TaxTMI 
TaxTMI 
2015 (11) TMI 1890
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....ntribution after spreading over of the above stated membership contribution. The Revenue's sole substantive ground in its cross appeal assail correctness of the spreading over exercise hereinabove. 3. The assessee-company is engaged in the business of conveyance of industrial effluent and maintenance of channel. It received membership contribution from its new members for life time a sum of Rs. 2,09,76,612/- in lieu of offering effluent disposal facility. The Assessing Officer taxed the entire sum in the impugned assessment year of receipt by following his line of action adopted in assessment year 2001-02, 2004-05 to 2008-09 thereby rejecting assessee's accounting treatment treating the same as a capital receipt on the ground that it was yet to perform its part of obligation. The same was accordingly adjusted the brought forward sum resulting in the impugned addition of Rs. 39 lacs. 4. The assessee preferred appeal. The CIT(A) has dealt with the issue as under:- "4. I have considered appellant's submissions but do not find them to be acceptable. Appellant company, a co-operative venture looking after disposal of effluent discharges by member industries provides 1....
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....rovided by the appellant. One time payments received are non-refundable and were received in the course of normal business activity of the appellant. Nomenclature given by the appellant, i.e. capital contributions to such one time payments is immaterial. Appellant's contention that the so called capital contributions received from the members were capital receipt is, therefore not acceptable and is already rejected by the Hon'ble ITAT also. In AYs 2001-02, 04-05 & 05-06, ITAT by following decision of ITAT's Special Bench in the case of Mahindra Holidays and Resort (I) Ltd (2010), 131 TTTJ (Chennai) (SB) and by referring to AS-9, accepted appellant's offer to tax, on deferred basis one time contributions received from members. Since AY 08-09, appellant, unlike preceding years where one time contributions were offered as income on deferred basis over a period of 5 years started not offering one time contributions as income at all. Appellant did not even include l/5th portions of one time contributions received in preceding four years as its taxable income for AY 2008-09 as well as AY 2009-10. One time contributions received from members are undoubtedly of revenue natu....
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....e Tribunal vide order No. 4280/ahd/2007, 374/ahd/2009, 2682/ahd/2008 & 3625/ahd/2008. We have already given copy in our earlier submission. Be as it may, the appellant company held this entire amount of Rs, 39, 00, 000/- as amount received as capital contribution. The entire capital contribution, being of capital nature, has been included in the current liabilities as the same has been received from the member with specific direction that it should be spent on capital project envisaged by the company. As per USER"S AGREEMENT on page no 3 specify that CAPITAL CONTRIBUTION means contribution towards capital expenditure incurred/to be incurred by ECPL for its activities. Leaving this aspect aside, the moot question that arises is whether the receipt of capital contribution is an income of the assessee? This appeal is, therefore, against the taxability of the entire capital receipt as revenue receipt as has been done by the Ld. Assessing Officer in one year. It is a clearly established principle that in determining a receipt as capital receipt or revenue receipt one must have regard to the nature and quality of the receipt. Every receipt cannot be de....
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....e taxpayer to service the members for the contracted period. The Capital contribution towards for capital expenditure incurred/ to be incurred by company and it becomes owner of the entire sum only when the service obligation is fully discharged for the entire period of membership as per agreement. Relying on the SC decision in the case of E.D. Sassoon & co ltd, the SB observed that the following two condition are necessary to say that income has accrued to or earned by a taxpayer^) the taxpayer must have come into existence and the taxpayer must have acquired a right to received the payment. In the present case, a debt is created in favour of the taxpayer immediately on execution of the contract. However, it cannot be said that the taxpayer has fully contributed to its accruing by rendering services which will be done over a number of years. Moreover the assessee company allows to the members to utilize its capital facilities for the period of 99 years for discharge of agreed quantities of effluent. In other words, Assessee Company has to perform its part of obligation for next 99 years and to keep the capital set up intact and allow the use thereof by t....