TaxTMI 
TaxTMI 
2022 (4) TMI 1388
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....ne taxability of Rs. 8,63,92,930/- being entrance fees received from the members treating the same to be a revenue receipt and taxable income of the Appellant. (2) It is submitted that the CIT has passed the order without giving a chance of personal hearing to the Appellant and has further erred in setting it aside particularly since the AO., in the course of passing order u/s.143(3) dated 21-12-17 has specifically asked for the details of the entrance fees, has examined the nature and character of its receipt and has taken a well considered view that the same is in the nature of capital receipt and hence not taxable income of the Appellant. (3) Further, the order of the AO has merged with that of the order of CIT(A) on identical issue of taxability or otherwise of subscription received from the members which are not taxable on principles of mutuality. (4) The order of the C1T therefore be cancelled as an erroneous order and the order of the AO be reinserted. II. On Merits: (1) Without prejudice to above, the CIT has erred in holding that Rs. 8,63,92,930/- being entrance fees received from the members is a revenue receipt and hence taxable as income of the Appellant. (2....
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....e of Delhi Stock Exchange Ltd. Vs. CIT(1959) 36 ITR 222(Supreme Court). However, the A.O. did not take note of the above-referred decision and did not tax the amount of Rs. 8,63,92,930/- as taxable receipts. Thus, the assessment order passed u/s 143(3) of the Act on 21.12.2017 was erroneous and prejudicial to the interest of the revenue so far as non-taxing of these receipts is concerned. 3.2 In response to this notice, the assessee-company has filed letter dated 03.03.2020 and made various submissions which challenged the issuance of notice u/s order passed u/s 263 of the Act since the two pre-requisite to exercise revisionary powers that the order of the A.O. should be erroneous and it should also be prejudicial to the interest of the revenue are not met in the instant facts. The assessee submitted the issue with respect to nontaxability of entrance fees on account of mutuality as well as considering the same as capital in nature has already been examined by the A.O. during the assessment proceedings u/s 143(3) of the Act and after due application of mind, Ld. Assessing Officer had considered such entrance fees as nontaxable item. The view expressed by the A.O. through the asses....
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....ies or verification of the issue as mentioned above. Secondly, the very basis of resorting to the revisionary proceedings u/s 263 of the Act is the decision of the Hon'ble Supreme Court of India in the case of Delhi Stock Exchange Ltd. Vs. CIT reported at (1961) 41 ITR 486 which affirmed the decision of the Hon'ble High Court of Delhi reported (1959) 36 ITR 222(S.C.) in which the identical issue has been dealt with. The assessee's case is squarely covered by these decisions. Thirdly, reliance by the assessee on the decision of the Hon'ble ITAT rendered in its own case for A.Yrs. 1966-67, 1967-68, 1968-69 and 1969-70 dated 21.03.1975 is misplaced since the core issue in these cases was denial of exemption u/s 10(23) of the Act by the A.O. In the present case, the issue of receiving the lifetime membership or onetime membership fees transferred to the balance-sheet as reserve and surplus has not been precisely examined as it was not the core issue in the above cases. Therefore, this decision is held to be rendered in respect of the claim made u/s 10(23) of the Act and thus not applicable to the present case on hand. Ld. Pr. CIT accordingly set aside the assessment order b....
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....el for the assessee submitted that the same were discussed with Pr. CIT, who has not given any cogent reasons for disregarding the same. Ld. Counsel for the assessee further submitted that the Pr.CIT has not been able to distinguish the above decisions on facts and has given no reason why the same should not apply to assessee's set of facts. The ld. counsel for the assessee relied on the case of State of West Bengal v. Calcutta Club Ltd [2019] 110 taxmann.com 47 (SC) to submit that SC in the above case has held that doctrine of mutuality is applicable to incorporated and unincorporated members' clubs and thus sales tax could not have been levied on such clubs for supply of food and drinks to permanent members (in VAT proceedings). The Hon'ble Supreme Court has upheld that the doctrine of mutuality is applicable to incorporated clubs like the assessee. He argued that if revenue receipts are exempt on the basis of principles of mutuality, then, capital receipts in the nature of one-time membership fees should also be exempt from taxation. The ld. counsel for the assessee drew our attention to page 69 of paper book and submitted that for the past 12 years i.e. from Assessment Year....
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....e, the entrance fee was charged by the assessee for enrolment of its customers as members of 'executive centre'. The entrance fee was a one-time fee and only members were eligible to avail of the facilities available in the 'executive centre' and the entrance fee was non-refundable, following the decision in the case of CIT v. W. I. A. A. Club Ltd. [1982] 136 ITR 569 (Bom), it is held by the Bombay High Court that the entrance fees were paid to the club in order to acquire the right to avail of the services and facilities extended by the club and therefore, the receipts constituted capital receipts. 13. In view of the above discussion, accepting the arguments of the assessee that the receipts on account of entrance fees and life membership fees received by the assessee from its members, was not a revenue or trading receipt and therefore, cannot be included in the assessable income, we hold that the addition on this account has rightly been deleted by the learned Commissioner of Income tax (Appeals) and we confirm his order to that extent. 7.2 In our view, the facts in the assessee's case and the Karnavati Club case supra are identical, wherein the jurisdictional ....
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.... and profession'. It would also be apt to refer to the decision of ITAT in the case of DCIT v. Bengal Rowing Club [1994] 48 ITD 512 (Calcutta), where the ITAT discussed and distinguished the applicability of Delhi Stock Exchange case supra to facts of the assessee's case, which was a Rowing Club, in the following words: "18. It was then doubted whether the subscription paid by the members for the services rendered by the club cannot be taxed in view of the decisions of the Supreme Court in the case of CIT v. Calcutta Stock Exchange Association. Ltd. [1959] 36 ITR 222 and in the case of Delhi Stock Exchange Association Ltd. v. CIT [1961] 41 ITR 495 (SC). Under section 28(iii) of the Income-tax Act, 1961, income derived by a trade, professional or similar association from specific services performed for its members are taxable as income from business. The fore-runner of this provision In the Act of 1922 was section 10(6) thereof. The decisions of the Supreme Court cited above were concerned with section 10(6) of the 1922 Act. In the present case, we are not concerned with the Income of any trade or professional or similar association. A trade or professional association is an assoc....
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....k Exchange Association are entirely different, as the said associations are not members' clubs. The receipts sought to be charged in both cases are referable to certain specific services, which are not privileges of membership." It is, therefore, not possible to countenance the proposition that the subscription paid by the members for the privileges and services enjoyed by them can be taxed under section 28(iii) of the Act. 7.4 In view of the above discussion, we are of the considered view that the Delhi Stock Exchange case would not apply to the assessee's set of facts, firstly, for the reason the Hon'ble Supreme Court in the said case taxed the income in the hands of the Trade Association on the basis that the principle of mutuality is lacking, whereas in the case of State of West Bengal v. Calcutta Club Ltd [2019] 110 taxmann.com 47 (SC), the Hon'ble Supreme Court in VAT proceedings has upheld that the incorporated Members Clubs are governed by the principle of mutuality. Secondly, as aptly noted in the DCIT v. Bengal Rowing Club [1994] 48 ITD 512 (Calcutta), the facts of trade associations cases and that of Membership Clubs are on a different footing and ratio of....