ITO, New Delhi V. Dalmia Resorts International (Pilgrimage) (P) Ltd., New Delhi

ITA 1385/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0349 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 30-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: STEPHEN GEORGE
• Assessee Lawyers: TA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.1384/DEL/2010 ASSESSMENT YEAR: 2005-06 INCOME TAX OFFICER, WARD-10(2), R.NO. 199, C.R. BUILDING, NEW DELHI. VS. M/S DALMIA RESORTS INTERNATIONAL (BEACHES) (P) LTD., 4, SCINDIA HOUSE, CONNAUGHT PLACE, NEW DELHI 110 001. (APPELLANT) (RESPONDENT) ITA NO.1385/DEL/2010 ASSESSMENT YEAR: 2005-06 INCOME TAX OFFICER, WARD-10(2), R.NO. 199, C.R. BUILDING, NEW DELHI. VS. M/S DALMIA RESORTS INTERNATIONAL (PILGRIMAGE) (P) LTD., 4, SCINDIA HOUSE, CONNAUGHT PLACE, NEW DELHI 110 001. (APPELLANT) (RESPONDENT) ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 2 ITA NO. 2300/DEL/2010 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER, WARD-10(2), R.NO. 199, C.R. BUILDING, NEW DELHI. VS. M/S DALMIA RESORTS INTERNATIONAL (P) LTD., 4, SCINDIA HOUSE, CONNAUGHT PLACE, NEW DELHI 110 001. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI STEPHEN GEORGE, CIT-DR. RESPONDENT BY : SHRI TAPAN K.CHAKRABORTY AND SHRI S.CHOUDHARY, ADVOCATES. ORDER PER RAJPAL YADAV, JM: THE PRESENT THREE APPEALS ARE DIRECTED AT THE INST ANCE OF REVENUE AGAINST THE SEPARATE ORDERS OF LD. CIT(A) DATED 2 ND FEBRUARY,2010,1 ST FEBRUARY, 2010 AND 27 TH MARCH, 2010 PASSED IN ASTTT. YEARS 2005-06 AND 2006-07. M/S. DALMIA RESORT INTERNATIONAL (BEAC HES) PVT. LTD. IS ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 3 ENGAGED IN THE BUSINESS OF RESORTS AT GOA. IT HAS F ILED ITS RETURN OF INCOME ON 28 TH OCTOBER 2005 DECLARING NET LOSS OF ` 99,905/-. THE AO FOUND THAT ASSESSEE ENTERED INTO AN AGREEMENT FOR T IME SHARING UNITS AND RECEIVED A TOTAL CONSIDERATION OF ` 2,76,05,000/- ON ACCOUNT OF SALE OF 105 UNIT-WEEKS DURING THE YEAR. IT HAS DECLARED TOTAL RECEIPT OF ` 11,35,303/- ONLY. AN ASSESSMENT HAS BEEN MADE IN TH IS CASE U/S 143(3) ON 31.12.2007. AO HAS ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT ` 2,63,69,790/-. HE TREATED THE RECEIPT ISSUED BY THE ASSESSEE FOR SALE OF 105 UNITS AS REVENUE RECEIPTS. THE ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A) AND HAS DECIDED ITS APPEAL VIDE ORDER DATED 2 ND FEBRUARY, 2010. THE REVENUE IS CHALLENGING THIS ORDER IN ITA NO. 13 84/DEL/2010. 2. IN ITA NO. 1385/DEL/2010 REVENUE IS CHALLENGING THE ORDER OF THE LD. CIT(A) IN THE CASE OF M/S. DALMIA RESORT INTERN ATIONAL (PILGRIMAGE) PVT. LTD. THE ASSESSEE HAS FILED ITS RETURN OF INCO ME DATED 28 TH OCTOBER 2005 DECLARING NET LOSS OF ` 5,94,642/-. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RESORT AT TIRUPATI. IT HAD ENTERED INTO AGREEMENT FOR TIME SHARING UNIT AND RECEIVED A TOTAL CONSIDERATION OF ` 9,49,600/- ON ACCOUNT OF SALE OF 71 UNIT WEEKS. IT HAS SHOWN TOTA L RECEIPT AT ` 18,42,272/-. THE AO IN CONSONANCE TO HIS FINDING IN THE CASE OF M/S. DALMIA RESORT INTERNATIONAL (BEACHES) HAS TREATED T HE TOTAL RECEIPT AS REVENUE RECEIPT AND PASSED AN ASSTT. ORDER U/S 143( 3) ON 31.12.2007. ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 4 HE DETERMINED THE TOTAL TAXABLE INCOME OF THE ASSES SEE AT ` 70,71,290/-. ON APPEAL, LD. CIT (A) DELETED THIS ADDITION VIDE O RDER DATED 1 ST FEBRUARY, 2010. 3. IN ITA NO. 2300/DEL/2010 REVENUE IS IMPUGNING TH E ORDER OF LD. CIT(A) DATED 27.3.2010. IN THIS CASE, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RESORT. IT HAS SOLD 27 UNITS WEEKS FOR A CONSIDERATION OF ` 6,57,33,483/- AS AGAINST THIS IT DISCLOSED A RECEIP T OF ` 7,46,972/- IN ASSTT. YEAR 2006-07. THE AO TREATED THE TOTAL CONSI DERATION RECEIVED FROM SALE OF TIME SHARE UNIT AS REVENUE RECEIPTS. 4. THUS THE COMMON DISPUTE IN ALL THE THREE APPEALS IS WHETHER THE ENTIRE AMOUNT OF SALE OF TIME SHARING UNIT IS TO BE TREATED AS REVENUE RECEIPT OR NOT. THE EXPLANATION OF THE ASSESSEE GIV EN IN THE CASE OF M/S DALMIA RESORT (BEACHES) IS COMMON IN THE PURPOSE OF ALL THE THREE APPEALS IT READ AS UNDER :- THOUGH THE AMOUNT IS RECEIVED IN ADVANCE AT THE TI ME OF AGREEMENT, BUT THE LEASING RIGHTS OF A UNIT ARE GIVEN FOR 99 Y EARS OR 33 YEARS AS THE CASE MAY BE . AS SUCH, EVERY 1/99 TH OR 1/33 RD PORTION OF THE ADVANCE ACCRUES TO THE ASSESSEE COMPANY AS LICENSE FEE DURING THE YEAR. AS PER THE AGREEMENT IF IN ANY YEAR, VACATION OWNER DOES NOT UTILIZE ITS UNIT PERIOD, THE SAID SUM I.E 1/99 TH OR 1/33 RD PORTION OF ADVANCE RECEIVED IS REFUNDED TO THE VAC ATION OWNER. FURTHER, THE ASSESSEE COMPANY IS UNDER OBLIGATION T O PROVIDE SERVICES, FACILITIES AND AMENITIES TO THE VACATION OWNER AT T HE RESORT, SUCH AS FOOD AND BEVERAGE SERVICES, HOUSE KEEPING, UTILITIES, SECURI TIES AND ADMINISTRATIVE SERVICES. IT IS ONLY WHEN VACATION OWNER UTILIZES A UNIT PERIOD AT THE RESORT DURING THE YEAR AND ASSESSEE COMPANY PROVIDES HIM/H ER WITH THE ABOVE SERVICES, THEN THE COMPANY BECOMES ENTITLED TO THE LICENSE FEE RELATING TO THAT YEAR. THEREFORE, LICENSE RECEIVED IN ADVANCE FOR 99 YEARS OR 33 YEARS, AS THE CASE MAY BE, CANNOT BE TREATED AS TRADING RECEIPTS AND SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE COMPANY. ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 5 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ISSU E IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF ITAT PASSED IN ASSTT. YEAR 2005-06 IN THE CASE OF M/S. DALMIA R ESORT INTERNATIONAL (HILLS) WHERE THE ASSESSEE HAS ENTERED INTO SIMILAR TYPE OF ARRANGEMENT. HE PLACED ON RECORD COPY OF THE TRIBUNAL ORDER DATE D 10 TH FEBRUARY, 2010. HE ALSO SUBMITTED THAT THERE WERE CONFLICTING OPINION ON THIS ISSUE AT THE LEVEL OF TRIBUNAL THE AO HAS RELIED UPON THE ORDER OF THE ITAT IN THE CASE OF M/S. STERLING HOLIDAYS RESORTS (INDIA) REPORTED IN 295 ITR (AT) 162. THIS DIVERGENCE OF OPINION HAS BEEN SILEN CED BY THE SPECIAL BENCH OF THE TRIBUNAL IN ITS DECISION RENDERED IN T HE CASE OF ACIT VS. MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD. VS. ASSTT. CIT REPORTED IN 131 TTJ 8. HE PLACED ON RECORD COPY OF THE SPECIAL BENC H DECISION. 6. LD. DR ON THE OTHER HAND CONTENDED THAT THERE IS NO CONCEPT OF DEFERRED INCOME IN THE INCOME TAX ACT. ASSESSEE OUG HT TO HAVE SHOWN THE TOTAL RECEIPT AS A REVENUE RECEIPT IN THE YEAR UNDER CONSIDERATION. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT FACTS AND CIRCUM STANCES ARE IDENTICAL IN THE CASE OF ASSESSEE AS WELL AS IN THE CASE OF M/S. DALMIA RESORT INTERNATIONAL (HILLS) PVT. LTD. THE TRIBUNAL HAS D ISCUSSED THE ISSUE IN DETAIL. THE FINDING OF THE TRIBUNAL READ AS UNDER : - ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 6 THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 16.2.2009 FOR AY 2005-06, WHEREIN REVENUE IS AGGRIEVED FOR DELETION OF ADDITION OF RS.2,00,93,226/- MADE BY THE AO BY TREA TING THE ADVANCE RECEIPTS FROM SALE OF VACATION UNITS AS THE INCOME OF THE AS SESSEE IN THE YEAR OF RECEIPT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ENGAGED I N THE BUSINESS OF RUNNING OF RESORTS AT MUSSOORIE. IT ENTERED INTO AGREEMENT FOR TIME SHARING UNITS AND RECEIVED TOTAL CONSIDERATION OF RS.2.11 CRORES ON A CCOUNT OF ALLOTMENT OF 131 UNIT WEEKS DURING THE YEAR. FOR THIS PURPOSE, IT E NTERED INTO AN AGREEMENT WITH THE PROSPECTIVE CUSTOMERS WHO IN CONSIDERATION OF GRANT OF RIGHTS BY THE ASSESSEE COMPANY TO THE VACATION OWNER PAID THE ASS ESSEE COMPANY A PROPORTIONATE SUM OF MONEY AS COST OF EVERY UNIT WE EK IN EACH YEAR FOR 99/33 YEARS. SUCH RECEIPT OF UNIT WEEK WAS APPORTIONED B Y THE ASSESSEE COMPANY IN THE RESPECTIVE YEARS TO WHICH IT PERTAINS, MEANI NG THEREBY 1/99 TH /1/33 RD SHARE OF RECEIPT WAS ACCOUNTED FOR AS INCOME EVERY YEAR, OUT OF THE TOTAL AMOUNT PAID BY THE VACATION OWNER. AS PER THE TERM S OF THE AGREEMENT, THE ASSESSEE COMPANY WAS ENTITLED TO SUCH LICENSE FEE O NLY WHEN IT FULFILS ITS OBLIGATION TO ITS MEMBERS, ACCORDING TO WHICH THE A SSESSEE COMPANY WAS RESPONSIBLE TO PROVIDE A UNIT/FULLY FURNISHED ROOM WHICH INCLUDED SINGLE APARTMENT IN THE RESORT AS PER ENTITLEMENT. HOWEVE R, THE AO BROUGHT TO TAX ENTIRE AMOUNT RECEIVED BY THE ASSESSEE IN THE YEAR OF RECEIPT AND DID NOT AGREE WITH THE CONTENTION OF ASSESSEE FOR SPREADING THE AMOUNT OVER 99/33 YEARS FOR WHICH ASSESSEE WAS TO PROVIDE SERVICES TO THE VACATION OWNER. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITION BY RELYING ON THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE. AGGRIEVED BY T HE SAME, REVENUE IS IN FURTHER APPEAL BEFORE US. 3. AT THE OUTSET, LEARNED AR PLACED ON RECORD THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1994-95, 96-97, 97-98 AN D 98-99, ORDER DATED 26.5.2005 WHEREIN EXACTLY SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN ASSESSEES FAVOUR. IN THIS ORDER, THE TRIBUNAL HAS HELD THAT ASSESSEE WAS JUSTIFIED IN TREATING ONLY 1/99 TH PART OF THE TOTAL AMOUNT OF RECEIPT ON ACCOUNT OF SALE OF TIME SHARING UNITS AS ITS INCOME. FOLLOWIN G WAS THE OBSERVATION AND CONCLUSION OF THE TRIBUNAL:- 20. IN THE CASE BEFORE US, THERE ARE TWO IMPORTANT FEATURES. FIRSTLY, THE ASSESSEE IS UNDER AN OBLIGATION TO PRO VIDE SERVICES TO THE VACATION OWNERS FOR 99 YEARS. THE SERVICES ARE IN THE FORM OF PROVIDING ACCOMMODATION FOR THE SPECIFIED T IME AND IT ENTAILS A HOST OF EXPENDITURE TO BE INCURRED LIKE M AINTENANCE OF ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 7 THE ACCOMMODATION, REPAIRS, PROVISION OF GADGETRIES , KITCHENETTE AND MANY OTHERS. THUS, UNLESS THE VACATION OWNER U TILIZES HIS RIGHT, NO RIGHT TO INCOME ACCRUES TO THE ASSESSEE. THERE ARE TWO CIRCUMSTANCES UNDER WHICH THE RIGHT TO INCOME ACCRU ES TO THE ASSESSEE. ONE, WHEN THE VACATION OWNER AVAILS OF T HE SERVICES. THE OTHER IS WHEN THE VACATION OWNER FORGOES THE RI GHT OF AVAILING THE SERVICES BY NOT GIVING 60 DAYS NOTICE AS PROVIDED IN THE AGREEMENT. UNDER THESE TWO CIRCUMSTANCES, THE ASSESSEE WOULD BE ENTITLED TO APPROPRIATE 1/99 TH PART OF THE TOTAL RECEIPTS AS ITS INCOME OF THE YEAR. FURTHER, UNDER THE AGRE EMENT, IF THE VACATION OWNER GIVES 60 DAYS NOTICE EXPRESSING HIS INTENTION NOT TO AVAIL THE SERVICES, THEN THE ASSESSEE IS UNDER A N OBLIGATION TO REFUND 1/99 TH PART OF THE TOTAL AMOUNT. THUS, FIRSTLY, THERE IS AN OBLIGATION ON THE PART OF THE ASSESSEE TO REFUND AN D SECONDLY, THERE IS AN OBLIGATION TO PROVIDE SERVICES. TILL T HESE CONTINGENCIES TAKE PLACED, NO INCOME CAN BE SAID TO HAVE ACCRUED TO THE ASSESSEE. IN OUR VIEW, THE LEARNED CIT(A) WAS JUSTIFIED IN ACCEPTING THE ACCOUNTING TREATMENT ADO PTED BY THE ASSESSEE. 