2025 (11) TMI 823 - SCH - Income Tax

Advance membership and room-night receipts not revenue expenditure where refund obligations exist; s.263 directions require appellate review

SC dismissed the Civil Appeals and SLPs, upholding the HC's factual finding that advance receipts under membership/room-night schemes do not constitute ... Revision u/s 263 - advance amount of sale of room nights - considering that the principal business of the assessee engaged in running of hotels, resorts and clubs is to provide accommodation and other facilities to tourist members, then a provision of the nature made cannot be said to be an allowable revenue expenditure - As decided by HC [2015 (2) TMI 359 - BOMBAY HIGH COURT] finding of fact that the schemes oblige the assessee to refund not only the advance but also the surrendered value, then the further conclusion that the assessee incurs a liability and no income accrues to the assessee on receipt of this advance, cannot be said to be perverse or vitiated by any error of law apparent on the face of record. Thus considering the sweeping nature of the directions issued by the Commissioner in exercise of his powers under section 263 of the Income-tax Act, 1961, the appeal to the Tribunal was competent and maintainable HELD THAT:- It is stated at the bar that in respect of the assessment years in question, there has been no claim made by the appellant-Department in the Corporate Insolvency Resolution Process (CIRP) proceedings, wherein the plan has been approved on 25.04.2024 and is being implemented. In the circumstances, appropriate orders may be made in these appeals. Taking note of the above submission and following the judgment of this Court in the case of Ghanashyam Mishra and Sons Private Limited Vs. Edelweiss Asset Reconstruction Company Limited [2021 (4) TMI 613 - SUPREME COURT], we dismiss these Civil Appeals and Special Leave petitions. It is recorded that for the assessment years in question the appellant-Department made 'no claim' in the Corporate Insolvency Resolution Process (CIRP), the resolution plan for which was approved on 25.04.2024 and is under implementation. On that basis and 'taking note of the above submission and following the judgment' in Ghanashyam Mishra and Sons Private Limited v. Edelweiss Asset Reconstruction Company Limited [(2021) 9 SCC 659], the Court ordered that the Civil Appeals and Special Leave Petitions be dismissed. The Court disposed of any pending applications. The decision rests on the absence of a claim in the CIRP and application of the cited precedent, resulting in dismissal of the departmental appeals challenging matters tied to the insolvency proceedings.