TaxTMI 
TaxTMI 
2024 (8) TMI 868
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....iable to be annulled. 2. That the learned CIT(A) under the facts and circumstances of the case has committed a mistake of law in sustaining the action of the assessing officer for making the addition on account of membership fee amounting to Rs 1,94,68,282/- pertaining to the period from 1 April 2008 and onwards as shown under the head membership fee received in advance' on accrual basis of accounting over the life of membership period as per accounting standard as notified by CBDT under section 145(2) being mandatory on assessee to follow. 3. That the learned CIT(A) was not Justified on facts and law in sustaining the action of the assessing officer in ignoring the contention of the assessee that when the change of method of accounting is bonafide and mandatory u/s 145(2) and consistently followed in the subsequent years by the assessee company, no addition can be made by invoking the provision of section 145(3) of the Income Tax Act. 4. That the learned CIT(A) under the facts and circumstance of the case has committed a mistake of law in sustaining the action of the assessing officer in not accepting the change of policy of accounting in respect of ....
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....- made by the Assessing officer under section 14A of the Income tax Act read with rule 8D(iii) of the Income Tax. 3. That the learned CIT(A) under the facts and circumstances of the case has committed a mistake of law in sustaining the action of the assessing officer for making the addition on account of membership fee amounting to Rs. 3,13,512/- on the basis of decision of predecessor CIT(A) for A.Y. 2008-2009. 4. That the learned CIT(A) under the facts and circumstances of the case has committed a mistake of law in sustaining the action of the assessing officer for incorrectly holding that the assessee's action in apportionment of the income, which had accrued and received in the year itself, is not justified. The assessee has apportioned only the income received between the income accrued and not accrued during the year. 5. That the learned CIT(A) had acted against the law and facts of the case in sustaining the addition of Rs. 3,13,512/- by incorrectly holding that the appellant had a vested right, with no obligation to return the same, the income is absolutely ascertained determined and specified over which the appellant has exclusive right in co....
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....he same as capital expenditure." 4. In ITA No. 326/Del/2015, following grounds have been raised by the assessee: "1. That the assessment under section 143(3) is bad in law and is liable to be annulled. 2. That the learned CIT(A) under the facts and circumstances of the case has committed a mistake of law in sustaining the action of the assessing officer for disallowing a sum of Rs. 3,33,617/- on estimated basis as of personal nature being 5% of claimed expenses of Rs. 30,51,838/- on business promotion expenses, Rs. 28,65,257/- on travelling expenses and Rs. 7,55,236/- on telephone expenses which was incurred wholly and exclusively for the business purpose of the appellant company. 3. That the learned CIT(A) under the facts and circumstances of the case has committed a mistake of law and facts in sustaining the action of the assessing officer by disallowing Depreciation of Rs. 3,39,503/- out of the depreciation claimed @ 60% as per entry III(5) of the New App I of Income tax Rule 1962 by the appellant company on Microsoft Navision software when the assessee has not acquired the software or its source code but has only acquired the right to use and as pe....
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....ant company did not earned any exempt income, (b) Investment was made in subsidiary private company out of the internal accrual and fund raised through issue of shares capital and no interest bearing fund was invested, (c) No satisfaction was recorded u/s 14A(2) of the Income tax Act having regard to the account of the incorrectness of claim of the assessee as well as ignoring the case laws relied on by the appellant, (d) The assessee company did not incur any expenditure." 5. In ITA No. 3548/Del/2018, following grounds have been raised by the Revenue: "1. Whether on facts and circumstances of the case, Ld. CIT(A) is legally justified in deleting disallowance of Rs. 20,38,149/- u/s 14A of the Income Tax Act, 1961 (hereinafter referred as "the Act") by not considering the provisions of Section 14A of the Act which stipulate computation of disallowance u/s 14A of the Act mandatorily under Rule 8D(2) of the Income Tax Rules, 1962 (hereinafter referred as "the Rules")? 2. Whether on the facts and circumstances of the case, Ld. CIT(A) is legally justified in deleting disallowance of Rs. 20,38,149/- u/s 14A of the Act without considering le....
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....business of running boutique and restaurant. The assessee has been receiving membership fee from the customers, the accounting of which is in dispute. 7. Ground No. 1 is general. 8. Ground No. 2 to 7 relates to membership fee. 9. Ground No. 8 & 9 is not pressed. Membership Fee: 10. The details of the proceedings before the AO and the ld. CIT(A) are as under: [Page 6 to 12 of the order of the ld. CIT(A)] "The Assessing Officer as per assessment order observed as under: "From the audit report of the auditors in Form No 3CD it has been noticed that during the year under consideration the assessee company has made changes in the accounting policy being regularly followed with regard to reorganization of revenue from membership fee from cash basis to accrual basis. The assessee company was consistently following the mercantile system of accounting but the membership fee received from the customer was being accounted for by the assessee company on the receipt basis up to A. Y. 200708. The change in the accounting policy is stated to be bona fide and had been done to match with the mercantile system of accounting regularly followed by the assessee As a res....