21. THERE IS ANOTHER ASPECT TO THE MATTER ALSO. WH ILE TAXING AN INCOME, THE MATCHING COST CONCEPT HAS ALSO TO BE KEPT IN MIND. BY THIS CONCEPT, IT IS MEANT THAT WHILE ACCO UNTING FOR AN INCOME, ALL COSTS INCURRED TO EARN SUCH INCOME HAVE ALSO TO BE CONSIDERED. IN OTHER WORDS, IN THE PRESENT CASE IF THE AO WANTED TO TAX THE RECEIPTS OF 99 YEARS IN ONE YEAR, HE SHOULD HAVE ESTIMATED THE EXPENSES FOR 99 YEARS AND ALLOWE D THE SAME AS DEDUCTION. BUT THAT IS NOT PRACTICABLE AND HENC E THE METHOD ADOPTED BY THE ASSESSEE, THOUGH PRIMARILY BASED ON SOUND ACCOUNTING PRINCIPLES, IS IN ACCORDANCE WITH LAW. IT IS NOT VIOLATIVE OF ANY STATUTORY PROVISION. IN FACT, THE SUPREME COURT, IN THE CASE OF CALCUTTA CO.LTD. VS. CIT (37 ITR 1) ALLOWED THE DEDUCTION OF A LIABILITY QUANTIFIED ON ESTIMATED BA SIS BUT WAS TO BE DISCHARGED AT A FUTURE DATE. HOWEVER, IN THE PR ESENT CASE, EVEN SUCH ESTIMATION IS NOT POSSIBLE AND HENCE THER E IS NOTHING WRONG IF THE ASSESSEE CLAIMS ITS YEARLY EXPENDITURE AGAINST 1/99 TH PART OF THE TOTAL RECEIPTS. BUT TO TAX THE RECEIP TS OF 99 YEARS IN ONE YEAR WITHOUT TAKING INTO ACCOUNT THE E XPENDITURE OF 99 YEARS WOULD BE, NOT ONLY AGAINST THE ACCOUNTING PRINCIPLES BUT WOULD ALSO NOT BE IN ACCORDANCE WITH LAW. MUCH HAS BEEN SAID ABOUT THE ACCOUNTING PRINCIPLES BY THE AO IN H IS ORDER. WE CAN ONLY REMIND OURSELVES OF THE JUDGMENT OF THE SU PREME COURT IN THE CASE OF CIT VS. U.P.STATE INDUSTRIAL D EVELOPMENT CORPORATION (225 ITR 703) WHEREIN IT WAS HELD THAT IN ORDER TO DETERMINE THE QUESTION OF TAXABILITY, WELL SETTLED LEGAL PRINCIPLES AS WELL AS PRINCIPLES OF ACCOUNTANCY HAVE TO BE TAK EN INTO ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 8 ACCOUNT. IT WAS OBSERVED THAT IT IS A WELL ACCEPTE D PROPOSITION THAT FOR THE PURPOSES OF ASCERTAINING PROFITS AND GAINS, THE ORDINARY PRINCIPLES OF COMMERCIAL ACCOUNTING SHOULD BE APPLIED, SO LONG AS THEY DO NOT CONFLICT WITH ANY EXPRESS PR OVISION OF THE RELEVANT STATUTES. IN THE LIGHT OF THE FOREGOING DISCUSSION, WE UPHOLD THE ORDER OF THE LEARNED CIT(A) ON THIS ISSU E. 4. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR EARLIER YEARS AS S TATED HEREINABOVE AND ALSO GONE THROUGH THE AGREEMENT EXECUTED BY THE ASSESSEE WITH THE PROSPECTIVE CUSTOMERS AND FOUND THAT DIFFERENT TYPES OF UNITS WERE BUILT AT THE RESORT AND THE UNIT WEEK WERE ALLOTTED TO THE VARIOUS MEMBERS ON VACATION TIMESHARE BASIS FOR SPECIFIED P ERIOD OVER THE LICENSE PERIOD I.E. 99 YEARS AND 33 YEARS. THE AMO UNT RECEIVED UNDER THE SCHEMES IN ADVANCE FOR 99 YEARS AND 33 YEARS UN DER DIFFERENT AGREEMENT IS CREDITED TO A PARTICULAR ACCOUNT, CALL ED ADVANCE LICENSE FEE A/C. OUT OF THIS ACCOUNT, A PROPORTIONATE AMOU NT EQUIVALENT TO 1/99 TH AND/OR 1/33 RD OF THE LICENSE FEE, IS CREDITED TO PROFIT AND LOSS ACCOUNT VERY YEAR UPON COMPANY BECOMING ENTITLED FO R SUCH AMOUNT. THE ASSESSEE COMPANY IS ENTITLED TO SUCH LICENSE FE E ONLY WHEN IT FULFILLS ITS OBLIGATION TO ITS MEMBERS. UNDER THE AGREEMENT, THE ASSESSEE COMPANY IS RESPONSIBLE AND LIABLE TO PROVI DE A UNIT/FULLY FURNISHED ROOM. ROOMS WERE PROVIDED TO THE CUSTOME RS, YEAR ON YEAR BASIS FOR THE FULL LENGTH OF LICENSE PERIOD I.E. 99 YEARS OR 33 YEARS EXCEPT THE TAXES, DUTIES, LEVIES ETC., AS MAY BE AP PLICABLE FROM TIME TO TIME. THE COST OF ALL THE SERVICES SO PROVIDED TO CUSTOMERS WAS MET OUT OF THE LICENSE FEES RECEIVED IN ADVANCE AND PRO PORTIONATELY CREDITED TO PROFIT & LOSS ACCOUNT. AS PER THE TERMS OF THE AGREEMENT, THE ASSESSEE COMPANY IS ALSO RESPONSIBLE TO PROVIDE AN ALTERNATE ACCOMMODATION IN ANOTHER RESORT OR HOTEL IF A UNIT IS NOT AVAILABLE FOR OCCUPANCY OF THE VACATION OWNER DURING THE SPECIFIE D PERIOD. IN CASE THE ASSESSEE COMPANY IS UNABLE TO, FOR ANY REASON, PROVIDE SUCH ALTERNATIVE STAY FACILITY, THE ASSESSEE COMPANY SHA LL PAY THE VACATION OWNER LIQUIDATED DAMAGES AS PER THE TERMS OF THE AG REEMENT. THE CUSTOMER IS ALSO ENTITLED TO DEPOSIT HIS UNIT VACAT ION PERIOD, EXCHANGE HIS UNIT VACATION PERIOD, SPLIT HIS UNIT VACATION P ERIOD AND ACCUMULATE AS SPECIFIED, ITS SPECIFIED PERIOD TIME FOR UTILIZA TION IN SUBSEQUENT YEARS SEPARATELY OR TOGETHER WITH THE SUBSEQUENT YEAR AS MENTIONED IN THE AGREEMENT. 5. IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE AO HAS TRIED TO DISTINGUISH THE CASE OF AY 2005-06 WITH THE EARLIER YEARS AND STATED THAT CLAUSE OF REFUND IS NOT THERE IN THE AGREEMENT ENTERED BY THE ASSESSEE COMPANY WITH THE UNIT HOLDERS DURING THE Y EAR UNDER CONSIDERATION. WITH THIS RESPECT, WE HAVE GONE THR OUGH THE AGREEMENT ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 9 AND FOUND THAT EVEN THOUGH CLAUSE OF REFUND WAS NOT THERE, BUT NEVERTHELESS THE AMOUNT SO RECEIVED WAS IN THE NATU RE OF ADVANCE RECEIVED FOR RENDERING SERVICES FOR 99/33 YEARS AND THERE WAS NO ACCRUAL OF ENTIRE AMOUNT RECEIVED DURING THE YEAR U NDER CONSIDERATION. THE AMOUNT WAS RELATABLE TO THE ENTIRE PERIOD OF 99 /33 YEARS FOR WHICH IT WAS RECEIVED. FURTHERMORE, IN CLAUSE 5 IT HAS B EEN MENTIONED THAT UNIT WEEK HOLDERS ARE ENTITLED FOR ACCUMULATION AND CARRY FORWARD OF UNIT WEEKS. THUS EVEN IN THOSE CASES WHERE NO REFU ND IS CLAIMED IN THE EVENT OF NON USER OF UNIT WEEKS BY THE UNIT HOL DERS, THE ASSESSEE COMPANY STANDS COMMITTED TO MAKE PROVISION OF SERVI CES IN THE SUBSEQUENT YEARS. WE ALSO FOUND THAT THE ASSESSEE COMPANY IS ALSO OBLIGED TO MAKE ARRANGEMENT IN OTHER SIMILAR RESORT S IN CASE THE REQUISITIONED ACCOMMODATION IS NOT AVAILABLE WITH T HE ASSESSEE COMPANY. THUS, THE ASSESSEE COMPANY IS LEGALLY AND COMMERCIALLY OBLIGED TO MAKE REQUISITE PROVISION FOR ARRANGEMENT OF ALL THESE SERVICES OF PROVIDING A COMFORTABLE ACCOMMODATION T O ALL THE UNIT WEEK HOLDERS FOR THE COMMITTED PERIOD OF 33 YEARS OR 99 YEARS AS THE CASE MAY BE. THUS, THE ASSESSEE COMPANY CANNOT ABSORB A ND CONSUME THE ENTIRE RECEIPTS ON ACCOUNT OF ALLOTMENT OF UNIT WEEKS IN THE FIRST YEAR ITSELF BY TREATING THE SAME AS INCOME OF THAT FIRST YEAR. IF IT IS SO DONE BY THE ASSESSEE COMPANY, IT WOULD BE LEFT WITH NO F UNDS TO MAKE ARRANGEMENT FOR THE SERVICES COMMITTED TO BE PROVID ED BY IT TO THE UNIT WEEK HOLDERS. MOREOVER, THE RESULTANT PROFIT AND L OSS ACCOUNT WOULD SHOW DISTORTED PICTURE AND ABSURD AND IRRATIONAL AC COUNTING RESULTS. THE AO HAS ATTEMPTED TO TAKE HELP FROM ACCOUNTING S TANDARD 9 ISSUED BY THE ICAI. THE AO HAS IN FACT MISUNDERSTOOD AND MISAPPLIED THE GUIDELINES GIVEN IN CLAUSES OF AS 9. THE CLAUSE NO .12 RELIED UPON BY THE AO ITSELF TALKS ABOUT SOME PROPORTIONATE COMPLE TION METHOD. THUS, EVEN AS PER THIS CLAUSE, REVENUE SHOULD BE RECOGNIZ ED IN PROPORTION TO SERVICES PERFORMED OR COMPLETED. 6. EVEN AS PER CLAUSE 12 OF AS-9 ISSUED BY THE ICAI WITH REGARD TO ISSUE TO REVENUE RECOGNITION, THE LEVEL OF WORK ACC OMPLISHED SHOULD BE BASED UPON PROPORTIONATE COMPLETION METHOD OR COMPL ETED SERVICES CONTRACT METHOD AS THE CASE MAY BE. IN THE CASE OF THE ASSESSEE, THERE WERE SPECIFIC OBLIGATIONS RELATED TO THE SERV ICES WHICH HAVE TO BE OFFERED TO THE VACATION UNIT HOLDERS AND FOR WHICH PROPORTIONATE COST HAS TO BE INCURRED FOR THE NEXT 99/33 YEARS. DETAI LS REGARDING THESE EXPENSES INCLUDED ITEMS OF BASIC INFRASTRUCTURE LIK E BEDS, TELEVISIONS, OTHER FURNITURE AND FURNISHING ETC. AS ALSO EXPENSE S WHICH WOULD BE INCURRED ON CLEANING AND MAINTENANCE AS WELL AS SEC URITY, HOUSE KEEPING ETC. FURTHERMORE, SUBSTANTIAL AMOUNT OF EX PENDITURE WOULD ALSO BE INCURRED ON MAINTAINING GENERAL ADMINISTRAT ION AND IN GENERAL TO KEEP THE VARIOUS FACILITIES IN READINESS SO THAT THE SAME COULD BE AVAILED BY THE VACATION OWNERS AT ANY POINT OF TIME DURING THE PERIOD OF 33/99 YEARS. ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 10 7. ITAT COORDINATE BENCH CUTTACK HAS ALSO DEALT WIT H THE SIMILAR ISSUE IN THE CASE OF T.K.INTERNATIONAL 91 ITD 481 AND HELD THAT THE AMOUNT OF ADVANCE RECEIVED WAS DEFERRED REVENUE INC OME OF THE ASSESSEE. IT WAS HELD THAT EVERY RECEIPT IS NOT AN INCOME AND ONLY THOSE RECEIPTS WHICH PARTAKE THE CHARACTER OF INCOM E OF THE CURRENT YEAR WILL ONLY BE TAXABLE DURING THE CURRENT YEAR, WHEREAS THE PORTION OF RECEIPTS WHICH IS IN THE NATURE OF ADVANCE RECEIPT IS NOT THE INCOME OF THE CURRENT YEAR, THEREFORE CANNOT BE BROUGHT TO TA X DURING THE CURRENT YEAR. SECTION 2(45) DEFINES TOTAL INCOME AS THE TOTAL AMOUNT OF INCOME REFERRED TO IN S. 5, COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. IT MAY BE SEEN THAT THE PRINCIPAL CHARGING S .4 MAKES THE TOTAL INCOME OF THE PREVIOUS YEAR SUBJECT TO THE CHARGE OF THE INCOME-TAX. THUS, THE INCOME WHICH CAN BE SUBJECT TO TAX, IS TH E INCOME OF PREVIOUS YEAR AND NOT THE RECEIPTS WHICH PERTAINS TO FUTURE 99 YEARS. THE AMOUNT IN RESPECT OF TIME SHARE SCHEME WAS ACTUALLY RECEIVED BY THE ASSESSEE, BUT SUCH RECEIPT WITHOUT THE SAME BEING H AVING ACCRUED DURING THE YEAR UNDER CONSIDERATION, WILL NOT BRING SUCH RECEIPT INTO THE TAX NET. IN THE INSTANT CASE, THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE COMPANY HAD TO RENDER SERVICES TO THE HOLD ER OF TIME SHARE UNIT IN THE NEXT 33/99 YEARS, THEREFORE, THERE IS N O REASON FOR TAXING THE RECEIPT RELATABLE TO FURTHER 99 YEARS IN THE YEAR O F RECEIPT ITSELF. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE DEPARTME NT TO THE EFFECT THAT THE ASSESSEE COMPANY IS NOT REQUIRED TO RENDER ANY SERVICES TO THE HOLDER OF THE TIME SHARE UNIT IN FURTHER 33/99 YEARS. ON THE CONTRARY, THE CONTRACTUAL AGREEMENT IS ENTERED BY T HE ASSESSEE COMPANY ACCORDING TO WHICH THE ASSESSEE COMPANY HAS TO PROVIDE ROOM ACCOMMODATION TO THE TIME SHARE UNIT HOLDER FO R 33/99 YEARS. 8. DETAILED FINDING HAS BEEN RECORDED BY THE CIT(A) WITH REGARD TO THE FACTS DISCUSSED HEREINABOVE AND THE TERMS OF TH E AGREEMENT SO EXECUTED BY THE ASSESSEE WITH THE UNIT HOLDER. RES PECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE VIS--VIS OTHER DECISION OF CUTTACK BENCH AS DISCUSSED HEREIN ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE CI T(A). 8. THE SPECIAL BENCH OF THE ITAT HAS ALSO CONSIDERE D THIS ISSUE IN THE CASE OF MAHINDRA HOLIDAYS & RESORTS (INDIA) LTD .. THE QUESTION CONSIDERED BY THE SPECIAL BENCH READ AS UNDER :- WHETHER THE ENTIRE AMOUNT OF THE TIME-SHARE MEMBER SHIP FEE RECEIVABLE BY THE ASSESSEE UPFRONT AT THE TIME OF E NROLMENT OF A MEMBER IS THE INCOME CHARGEABLE TO TAX IN THE INITI AL YEAR WHEN THERE IS ITA NOS.1384,1385,2300 /DEL/10 ASSTT. YEARS 2005-0 6,2005-06,2006-07 11 A CONTRACTUAL OBLIGATION FASTENED TO THE RECEIPT TO PROVIDE THE SERVICES IN FUTURE OVER THE TERM OF THE CONTRACT? 9. THE SPECIAL BENCH HAS HELD THAT THE ENTIRE AMOUN T OF TIME SHARED MEMBERSHIP FEE RECEIVABLE BY THE ASSESSEE UPFRONT A T THE TIME OF ENROLMENT OF A MEMBER IS NOT THE INCOME CHARGEABLE TO TAX IN THE INITIAL YEAR ON ACCOUNT OF CONTRACTUAL OBLIGATION I.E. FAST ENED TO THE RECEIPT TO PROVIDE SERVICES IN FUTURE OVER THE TERM OF CONTRAC T. 10. RESPECTFULLY FOLLOWING THE DECISION OF THE SPEC IAL BENCH AS WELL AS OF THE COORDINATE BENCH WE DO NOT FIND ANY MERIT IN THESE APPEALS THEY ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.2.2011. SD/- [SHAMIM YAHYA] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11.2.2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT