In the present case, the assessee was engaged in the business of selling yantras to customers, after being treated by havan and puja, and was also selling publication of a monthly journal on the astrology, named as Mantra Tantra Yantra Vigyan, and was having a huge number of subscribers.

He was receiving Rs. 1,500, according to the Revenue, by way of subscription for the life membership, which sum received was directly shown in the balance-sheet in the liabilities side. Thus, this amount of Rs. 1,500 received by the assessee, from various persons, during the various number of years, comprised in these appeals, is the precise subject-matter of the controversy.

While on scrutiny, AO found that cost of the journal issued to the life members is shown as business expenses of the assessee and therefore, AO on the basis on various grounds, treated the amount received towards life time membership (subscription) fee as revenue receipt and demanded Income Tax thereon.

This matter has been presented before the RAJASTHAN HIGH COURT and the honorable High Court after considering various facts, circumstances and landmark judgments of Supreme Court has held that:

It is held that the subscription amount received by the assessee from life members claimed by the assessee as security/dharohar, is not found to be revenue receipt. This amount, therefore, not liable to tax.

On the other side, HC has remanded back the case on the following ground:

as the firm being the assessee as such is not shown to have earned any income as interest from the so called security amount refundable but then it has come on record that the amount was passed on to the various family members of. the partners of the firm and on overall comprehension of the things it gives a clear picture that partnership was only a disguise, rather it was absolutely a family affair. In such circumstances, the question is required to be examined by the Assessing Officer in detail, on facts, and on legal provisions as to whether the income of the interest, on the aforesaid principal amount can be taxed and if yes, to what extent ?

(For full text of judgment - visit - 2008 -TMI - 4138 - RAJASTHAN HIGH COURT)

Life subscription receipts treated as security, not revenue, but interest on transferred funds requires tax examination. The assessee treated lump-sum life membership subscriptions as security/dharohar and recorded them as liabilities; the assessing officer treated them as taxable revenue receipts. The High Court found these receipts not to be revenue receipts and not taxable as business income, but remanded to permit the assessing officer to examine whether interest on the principal sums-given transfers to family members and potential partnership disguise-is assessable and to determine the taxable extent.