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....ear itself. This will mean an addition of Rs. 1,94,68,282/-. " During the proceedings before me, the assessee submitted as under: "The appellant company is consistently following the mercantile system of accounting but the membership fees received from the members were accounted for by the appellant company wrongly on receipt basis up to the assessment year 2007-2008 ignoring the provision of section 145(1) of the Income tax Act as amended w.e.f. 1.04.1997. When the auditor of the appellant company pointed out to the appellant company that the appellant being a company, it must follow mercantile system of the accounting as per provision of section 209 of the companies Act 1956 which is mandatory for a company, the appellant company accounted for the membership fees from receipt basis to accrual basis. During the assessment year 2008-2009, the appellant company received membership fees of Rs. 39,920,153/- out of which a sum of Rs. 19,468,282/- has been shown under the head 'membership fees received in advance' as it pertains to the membership for the period from 1st April 2008 and onwards and balance membership fees of Rs. 20,451,871/- since relate to assessment ye....
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.... membership fee. Such fees, it is important to note, shall always continue to vest in the appellant as it is not at all required to be refund the same to the payer under any circumstance. Thus, in my considered view, the appellant received the amount in its own right and exercises complete control over the usage/ appropriation/ownership of the same. Therefore, the amount received cannot, be regarded as a mere advance. The Assessing Officer has pointed that, it is not in doubt that the membership fee collected by the assessee is not refundable, which has not been objected by the assessee. Under these facts, in my view, the segregation of the portion of membership fee collected during the year as pertaining to the year under consideration and balance as advance pertaining to succeeding years is purely arbitrary, more so when the amount is not refundable. It is a settled principle that a receipt constitutes income, when an assessee is vested with the right to receive the payment. In the present case, as pointed above, since the appellant was vested with the right to receive the entire amount of membership fee from the payer, which is not refundable and there is no matching of....
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....ears the appellant had been consistently following the accounting policy of offering the entire amount received in a year for taxation as income of such year. In the aforesaid facts, the artificial segregation of the portion of Membership fees collected by the appellant in its own right during the year, in my opinion, is not permissible under the scheme of taxation as per the Act. The decision of the High Court in the case of CIT Vs. Dinesh Kumar Goyal (331 ITR 10), relied upon by the Id. AR, is distinguishable from the facts of the appellant and therefore, does not come to its rescue. In that case, the assessee was in the business of running a coaching institute, where students were coached for entrance examinations conducted by engineering institutes for a specified period of courses as well as it was running a beauty and slimming business providing packages for a specified period. In both the aforesaid businesses, the assessee collected total fee in lieu of the services, viz., coaching/beauty/slimming package to be provided over a period of time. The amount of total fee collected in relation to aforesaid services rendered during the year were offered to tax as ....
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....see is not only accrued but received by the assessee in year itself. The ld. DR argued that, once the amount is received, it becomes income irrespective of the fact whether the assessee has provided services in next financial year for the payment received in the financial year relevant to assessment year under consideration or not. The fees which is not only accrued but in fact received by the assessee, is to be assessed as income of the assessee for the year under consideration and should be taxed accordingly. Relying on the order of the ld. CIT(A), the ld. DR submitted that the income has been received by the assessee over which the assessee had vested right with no obligation to return the same. The income is absolutely ascertain, determined or specified over which the assessee has exclusive right. 13. Rebutting the arguments of the Revenue, the ld. AR argued the amount is treated as income only after providing of the services to the members. The amount received as membership cannot be treated as income in the same year as the period of membership runs over a longer duration. It was submitted that the advances received from customer has been duly offered as and when the servi....
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....010-11 3,55,56,371/- and offered in AY 2011-12 2011-12 9,80,31,544/- Amt. of AY 2010-11 = 3,55,56,371/- Amt. of Impugned year = 4,90,91,849/- Total Amt. offered = 8,46,48,220 4,89,39,695/- and offered in AY 2012-13 2012-13 9,79,28,137 No dispute between assessee and department. 17. From the above, it can be observed that the entire amount has been offered to tax. The working of the amounts offered for taxation given by the assessee has not been disputed by the Revenue authorities in the years before us and also accepted the methodology in the A.Y. 2012-13 and A.Y. 2013-14. Hence, keeping in view the entire facts and circumstances peculiar to the instant case, the appeal of the assessee is hereby allowed. ITA No. 6228/Del/2013 : A.Y. 2010-2011 Ground No. 9 : Disallowance u/s 14A: 18. Both the parties fairly submitted that the assessee has not earned any exempt income. Now, it is a settled matter that no disallowance is called for in the absence of any exempt income u/s 14A resulting in deletion of disallowance. Interest paid to NOIDA on plot installment: And also in Ground No. 5 : ITA No. 3548/Del/2018 : A.Y. 20112012 (Revenue Appe....