TaxTMI 
TaxTMI 
2011 (8) TMI 1221
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.... has been receiving Life Membership Fee and in this year this amount was Rs. 21,01,000/-. This amount is not refundable to the members even after the termination of life period of the members. But the Club has not offered this amount as income of the year, therefore, notice u/s 148 dated 28.3.2008 was issued. In response, the assessee has requested to treat the return filed originally as the return to have been filed in response to this notice. On a request made by the Club, the Assessing Officer supplied copy of reasons. Thereafter, a notice u/s 143(2), dated 23.5.2008 was issued, and served on the assessee. The Assessing Officer conveyed his intention to tax this amount of `21,01,000/- treating it as its income, the fee being non-refundable 'Life Membership Fee' and thus a revenue receipt of the year. This is precisely the issue involved in each of the years. The assessee-club has received certain amount towards Life Membership Fee in each year but has not offered the same as its income of that year. Obviously, the amount of Life Membership Fee differs in each year. Thus, except for the amount of Life Membership Fee, all other facts are common in all these years. 3. After consid....
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....llant from the members towards the corpus fund (life membership fund) is for the purpose of enhancing its corporate identity and creating of capital assets. This amount has no nexus with any facilities enjoyed by the members. 8. The CIT (Appeals) ought to have seen that the amount towards corpus fund is only a one time payment from each member and is non-recurring in nature. 9. The CIT (Appeals) erred in ignoring the fact that the appellant receives monthly/annual subscription from its members for the services/facilities offered by the appellant. It is only this receipt that is recurring in nature. 10. The CIT (Appeals) ought to have seen that the officer was wrong in proceeding on the footing that the liability ceases to exist after the termination of the life membership period and therefore, the receipt towards corpus fund has to be treated as revenue in nature. 11. The CIT (Appeals) failed to understand that it is the duty of the appellant to create capital assets and enhance its corporate identity out of the life membership fund amount. The fact that the appellant does not refund the amount to the members does not mean that the receipt is not capital in nature when the ....
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....he rival submissions and have given our anxious thought to the facts and evidence available on record. Before we proceed to decide the main issue as to what is the nature of this receipt, it was noticed that these appeals are barred by limitation by 51 days in each case. A requisite condonation petition has been properly filed for each year with a prayer to condone this delay of 51 days which was apparently caused due to acting on the advice given by the Legal Consultant of the Club. It was stated the he had advised to the assessee to file writ petition before the Hon'ble Supreme Court under Article 32 of the Constitution of India. However, the Hon'ble Supreme Court dismissed the petition on the reasoning that statutory appellate remedy was available against the order of the ld. CIT(A). Thus, after the dismissal of the petition by the Hon'ble Supreme Court, the assessee filed the present appeals before the Tribunal. The appeals against the ld. CIT(A)'s order ought to have been filed on or before 17.10.2010, but were filed after 51 days because of the route taken by the assessee on the basis of wrong advice. We find that this delay is neither willful or wanton but has oc....
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....eceived by the assessee is not a capital receipt but a revenue receipt and is liable to tax, the Assessing Officer has finally concluded that this receipt has to be taxed in the hands of the Club in the respective years as a revenue receipt. 6. After cogitating in depth the rival stands, the answer to the question raised in these appeals is not very simple and direct. Instead of jumping to the judicial pronouncements, we have to first cull out the correct facts of this case. There is no doubt that the assessee is a Private Limited Company and in such cases, one has to dive deep to discern the exact nature of the activities being carried on. Sometimes, the common place experience is that by using the term 'Club' some entities are doing business for profit under the guise of a Club. But every assessee cannot be doubted on that score alone. We are sure that the manner in which the assessee has treated this receipt in its books as 'capital receipt' would not alone decide the nature of this receipt even if this has not been included while computing the Profit & Loss Account. The ld.AR has time and again repeated that the monthly subscription are only subscription collected from members....
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....part has been treated as a capital receipt and the second part as revenue receipt. If this decision is applied to the facts of the given case, it would become a very difficult situation for the assessee itself. It is a clear cut case of the assessee-company that at the entrance level it charges a cumulative amount towards corpus fund of the club which is utilized in raising infrastructure and thereafter to avail facilities of the club, the member is required to make monthly/annual subscription. In a way, the facts of the Hon'ble Bombay High Court and the given facts are not resembling with each other. So, the decision of the Hon'ble Bombay High Court (supra) would not apply to the facts of this case rather it goes against the main contention of the ld.AR. The decision of Hon'ble Supreme Court rendered in the case of Delhi Stock Exchange Association Ltd vs CIT (supra) whose relevant portion has been reproduced by the ld. CIT(A) in para 7.5 of his order is of immense importance and we also reproduce the same herein below: " The company charged fees for the admission of members and their authorized assistants. Trading members had to be elected and pay entrance fees, and ....