the Hon’ble Coordinate Bench of this Tribunal in the case of DCIT Vs. KDA Enterprises (P.) Ltd. has held at para 31 and 32 as under: “31. As per the provisions of law prevailing during the year under consideration, the gift received by one corporate body from another corporate bodies do not come under the ambit of income as contemplated u/s 2(24) of the Act or any other provisions of the Act. The gift received are a voluntary payments made by the donors to the assessee. Neither the assessee has any legal right to claim the gift from the donor nor donors have any legal or contractual obligations to give gift to the assessee. The gifts received by the assessee was a voluntary payments made by the donor, without consideration to the assessee. The gift received has nothing to do with the business of the assessee so as to constitute its income from business or a revenue receipt in the nature of income. 32. As per section 14 of the Act, income of an assessee is classified under the following heads of income viz ―Salaries‖, ―Income from house property‖, ―Profit and gains of business or profession‖, ―Capital gain‖ and ―Income from other sources‖. Provisions of the Act provides for what can be considered as income under the various heads of income. Thus income of an assessee shall be chargeable to tax only if it falls under any heads M/s. Royal Western India turf Club Ltd., Mumbai. - 11 - of income. Thus gift received is neither in the nature of Salary nor in the nature of income from house property. By no stretch of imagination it can be said that the assessee is engaged in the business of receiving gifts from corporate bodies; hence the gift can also not be considered as the income from business of the assessee. As the gift has no relation to any capital asset, the same can also not be considered as capital gain for the assessee. With respect to income from other source, that income of every kind which is not chargeable to tax under any head of income are subjected to tax under the residuary head of income i.e. income from other sources. However again what is subjected to tax under the provisions of section 56 is income of revenue nature. The gift was always treated as non taxable capital receipt in the hands of the recipient till 31.03.2005. Thereafter the legislature vide Finance (No.2) Act, 2004 w.e.f. 1.04.2005 inserted clause (v) to sub section (2) of section 56 of the Act so as to include any sum of money received without consideration from any person, other than exception provided in that section, by an individual or Hindu Undivided Family was made subjected to tax. The scope of the said section was further narrowed down by raising the limit of receipt from Rs.25,000/- to Rs.50,000/- with effect from 1.04.2006. The said section was amended from time to time by amending the limit of receipts and nature of transaction but the applicability of the said section was restricted only to an individual or Hindu Undivided Family. Thus when the legislature intended for bringing to tax net the gift received by an assessee it has specifically provided so by enacting the law. As per section 56(2)(v) the gifts received by an individual and HUF only are made liable to tax. Thereafter for the first time two other category of assessees were added with effect from 1.06.2010 by Finance Act, 2010 in clause M/s. Royal Western India turf Club Ltd., Mumbai. - 12 - (viia) of section 56(2) of the Income Tax Act, 1961. These two categories of the assessees are ―a firm‖ and ―a company‖. However, the parliament restricted the taxability to receipt in the form of shares of an unlisted company without consideration or without sufficient consideration. Thus even after this amendment, any other movable / immovable properties received as gift was not covered and accordingly not subjected to tax. However, certain gifts are made taxable from time to time by various well thought and well intended amendments in the Act and all the definition regarding taxability of gift (i.e. receipt of assets without sufficient or without any consideration) are inclusive and only those instance of gifts are required to be taxed and not all gifts. This is so, more particularly, because all gifts are capital receipt in nature and only certain gifts are made taxable. As provisions of Section 56(2)(v)(vi), (vii) and (viia) specifically covers the instances of gift which are taxable under the provisions of IT Act; and all other gifts received by the assessee other than those covered in other sections are not chargeable to tax being capital receipt in nature. Hon‘ble Supreme Court in the case of Padmaraje R. Kadambande Vs. CIT, 195 ITR 877 (SC); Hon‘ble Bombay High Court in case of Mehboob Productions Private Ltd. Vs. CIT, 106 ITR 758 and in case of H.H.Maharani Shri Vijaykuverba Saheb of Morvi & Anr. Vs. CIT, 49 ITR 594, held that gifts are capital receipts when consideration are not in the nature of income and,hence, same cannot be charged to tax under the provisions of Income Tax Act.
We considered the Coordinate Bench decisions, and the facts which are identical and similar in the earlier years observe that the Ld.DR could not M/s. Royal Western India turf Club Ltd., Mumbai. - 13 - controvert the findings of the CIT(A) with any new cogent evidence or information. We find the Ld.CIT(A) has granted the relief relying on the assessee’s own case of earlier years and passed a reasoned order. Accordingly, we up held the order of the Ld.CIT(A) on these disputed issues and dismiss the grounds of appeal of the revenue.
In the result, the appeal filed by the revenue is dismissed.