TaxTMI 
TaxTMI 
TaxTMI 
2015 (1) TMI 525
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.... 2000-01 1477/2005 04/11/04 2558/Ahd/2004 1998-99 1478/2005 04/11/04 2559/Ahd/2004 2001-02 1.1 These matters were admitted by this Court for consideration of the substantial question of law as to whether the Appellate Tribunal was justified in setting aside the order of the CIT passed under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 2. The assessee company is engaged in the business of providing facility cards to the members on payment of prescribed fees which is called membership fees which is a one-time fee and is non-refundable. The period of membership varies between one to fifteen years. It is the case of the assessee that the payment of the membership is non-transferable. The accounts of the assessee had been prepared on accrual basis and accordingly it had apportioned the membership fees received from the members enrolled in a particular accounting year over the entire period of their membership. 2.1 The assessment year 1997-98 was the first assessment year in which the Assessing Officer rejected the method of accounting followed by the assessee and he considered the receipt in the year in which the cards were ....
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....ale of cards in the first year and is giving distorted picture of the working results since the expenses have been claimed but the income is postponed. He submitted that in such a scenario, the assessee will be showing loss all throughout. 4. Mr. B.S. Soparkar, learned advocate appearing for the assessee supported the impugned order passed by the Tribunal and submitted that no interference is called for in the same. He submitted that except for the year 1998-99 wherein the Assessing Officer accepted the assessee's method of accounting to be correct and CIT(A) set aside the order of the Assessing Officer u/s 263 of the Act, the CIT(A) allowed in favour of the assessee. He submitted that the method of accounting followed by the assessee is a recognized method and true and fair profit of each assessment year is determined through the same. He further submitted that the assessee company provides various facilities to the card holders/members. 5. We have heard learned advocates for both the sides and perused the materials on record. The main dispute in all these appeals is with regard to the correctness of the method of accounting of the assessee company for recording the receipt ....
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....to the case under consideration before us as the facts in both the cases are identical. In the case under appeal before us also, the assessee is under an obligation to provide the services on continuous basis for the period for which the card is issued. The assessee has spread over the receipt as well as expenditure as per Accounting Standard - 9 and the same is disclosed by the assessee by way of Note in the audited accounts. If the contention of the Revenue is accepted and the entire memebership fee collected is taxed in the year of receipt then in the subsequent year when the assessee will incur the expenditure there will be loss. That would give distorted picture of the working result of the assessee. In view of the above, we respectfully following the above decision of ITAT, Hyderabad Bench in the case of Treasure Island (P) Ltd (supra) hold that the method of accounting followed by the assessee was proper and correct method and the Assesing Officer has wrongly rejected the same." 6. In this regard we are supported by the decisions of the Apex Court as well as this Court, Bombay and Delhi High Courts. The Bombay High Court in the case of Taparia Tools Ltd. vs. Jt. CIT, [2003]....
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....hat moment. From this, it follows that there must be the "right to receive the income on a particular date, so as to bring about a creditor and debtor relationship on the relevant date". The Court further explained that a right to receive a particular sum under the agreement would not be sufficient unless the right accrued by rendering of services and not by promising for services and where the right to receive is interior to rendering of service, the income, therefore, would accrue on rendering of services." 6.3 This Court has also taken the same view in a recent decision in the case of Snesh Resort Pvt. Ltd vs. Dy. CIT rendered in Tax Appeal No. 113 of 2004 on 18.11.2014. This Court has observed as under: "6.2 Similarly in the case of Bilahari Investment P. Ltd (supra) the Apex Court has held that since from the various statements produced, the entire exercise arising out of the change of method from the completed contract method to deferred revenue expenditure was revenue neutral, the completed contract method was not required to be substituted by the percentage of completion method. &....