2012 (5) TMI 123 - HC - Income Tax

Treatment of Membership Fees as Income Upheld: Lack of Refundability and Separate Accounts Key

The Tribunal upheld the decision to treat the sum of Rs.2,72,000/- received by the appellant from life members as income for the year, considering it a ... Treatment of receipt by way of subscription of magazine from life members – Tribunal held it as revenue receipt – Held that:- The assessee has failed to prove that the subscription amount which was received from the life members was in the nature of deposit and is refundable to the subscriber as and when any subscriber so desires - being no evidence that ten years subscription and annual subscription are considered as revenue receipt, there is no justification to treat the receipt of life membership subscription of the magazine differently other than the income receipt - the manner in which the sums are treated by the assessee in its accounts is neither conclusive nor a sure indication of the nature and character of the receipt – against assessee. Issues involved:Whether the receipt of Rs.2,72,000/- by the appellant assessee from life members for a magazine subscription is a revenue receipt or a deposit for membership.Analysis:The appellant published a monthly magazine and received a sum of Rs.2,72,000/- as life membership subscription. The Assessing Officer treated this amount as a revenue receipt, adding it to the assessee's income. The appellant argued that the amount was refundable and hence not a revenue receipt. The CIT (A) allowed the appeal, but the Income Tax Appellate Tribunal reversed the decision. The substantial questions of law included whether the amount was rightly treated as a revenue receipt and if the Tribunal's view was based on relevant considerations.The Tribunal observed that the CIT (A) did not calculate the average expenditure on supplying the magazine to life members to determine if the interest earned on the subscription was sufficient to cover costs. It noted that annual and ten-year subscriptions were treated as revenue receipts, justifying a similar treatment for life membership subscriptions. The Tribunal emphasized that the nature of a receipt as a trading or capital receipt is determined at the time of receipt, and the appellant failed to prove the subscription amount was a deposit.The Tribunal distinguished a previous case where a similar issue was decided in favor of the assessee, highlighting the lack of evidence or a refund agreement for the subscription amount in the present case. The Tribunal's decision was supported by the absence of separate accounts for expenses related to the magazine distributed to life members, contradicting the appellant's claim that the sums received were not income. Ultimately, the Tribunal's decision to treat the sum of Rs.2,72,000/- as income for the year was upheld, concluding that it was a justified finding.In summary, the judgment revolved around whether the subscription amount from life members was a revenue receipt or a deposit for membership. The Tribunal's decision to treat it as income was based on the lack of evidence for refundability, the treatment of other subscriptions as revenue receipts, and the absence of separate accounts for related expenses. The appellant's arguments and reliance on previous cases were deemed irrelevant to the specific circumstances of the case, leading to the dismissal of the appeal.