DCIT 5(2), MUMBAI V. MALBAR HILL CLUB LTD, MUMBAI

ITA 292/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2156 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-05-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR ITA NO M; CO M A Y
• Assessee Lawyers: J D MISTRI
• Keywords: Capital receipt; Condonation of delay; Reason to believe
• Section: 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI . , , !' #$, % , & BEFORE SHRI D. KARUNAKAR RAO, AM AND SHRI AMARJIT S INGH, JM / I.T.A. NO.292/M/12 ( %' ( )( / ASSESSMENT YEAR: 2003-04) DEPUTY COMMISSIONER OF INCOME TAX 5(2), R.NO.571, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 ' / VS. M/S. MALABAR HILL CLUB LIMITED IL PALAZZO, B.K.KHER MARG, MALBAR HILL, MUMBAI-400006 C.O. NO. 58/M/13(ARISING I.T.A. NO.292/M/12) ( %' ( )( / ASSESSMENT YEAR: 2003-04) M/S. MALABAR HILL CLUB LIMITED B.K.KHER MARG, MALBAR HILL, MUMBAI-400006 ' / VS. DEPUTY COMMISSIONER OF INCOME TAX 5(2), R.NO.571, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. : AAACW3868M ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 23.11.2015 !' /DATE OF PRONOUNCEMENT: 30.11.2015 #$ / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-9, MUMBAI [HEREINAFTER REFERRE D TO AS THE LEARNED CIT(A)] ASSESSEE BY: SHRI J.D.MISTRI DEPARTMENT BY: SHRI SUMIT KUMAR ITA NO. 292/M/12 & CO 58/M/13 A.Y. 2003-04 2 DATED 14.10.2011 RELEVANT TO THE A.Y. 2003-04. THE ASSESSEE HAS ALSO FILED THE CROSS OBJECTION. THEREFORE, THESE CASES ARE BEING T AKEN UP TOGETHER AND ARE BEING DECIDED JOINTLY BY PASSING THE SINGLE ORDER BEING T HE PARTIES ARE SAME AND MATTER OF CONTROVERSY IS ALSO THE SAME WHICH CAN BE ADJUDICAT ED CONVENIENTLY. 2. THE ASSESSEE IS A MEMBERS CLUB WHICH PROVIDES C ATERING, GAMES, OTHER RECREATIONAL FACILITIES, ETC. TO ITS MEMBERS. THE SOLE POINT WHICH HAS BEEN RAISED BEFORE US THAT WHETHER THE MEMBER FEES RECEIVED BY THE ASSESSED ARE LIABLE TO BE TAXED OR NOT. THE ASSESSEE HAS RECEIVED ENTRANCE F EES FROM LIFE MEMBERS AS UNDER: (I) FROM LIFE MEMBERS RECEIVED DURING THE YEAR RS.3 ,43,15,700/- (II) FROM LIFE MEMBERS RS. 20,21,500/- (TRANSFERRED FROM ADVANCE ACCOUNT) TOTAL.. RS.3,63,37,200/- THE ASSESSING OFFICER ARRIVED AT THIS CONCLUSION TH AT IN VIEW OF THE DECISION OF THE HONBLE HIGH COURT, MUMBAI, 80% OF THE LIFE MEMBERS HIP FEES RECEIVED IS REQUIRED TO BE TREATED AS A INCOME OF THE ASSESSEE. 3. ACCORDINGLY, AN AMOUNT OF RS.2,90,69,760/- I.E. 80% OF RS.3,63,37,200/- WAS TREATED AS REVENUE RECEIPT AND THE SAME IS BROU GHT TO TAX TO TUNE OF RS.86,39,500/-. THEREFORE, ASSESSING OFFICER MADE NET ADDITION OF RS. 2,04,30,260/-(RS.2,90,69,760 - RS.86,39,500). OTHE RWISE, ASSESSEE CLAIM RS. 3,63,37,200/- IS CAPITAL IN NATURE. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE LEARNED CIT(A) AND THE LEARNED CIT(A) REJECTED THE PLEA OF ASSESSEE. THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE TH E TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND HAVE GONE THROUGH THE CASE FILES CAREFU LLY. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS ARGUED THAT THE CROSS OBJECTION HAS BEEN FILED BY THE ASSESSEE ITA NO. 292/M/12 & CO 58/M/13 A.Y. 2003-04 3 BY 60 DAYS DELAY. THEREFORE, THE CROSS OBJECTION I S NOT LIABLE TO BE ENTERTAINED. WHILE, ON THE OTHER HAND LEARNED REPRESENTATIVE OF THE ASSESSEE REFUTED THE SAID CONTENTIONS. THE ASSESSEE FILED THE APPLICATION FO R THE CONDONATION OF DELAY AND ALSO FILED AN AFFIDAVIT IN SUPPORT OF THEIR CONTENT IONS. THE REPRESENTATIVE ON BEHALF OF THE ASSESSEE MS. ANJANA MANUBHAI PATEL FILED THE AFFIDAVIT STATING THEREIN THAT SHE WAS ON LEAVE FOR THE PERIOD W.E.F. 10 TH DECEMBER 2012 TO 10 TH JANUARY 2013 FOR HER MARRIAGE WHICH TOOK PLACE ON 16 TH DECEMBER 2012 AND SHE RESUMED HER DUTIES ON 11 TH JANUARY 2013. SHE RECEIVED THE NOTICE FROM THE IN COME TAX DEPARTMENT WITH REGARD TO APPEAL FILED ON 11 TH FEBRUARY 2013. THEREAFTER, THE CROSS OBJECTION HAS BEEN PREPARED AND FILED ON 8 TH MARCH 2013. NO DOUBT, THERE IS 59 DAYS DELAY IN FILING THE CROSS OBJECTION BUT THE CONTENTS OF AFFI DAVIT SPEAKS ABOUT THE SUFFICIENT CAUSE FOR FILING THE CROSS OBJECTION DELAYED, HENCE THE DELAY OF THE ASSESSEE IS HEREBY CONDONED IN THE INTEREST OF JUSTICE. THE AS SESSEE IN HIS CROSS OBJECTION TOOK THE PLEA THAT THE REOPENING OF ASSESSEE U/S. 148 OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT) IS WRONG AGAINST LAW AND FACTS. A S PER RECORD IT CAME INTO THE NOTICE THAT THE RETURN FOR ASSESSMENT YEAR 2003-04 WAS ACCEPTED U/S 143(1) OF THE ACT IN A ROUTINE MANNER AND NO OPINION WAS FORMED. NOTHING WAS BROUGHT IN TO THE NOTICE THAT ON WHICH GROUND THE NOTICE U/S 148 IS BAD IN LAW. ASSESSING OFFICER HAD A REASON TO BELIEVE THAT THERE WAS AN ESCAPED A SSESSMENT. THE ASSESSING OFFICER WAS OF THE VIEW THAT AN AMOUNT OF ENTRANCE FEES TO THE EXTENT OF 80% WAS TO BE TAXABLE IN VIEW OF THE JUDGEMENT OF HONBLE BOMB AY HIGH COURT. THEREFORE, WE FOUND NO GROUND TO INTERFERE WITH THE FINDING OF THE LEARNED CIT(A) UPHOLDING THE REOPENING U/S. 148 OF THE ACT IN HIS ORDER IN Q UESTION DATED 14.10.2011. 5. NOW COMING TO THE APPEAL FILED BY THE REVENUE, I T IS PLEADED BY LEARNED DR THAT THE MEMBERSHIP FEES RECEIVED BY THE ASSESSEE C LUB IS LIABLE TO BE TAXABLE IN VIEW OF THE JUDGEMENT HONBLE BOMBAY HIGH COURT BU T THE SAID JUDGEMENT HAS ITA NO. 292/M/12 & CO 58/M/13 A.Y. 2003-04 4 NOT PRODUCE BEFORE THE BENCH. HOWEVER, IT IS ALSO PLEADED THAT THE 80% ENTRANCE FEES RECEIVED FROM THE LIFE MEMBER WAS LIABLE TO BE TAXABLE. AS MENTIONED ABOVE IN SUPPORT OF THIS CONTENTIONS NO MATERIAL HAS BEEN PLACED ON RECORD. HOWEVER, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THI S ISSUE HAS NOW COVERED BY THE ORDER OF THE CIT(A) FOR THE A.Y.2005-06 WHO DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE RELYING UPON THE BOMBAY HIGH COURT JUDGEME NT IN THE ASSESSEES OWN CASE FOR THE YEAR 1963-64 AND 1964-65 CITED IN 136 ITR 569. IN THE SAID JUDGEMENT ALLOCATION OF RELEVANT RECEIPTS IN THE RATIO OF 20: 80 ON LIFE MEMBERSHIP RECEIPTS I.E. CAPITAL RECEIPTS AND REVENUE RECEIPTS WAS DECIDED B Y THE HONBLE BOMBAY HIGH COURT. THE SAID RATIO IS RELEVANT FOR THAT YEAR UN DER CONSIDERATION AND IS NOT UNIVERSALLY APPLICABLE FOR ALL THE ASSESSMENT YEAR OF THE ASSESSEE. THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT SHOULD BE PRO PERLY APPRECIATED. AFTER HEARING BOTH THE PARTIES WE ARE REPRODUCING THE EXT RACT OF THE SAID PARA PAGE 7 OF THE LEARNED CIT(A) ORDER AS UNDER: THE ONLY DISPUTE IN APPEAL IS WHAT PORTION OF THE ENTRANCE FEES RECEIVED BY THE APPELLANT FRONT PERSONS AT THE TIME OF ADMITTING THEM AS LIFE MEMBERS ARE TAXABLE RECEIPTS. THE ISSUE HAS BE EN SETTLED BY THE BOMBAY HIGH COURT IN ITS OWN CASE IN ASSESSMENT YEA R1963-64 AND ASSESSMENT YEAR 1964-65 (136 ITR 569). BOMBAY HIGH COURT HELD THAT THE ENTRANCE FEE PAID BY THE LIFE MEMBERS EQUIVALENT T O THE AMOUNT COLLECTED FROM ORDINARY MEMBERS IS A CAPITAL RECEIPTS NOT LIA BLE TO TAX AND THE BALANCE AMOUNT IS INFACT COMPOUNDED PAYMENT IN LIEU OF ANNUAL SUBSCRIPTIONS AND THEREFORE ARE REVENUE RECEIPTS. . THUS IT WILL BE SEEN THAT BOMBAY HIGH COURT HAS NOT LAID DOWN ANY RATIO FOR T HE PURPOSE OF SPLITTING ENTRANCE FEE BETWEEN REVENUE AND CAPITAL RECEIPT. THEREFORE, THE ASSESSING OFFICER WAS WRONG IN SPLITTING THE FEE RE CEIVED FROM LIFE MEMBERS INTO CAPITAL AND REVENUE RECEIPTS IN 20 : 8 0 RATIO. THAT PART OF THE ENTRANCE FEE COLLECTED FROM LIFE MEMBERS, WHICH COLLECTED FROM ORDINARY MEMBERS, IS TO BE TREATED AS CAPITAL RECEI PTS AND OVER AND ABOVE THIS AMOUNT IS TO BE TREATED AS COMPOUNDED MILLE OF ANNUAL SUBSCRIPTIONS AND THEREFORE THIS PART IS A TAXABLE RECEIPTS AS HE LD BY BOMBAY HIGH COURT. ACCORDINGLY THE ASSESSING OFFICER WAS NOT J USTIFIED IN MAKING AN ADDITION OF RS.5. 76,000/- TO THE INCOME OF THE APP ELLANT ON ACCOUNT OF SUBSCRIPTIONS TRANSFERRED FROM THE ADVANCE SUBSCRIP TION ACCOUNT OF ITA NO. 292/M/12 & CO 58/M/13 A.Y. 2003-04 5 ORDINARY MEMBERS TO THE LIFE MEMBERS SUBSCRIPTION A CCOUNT. THIS GROUND OF THE APPEAL OF THE APPELLANT IS ALLOWED. 5.2 I HAVE CONSIDERED THE FACTS AND THE SUBMISSIONS MADE BY THE AUTHORIZED REPRESENTATIVE. SINCE THE FACTS ARE SAM E AND ISSUE IS IDENTICAL, I DO NOT FIND ANY REASON TO DEVIATE FROM THE STAND TAKEN BY MY PREDECESSOR AND ACCORDINGLY HOLD THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. THE GROUND OF APPEAL IS, THEREFORE ALLOWED. FROM THE ABOVE, LEARNED CIT(A) MERELY FOLLOWED HIS PROCESSED ORDER WHO RELIANCE UPON THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT FOR THE A.Y.1964-65(SUPRA). REQUIREMENT OF SPLITTING UP OF THE ENTRANCE FEE COL LECTED FROM LIFE MEMBERS IN THE RATIO 20:80 IS NOT THE RATIO OF THE CITED JUDGEMENT . TO THAT EXTENT, THE DECISION OF THE LEARNED CIT(A) IS IN ORDER. CONSIDERING THE AB OVE LEARNED DR HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW HOW THE IMPUGNED ORDER O F LEARNED CIT(A) DECIDED ON THE STRENGTH OF BOMBAY HIGH COURT JUDGEMENT IS NOT FAIR. WE FIND THE ORDER OF LEARNED CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE AND CRO SS OBJECTION OF THE ASSESSEE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2015. SD/- SD/- (D.KARUNAKAR RAO) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 30 TH NOVEMBER, 2015 MP MP MP MP ITA NO. 292/M/12 & CO 58/M/13 A.Y. 2003-04 6 + , -%'#. /.)' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. +' / BY ORDER, - & //TRUE COPY// 0/$ ! (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI