DCIT 8(1)(1), MUMBAI vs. ROYAL WESTERN INDUA TURF CLUB LTD, MUMBAI

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.

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)

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.