ITO (E) 1(3), MUMBAI V. INDIAN INSTITUTION OF INDUSTRIAL ENGINEERING, MUMBAI

ITA 4992/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8139 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4992/MUM/2015 ASSESSMENT YEAR: 2010 - 11 ITO - 1(3) ROOM NO. 511, 5 TH FLOOR, PIRAMAL CHAMBER, PAREL, LALBAUG, MUMBAI - 400012 VS. INDIAN INSTITUTION OF INDUSTRIAL ENGINEERING 22, MAKER TOWERS - F, 2 ND FLOOR, CUFFE PARADE, MUMBAI - 400614. PAN NO. AAA TI0182R APPELLANT RESPONDENT REVENUE BY : MR. SAURABH KUMAR RAI, DR ASSESSEE BY : MR. JAYANT R. BHATT , AR DATE OF HEARING : 26/10 /2017 DATE OF PRONOUNCEMENT : 21/12/2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2010 - 11 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, MUMBAI AND ARISES OUT OF THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE SOLE GROUND RAISED B Y THE REVENUE IN THIS APPEAL AS THAT THE LD. CIT(A) ERRED IN ACCEPTING THAT THE ENTRANCE FEE RECEIVED OF RS.61,81,375/ - IS CAPITAL RECEIPT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) OBSERVED DURING THE COURSE OF ASSESSME NT PROCEEDINGS THAT THE INDIAN INSTITUTION OF INDUSTRIAL ENGINEERING ITA NO. 4992/MUM/2015 2 ASSESSEE HAD TAKEN ENTRANCE FEES OF RS.61,81,375/ - TO ITS BALANCE SHEET AND ADDED THE SAME TO CAPITAL FUND INSTEAD OF TAKING IT AS INCOME IN INCOME AND EXPENDITURE ACCOUNT . THE AO TREATED THE SAID AMOUNT AS INCOME AND MADE AN ADDITION OF RS.61,81,375/ - . 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) FOLLOWED HIS ORDER FOR THE AY 2011 - 12 AND ALLOWED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US, THE LD. DR RELIES ON THE ORDER PASSED BY THE AO. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE RELIES ON THE ORDER PASSED BY THE LD. CIT(A) AND THE ONE PASSED BY THE ITAT IN ASSESSEES OWN CASE FOR THE AY 2011 - 12. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE ITAT I BENCH IN ASSESSEES OWN CASE FOR THE AY 2011 - 12 (ITA NO. 3817/MUM/2015). THE TRIBUNAL HELD AS UNDER: 8. WE HAVE DELIBERATED ON THE AFORESAID JUDGMENT OF THE HONBL E HIGH COURT OF JURISDICTION, AND ARE OF THE CONSIDERED VIEW THAT AS THE ONE - TIME ENTRANCE FEES OF RS.59,87,450/ - RECEIVED BY THE ASSESSEE BEFORE US IS BACKED BY A REQUIREMENT OR CONDITION PRECEDENT TO THE MEMBERSHIP AND IS A PRICE FOR ADMISSION TO THE PRI VILEGES AND BENEFITS OF THE INSTITUTION UNDER A CONTRACT, THEREFORE, THE SAME CANNOT BE CHARACTERIZED AS A VOLUNTARY CONTRIBUTION. WE FURTHER FIND T HAT THE AFORESAID AMOUNT OF RS. 59,87,450/ - HAD BEEN CAPITALIZED AND CREDITED TO THE CAPITAL FUND PURSUANT TO THE OBLIGATION IMPOSED BY CLAUSE 4.1.1 OF THE MEMORANDUM OF ASSOCIATION AND RULES AND REGULATIONS OF THE ASSESSEE TRUST. WE FURTHER ARE PERSUADED TO BE IN AGREEMENT WITH THE CONTENTIONS OF THE LD. A.R THAT AS THE ONE - TIME ENTRANCE FEES HAS NOTHING TO DO WITH THE FACILITIES AND AMENITIES PROVIDED BY THE INSTITUTION OF THE ASSESSEE TRUST, AND RATHER HAS MUCH TO DO WITH THE INDIAN INSTITUTION OF INDUSTRIAL ENGINEERING ITA NO. 4992/MUM/2015 3 STATUS OF THE PARTICULAR CLASS OF THE