2012 (7) TMI 1159 - AT - Income Tax

Tribunal allows assessee's appeal on capital contributions treatment, upholds revenue deferral practice.

The Appellate Tribunal allowed the assessee's appeal against the Ld. CIT (A) order for the assessment year 2007-08 concerning capital contributions from ... - Issues involved: Appeal against order of Ld. CIT (A) for assessment year 2007-08 regarding capital contribution received from new Members.Summary:The appeal was filed by the assessee against the order of the Ld. CIT (A)-I, Baroda for the assessment year 2007-08. The main issue was the capital contribution received from new Members amounting to Rs.29,89,033/-. The assessee, engaged in the business of conveyance of industrial effluent and channel maintenance, had filed its return of income showing a loss. The Assessing Officer (A.O.) observed that the assessee had received capital contribution from new members for a lifetime membership for effluent disposal facility. The assessee treated the receipts as deferred income spread over 5 years, while the A.O. treated the entire contribution as a revenue receipt. The Ld. CIT (A) confirmed the addition made by the A.O. based on a previous decision for an earlier year. The assessee then appealed to the Appellate Tribunal.The Appellate Tribunal noted that in the assessee's own case for a previous year, it was held that the assessee was justified in deferring the revenue for tax for 4 years. Since there was no change in facts compared to earlier years, the Tribunal held that the assessee was justified in deferring the revenue over 4 years. Consequently, the Tribunal allowed the ground of the assessee and the appeal was allowed in favor of the assessee.In conclusion, the Appellate Tribunal, in the case of the assessee's appeal against the order of the Ld. CIT (A) for the assessment year 2007-08 regarding capital contribution received from new Members, held in favor of the assessee based on the principle of deferring revenue over 4 years as justified in the previous year's decision.