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Facts
The assessee, a charitable trust registered under sections 12A and 80G, received membership fees, institutional membership fees, and an award fund, which it treated as corpus donations. The Assessing Officer, however, treated these receipts as revenue in nature, leading to an addition of Rs. 1,96,54,650/- to the assessee's income for AY 2017-18, a decision initially upheld by the CIT(A).
Held
The Tribunal noted that the issue was previously settled in favor of the assessee in earlier assessment years (2012-13 to 2016-17) by both the ITAT and the CIT(A), thereby applying the principle of consistency. Furthermore, the society had amended its Memorandum of Association and Rules in 2017, explicitly stating that such fees should be treated as part of the corpus fund. Considering these factors, the Tribunal accepted the assessee's submissions and allowed the appeal.
Key Issues
Whether institutional membership fees, life membership fees, and award funds received by a charitable trust should be treated as capital receipts forming part of the corpus fund or as revenue receipts.
Sections Cited
Section 143(3), Section 250, Section 12A, Section 80G(5)(vi), Section 11(1)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: SHRI S. RIFAUR RAHMAN & SHRI YOGESH KUMAR US, JUDICIALMEMBER
The captioned appeal preferred by the assessee is directed against the order of learned Commissioner of Income-tax (Appeals)-12, Mumbai (hereinafter referred to ‘Ld. CIT (A)’) dated 07.02.2024 in proceedings u/s 143(3) of the Income-tax Act, 1961 (for short ‘the Act”) for Assessment Year 2017-18. The assessee has raised following grounds of appeal:
“1. That having regard to the facts and circumstances of the case and in India Society for Technical Education law, the CIT Appeal has erred in law and facts of the case in passing order u/s 250 in impulsive and imperious manner thereby dismissing the Appeal of the assessee with total lack of application of mind.
That having regard to the facts and circumstances of the case, Ld/- CIT has erred in law and facts of the case in dismissing the appeal by treating the Institutional Membership fees, Life Membership Fees and Award Fund as Revenue Receipt instead of Capital Receipt and that too by recording incorrect facts and findings and without observing the principles of natural justice.
That on the facts and circumstances of the case the appellant denies addition of Rs 1,96,54,650/- as made on account of Institutional Membership Fees and Life Membership Fees and Award Fund and accordingly denies its liability to pay Penalty and interest thereon.
The Appellant craves leave to add, modify, amend, delete or alter any of the grounds of appeal at the time of hearing and all the above grounds are prejudice to each other."
2. At the time of hearing learned AR of the assessee brought to our notice that assessee is a trust registered u/s 12A of the Act vide order dated 05.08.1989 and also u/s 80G(5)(vi) vide order dated 12.08.2009. The assessee is undertaking the activity of technical education. He submitted that in the current assessment assessee has filed its return of income and claimed of membership fee of Rs.
1,73,47,550/-; institutional membership fees of Rs. 22,57,100/-; and award fund of Rs. 50,000/- as capital receipt a part of corpus fund. He submitted that during assessment proceedings the Assessing Officer has rejected the claim of the assessee and proceeded to treat the above fees are voluntary and revenue in nature and there is no specific direction as mandated u/s 11(1)(d) of the Act. He submitted our notice coordinate bench decision in assessee’s own case relating to assessment and submitted that Hon’ble ITAT has considered similar issue under consideration and remitted the issue back to the file of Assessing Officer to consider the submissions of the assessee and verify the specific direction from the members of the society with regard to various fees collected from them. He further brought to our notice decision of NFAC Delhi in assessee’s own case for assessment year 2012-13 and in the set aside order by Hon’ble ITAT, the learned CIT(A) considered the various submissions made by the assessee and decided the issue in favour of the assessee vide order dated 20.03.2024 and the above said order is placed on record. Further, learned AR submitted that similar issue was considered in subsequent assessment years 2014- 15, 2015-16 and 2016-17 and allowed by learned CIT(A) in favour of the assessee. Therefore, he submitted that the issue under consideration is already settled in favour of the assessee and concept of consistency has to be maintained.
However, in the present case the Assessing Officer has raised the similar issue which has already reached finality in favour of the assessee.
3. On the other hand, learned DR objected to the submissions of the learned AR and brought to our notice page 143 of the paper book which is the order passed by the CIT(A) for assessment year 2012-13 in which he brought to our notice the members are cyclostyled letters prepared during the month of December 2011 for the fees collected during the previous year 2011-12 and in many such letters amounts are not mentioned which show that these letters were prepared haphazardly and it was only an afterthought. Further, he brought to our notice page 147 of the paper book in which, in the same order of the learned CIT(A), learned CIT(A) has accepted the directions of the ITAT, even though the material brought on record by the assessee were defective. He relied on the findings of the Assessing Officer.
In rejoinder, learned AR submitted that the issue under consideration was already considered by the Committee which was held on 03.07.2016 and a proper resolution was passed and the society has modified the Memorandum of Association and Rules. He brought to our notice Rule no. 2(ii) life membership. It was specifically indicated that life membership fee shall be part of the corpus fund of the society. Similar modification was also made in rule 2(v). Therefore, he submitted that the issue under consideration is settled in favour of the assessee and similar treatment may be allowed in the current assessment year also.