MEMBER, THEREFORE, THE SAME TAKES THE COLOR AND CHARACTER AS THAT OF A CAPITAL RECEIPT. WE FURT HER FIND THAT THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. W.I.A.A CLUB LTD. (1992) 136 ITR 569 (BOM), HAD HELD THAT THE ENTRANCE FEES ONLY VESTS A RIGHT OF MEMBERSHIP, AND THOUGH THE MEMBER BY MAKING SUCH PAYMENT DOES NOT GET ANY RETURN IN TH E FORMOF SERVICES OR AMENITIES, BUT ALL THAT HE GETS IS A RIGHT TO AVAIL OF THE AMENITIES OR FACILITIES PROVIDED BY THE INSTITUTION. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE IN THE LIGHT OF THE SETTLED POSITION OF LAW, AND ARE OF T HE CONSIDERED VIEW THAT AS THE ONETIME ENTRANCE FEES RECEIVED BY THE ASSESSEE TRUST FROM THE STUDENTS WHO APPEAR FOR THE GRADUATIONSHIP EXAMINATION CANNOT BE CONSIDERED AS GRATUITOUS PAYMENT MADE BY THE MEMBERS TO THE TRUST OR AS A PAYMENT WITHOUT ANY CONS IDERATION, THEREFORE, THE SAME CANNOT BE CHARACTERIZED AS VOLUNTARY CONTRIBUTIONS. 9. WE FURTHER FIND THAT THE ISSUE BEFORE US HAD EARLIER CAME UP BEFORE A COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF COTTON TEXTILES EXPORT PROMOTION COUNCIL VS. ITO (EXEMPTIONS), RANGE 1(1), MUMBAI (2009) 117 ITD 90 (MUM). THE TRIBUNAL HAD IN THE AFORESAID CASE OBSERVED AS UNDER: - 13. NOW WE TAKE UP THE REVENUES APPEAL. THE ONLY ISSUE ARISING IN THIS APPEAL IS WHETHER THE ENTRANCE FEES RECEIVED BY THE ASSESSEE CAN BE EXCLUDED FROM THE INCOME OF THE ASSESSEE. THE AO WAS OF THE VIEW THAT THE ENTRANCE FEE COULD NOT BE CONSIDERED AS V OLUNTARY CONTRIBUTION WITH SPECIFIC DIRECTION TO FORM PART OF THE CORPUS. ACCORDINGLY, THE SAME WAS INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THE CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN ASST. YR. 1992 - 93 HELD THAT THE ENTRANCE FEES COULD NOT B E TREATED AS INCOME OF THE ASSESSEE. AGGRIEVED BY THE SAME, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. AFTER HEARING BOTH THE PARTIES, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE, SINCE THE DECISION OF THE CIT(A) IS IN ACCORDANCE WITH THE ORDE R OF THE TRIBUNAL. THE ORDER OF THE CIT(A) IS, THEREFORE, UPHELD ON THIS ISSUE. INDIAN INSTITUTION OF INDUSTRIAL ENGINEERING ITA NO. 4992/MUM/2015 4 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE IN THE BACKDROP OF THE SETTLED POSITION OF LAW, AND ARE OF THE CONSIDERED VIEW THAT THE ISSUE INVOLVED HEREIN IS SQUARELY COVERED BY THE AFOREMENTIONED JUDGMENTS OF THE HONBLE HIGH COUR T OF BOMBAY AND THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL. WE THUS BEING OF THE CONSIDERED VIEW THAT THE CIT(A) HAD BY WAY OF A WELL - REASONED ORDER ADJUDICATED THE ISSUE, THEREFORE, FINDING NO REASON TO TAKE A DIFFERENT VIEW, THUS UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 6.1 FACTS BEING SIMILAR, WE FOLLOW THE ABOVE ORDER OF THE CO - ORDINATE BENCH AND UPHOLD THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN T HE OPEN COURT ON 21/12/2017. SD/ - SD/ - ( C.N. PRASAD ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 21/12/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI