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 dismissed, upholding the deletion of the Rs. 50 lakhs addition.

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Issues Involved
1. 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 Analysis

1. Taxability of Entrance Fees Collected by the Assessee
The 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 Act
The 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 Parikh
In 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.

Conclusion
The 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.

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