AI Drafter 
TaxTMI 
TaxTMI 
2018 (5) TMI 1082
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....n 143(3) of the Income Tax Act, 1961 (in short "the Act") dated 29.12.2009 for the Assessment Year 2007-08. 2. The only issue to be decided in this appeal is as to whether the ld CITA was justified in confirming the addition of Rs. 20,08,334/- on account of income not offered to tax, in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a private limited company running a beauty parlour. The return of income for A.Y.2007-08 was filed by the assessee on 31.10.2007 declaring total income of Rs. ' Nil' . The assessee received a sum of Rs. 22,00,000/- from two parties who entered into joint venture - one for centre at Bangalore and another centre at Girish Park, Kolkata. The assessee is the o....
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....rally. The agreements also provided that in case of violation any part of this agreement, which necessitates termination of this agreement, the assessee can withdraw its equipments procured and installed by the franchise partner in the leased premises, by giving a notice period of one week. The agreement further provided that the management of the 'Vibes' clinic shall vest with the assessee and the assessee shall have sole discretion and complete control over all the promotional activities and had to take administrative management of the business affairs and running of the clinic and the franchise partner shall not interfere with the funding of the clinic in any manner whatsoever. The agreement specifically provided that mobilization and te....
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....accordance with Clause-3. (d) To pay rent of the premises as specified in the Lease Deed to the Landlord till the date of the inauguration of the Clinic. ( e) To have in the Premises telephone connections, electrical fittings such as tube lights, fans exhaust fans, geysers, heaters and the requisite connected power load in accordance with requirements provided by the first party .. (f) To have requisite permission/sanction from the Municipal Corporation and other connected statutory bodies to conduct carry out Activities of the Clinic. (g) To develop the Premises in accordance with Clause 4 above. (h) To abide by the provisions of clause 5 and to contribute for different types of reserves as prov....
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.... recognition of Rs. 1,91,666/- is its income in the year under consideration. The ld. AO also placed reliance on AS-9 and observed that the assessee had shifted the entire risk to the other person and the consideration received by the assessee is not refundable to the other person under any circumstances. Hence the entire business risk is only on the other person and not on the assessee. Accordingly he observed that there is no reason for the assessee to defer the recognition of income over a period of the agreement i.e. 5 years. Based on these observations, the AO brought to tax differential amount of Rs. 20,08,334/- shown as liability by the assessee in its books as income accrued and received by the assessee for the year under considerat....
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....s by taking participation into management of business affairs of the vibes clinic among other responsibilities as enumerated (supra). Hence in our considered opinion, the assessee is justified in deferring the income of Rs. 22,00,000/- over a period of five years i.e. tenor of the agreement. We also take assistance from the Special Bench decision of Chennai Bench in the case of ACIT vs M/s Mahindra Holidays and Resorts India Ltd. In ITA No. 2412 to 2416/Mds/2005 for A.Y.1998-99 to 2002-03 dated 26.05.2010 wherein it was held that the amount of timeshare receivable by the assessee upfront at the time of enrolment of a member is not the income chargeable to tax in the initial year on account of contractual obligation that is fastened to the r....