2015 (11) TMI 1810 - AT - Income Tax

Tribunal grants partial relief to assessee, directs tax on entrance fee yearly

The Tribunal allowed the assessee's appeal in part, directing the Assessing Officer to tax 1/25th of the entrance fee each year. The revenue's appeal was ... Taxing the entrance fees collected - Revenue or capital receipt - certain loose papers were found at assessee’s premises on the basis of which the AO inferred that assessee had given ₹ 50 lakhs to Sujan Parikh group - CIT(A) deleted the addition - HELD THAT:- A categorical finding has been recorded by the CIT(A) to the effect that no additional amount was paid, the amount so paid was part and parcel of the total consideration paid to Shri Sujan Parikh. From the record we found that Mr. Sujan Parikh has received the consideration for transfer of shares of NPCL in direct proportion of the market value of the properties held by NPCL in the month of April 2006. There was no mention of any additional amount of ₹ 50 lakh. There was no other mention anywhere in the correspondence exchanged for family settlement which indicated that Mr. Sujan Parikh was paid ₹ 50 lakh extra over and above the consideration paid for sale of shares in the group companies. As per finding of the CIT(A) no cogent material was brought on record by the AO to hold that ₹ 50 lakhs was paid in addition to normal consideration so determined. Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the addition of ₹ 50 lakhs - Appeal of revenue is dismissed. Issues Involved1. Taxability of entrance fees collected by the assessee.2. Validity of retraction of statements made under section 132(4) of the Income Tax Act.3. Addition of Rs. 50 lakhs on account of alleged payment to Shri Sujan Parikh.Detailed Analysis1. Taxability of Entrance Fees Collected by the AssesseeThe primary issue in the assessee's appeal was whether the entrance fees collected, which were capital in nature, should be taxed. The assessee argued that the entrance fees collected were a one-time payment for membership valid for 25 years and should be considered a capital receipt, not liable to tax, based on the Bombay High Court judgment in the case of Diners Business Services Pvt. Ltd. The Assessing Officer (AO) rejected this claim, stating that the membership fees were for a limited period (25 years) and should be taxed in the year of receipt as revenue income. The Tribunal found that the facts of the case were distinguishable from Diners Business Services Pvt. Ltd., as the membership in the present case was not for a lifetime but for a specified period. The Tribunal directed the AO to tax 1/25th of the fee in each year, rather than the entire sum in the year of receipt, following the precedent set by the ITAT Special Bench in the case of Club Mahindra Holidays.2. Validity of Retraction of Statements Made Under Section 132(4) of the Income Tax ActThe assessee retracted the statement made under section 132(4) of the Act, claiming it was made under stress and without legal advice. The Tribunal considered the assessee's argument that the statement was made without appreciating the legal consequences and was a matter of legal interpretation. The Tribunal referred to the decision in Kailashben Manharlal Chosksi v. CIT, where a similar retraction was held valid, and the addition based on such a statement was not justified. The Tribunal also noted that an item not taxable under law cannot become taxable merely because of an admission or disclosure by the assessee.3. Addition of Rs. 50 Lakhs on Account of Alleged Payment to Shri Sujan ParikhIn the revenue's appeal, the issue was the deletion of an addition of Rs. 50 lakhs made by the AO, who inferred from loose papers that the assessee had paid this amount to Shri Sujan Parikh. The assessee contended that this amount was part of the total payment of Rs. 19.02 crores made for buying back shares and was not a separate unaccounted payment. The CIT(A) deleted the addition, stating that the AO had not justified the addition on any cogent grounds and had not rebutted the assessee's contentions. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the conclusion that the Rs. 50 lakhs was part of the total consideration and not an additional amount.ConclusionThe appeals of the assessee were allowed in part, directing the AO to tax 1/25th of the entrance fee each year. The revenue's appeal was dismissed, upholding the deletion of the Rs. 50 lakhs addition. The order was pronounced in the open court on 20/11/2015.