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Time-share membership fees received upfront were not taxable in full in the year of receipt because they were linked to continuing contractual obligations to provide accommodation and allied facilities over the membership period. The agreement created an accrued and enforceable liability, not a contingent one, and the fee had to be recognised in line with the period of performance under the real income and matching principles. Annual maintenance and utility charges were separate from the membership fee, so they did not justify immediate taxation of the entire receipt. The assessee's regularly followed method of accounting had legal sanction, and the Tribunal was in deleting the addition.
Time-share membership fees received upfront were not taxable in full in the year of receipt because they were linked to continuing contractual obligations to provide accommodation and allied facilities over the membership period. The agreement created an accrued and enforceable liability, not a contingent one, and the fee had to be recognised in line with the period of performance under the real income and matching principles. Annual maintenance and utility charges were separate from the membership fee, so they did not justify immediate taxation of the entire receipt. The assessee's regularly followed method of accounting had legal sanction, and the Tribunal was in deleting the addition.
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