Thane Bharat Sahakari Bank Ltd, MUMBAI V. Asstt,Commissioner of Income Tax Circle-3,Thane,

ITA 7006/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62637 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-07-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BABAN D PATIL
• Assessee Lawyers: G G SATHE
• Keywords: Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.7114/M/2010 (AY: 2007-2008) ITA NO.7006/M/2011 (AY: 2008-2009) THE THANE BHARAT SAHAKARI VS THE ACIT, C IRCLE - 3, BANK LTD., THANE (W). SHATATARKA, BAJI PRABHU DESHPANDE MARG, VISHNU NAGAR, THANE (W)-400 602. PAN: AAAJT 1230F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.G. SATHE RESPONDENT BY: SHRI BABAN D. PATIL, DR DATE OF HEARING: 05/07/2012 DATE OF PRONOUNCEMENT: 11/07/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THESE TWO APPEALS ARE BY THE ASSESSEE THANE BHARAT SAHAKARI BANK LTD., AGAINST THE ORDERS OF THE LD CIT (A), THANE DATED 3 0.07.2010 AND 29.07.2011RESPECTIVELY. THE ASSESSEE HAS RAISED CO MMON GROUNDS IN BOTH THE APPEALS AS UNDER: THE CIT (A) ERRED IN HOLDING THAT ANY RECEIPT WHI CH IS NOT REFUNDABLE CANNOT BECOME A CAPITAL RECEIPT AND THE ACTION OF THE AD IN TAXING IT AS REVENUE IS IN ORDER. THE CIT (A) FAILED TO APPRECIATE THAT I) THE RECEIPTS ARE COLLECTED AT THE TIME OF ADMISSION OF A PERSON TO THE MEMBERSHIP OF THE BYE-LAWS OF THE BAN K. BY LAW 9(B)(IV)(B). II) THIS IS A ONETIME RECEIPT AND IS CREDITED TO THE CA PITAL ACCOUNT OF THE BANK THAT IS TO SAY IT BECOMES A PAR T OF THE PROFIT MAKING APPARATUS AS DISTINGUISHED FROM T HE REVENUE GENERATED FROM IT. 2 ITA NO.7114/M/2010 ITA NO.7006/M/2011 III) IT THUS ASSUMES THE CHARACTER OF CAPITAL RECEIPT AN D CANNOT BEAR THE CHARACTER OF REVENUE AND CONSEQUENT LY CANNOT BE CONSIDERED AS INCOME. THE APPELLANT, THEREFORE, CONTENTS THAT TO HOLD SUC H RECEIPTS AS REVENUE RECEIPTS IS CONTRARY TO THE ACCOUNTING PRIN CIPLES AND PRACTICE AND IS THUS NOT JUSTIFIED. 2. BRIEFLY STATED, IN THE COURSE OF ASSESSMENT PROCE EDINGS THE ASSESSING OFFICER BROUGHT TO TAX AN AMOUNT OF RS. 65,340/- CO LLECTED AS MEMBERSHIP FEES AND RS. 1,78,780/- AS ENTRANCE FEES IN AY 2007-2008 AND AN AMOUNT OF RS. 54,680/- AS MEMBERSHIP FEES AND RS. 1,51,650/- AS E NTRANCE FEES IN AY 2008- 2009. IN AY 2007-2008, THE ASSESSING OFFICER BROUG HT AN AMOUNT TO TAX ON THE REASON THAT ASSESSEE FAILED TO FURNISH THE NECESSAR Y DETAILS OF WHETHER SUCH FEES DENOTE LIFE TIME MEMBERSHIP AND WHETHER ALLOTM ENT OF SHARES GIVES ANY RIGHT TO THE SHAREHOLDERS. HE WAS OF THE OPINION T HAT MEMBERSHIP FEES AND ENTRANCE FEES WERE COLLECTED IN THE NORMAL COURSE O F BANKING ACTIVITY THEREFORE, A REVENUE RECEIPT. IT WAS THE CONTENTION OF THE AS SESSEE THAT AS PER BYE-LAW 9(B)(IV)(B) IT REQUIRES INDIVIDUAL TO SUBSCRIBE AT LEAST FULLY PAID UP 40 SHARES AT RS. 25/- PER SHARE ALONG WITH ENTRANCE FEES OF RS. 50/- BEFORE THE BOARD APPROVES HIS MEMBERSHIP. IT WAS FURTHER CONTENDED THAT THE ABOVE RECEIPTS ARISE DUE TO BYE-LAW AND THEY ARE CAPITAL RECEIPTS NOT REVENUE RECEIPTS. 3. THE LD CIT (A) WITHOUT EXAMINING THE NATURE OF THE AMOUNT AFFIRMED THE ASSESSING OFFICERS OPINION THAT TWO ITEMS OF R ECEIPTS ARE NON-REFUNDABLE AND THEREFORE JUST BECAUSE THESE AMOUNTS ARE NON-RE FUNDABLE, THESE CANNOT BECOME AS A CAPITAL RECEIPT. HENCE, THE ASSESSEE I S IN APPEAL. 4. LEARNED COUNSEL PLACED ON RECORD THE BYE-LAWS AND S UBMITTED THAT THE MEMBERSHIP FEES AND ENTRANCE FEES WERE COLLECTE D ON THE ADMISSION OF THE MEMBER AS A SHAREHOLDER AND THEREFORE THESE AMOUNTS ARE CAPITAL IN NATURE. FOR THE OBSERVATION THAT ASSESSEE HAS NOT FURNISHED ANY DETAILS BEFORE THE AO, THE LD COUNSEL HAS NO OBJECTION IF THE MATTER WAS R EMITTED TO THE AO FOR FRESH EXAMINATION. 5. THE LD DR RELIED ON THE ORDER OF THE AO AND CIT(A). 3 ITA NO.7114/M/2010 ITA NO.7006/M/2011 6. WE HAVE EXAMINED THE ISSUE. JUST BECAUSE THE ASSES SEE HAS STATED THAT THESE AMOUNTS ARE RECEIVED BY WAY OF PROVISION S OF BYE-LAW AND ARE CAPITAL IN NATURE, THE ISSUE CANNOT BE DECIDED ONLY ON SUBM ISSIONS. SINCE THE DETAILS WERE NOT FURNISHED BEFORE THE AO ABOUT THE NATURE O F MEMBERSHIP GRANTED AND WHETHER THE SHARES WERE ALLOTTED OR NOT, THE ISSUE CANNOT BE DECIDED ONLY ON THE NOMENCLATURE OF THE AMOUNTS IN BOOKS. WE ALSO NOTICE THAT ANY MEMBER AT THE TIME OF ADMISSION SHOULD SUBSCRIBE TO 40 SHARES OF RS. 25/- EACH WHICH MEANS THE AMOUNT OF MEMBERSHIP FEES PER MEMBER SHOU LD BE RS. 1000/- WHEREAS THE ENTRANCE FEES PER MEMBER WAS ONLY RS. 5 0/- ( IE. 1000:50). WHEN THIS QUESTION WAS PLACED BEFORE THE LD COUNSEL, WHY THERE IS A MEMBERSHIP FEES OF RS. 65,340/- AND RS. 54,680/- ONLY WHEN ENT RANCE FEES WAS AT RS. 1,78,780/- AND RS. 1,51,650/-, WHICH DOES NOT TALLY WITH THE RATIOS PRESCRIBED IN THE BYE-LAW, HE COULD NOT EXPLAIN. ASSESSEE HAS NO OBJECTION IF THIS ASPECT ALSO WAS EXAMINED BY THE AO. SINCE THE VERY NATURE OF THE AMOUNTS RECEIVED COULD NOT BE RECONCILED BEFORE US, WE WERE UNABLE T O GIVE ANY FINDING WHETHER THE MEMBERSHIP FEES OR ENTRANCE FEES ACCOUNTED AS S UCH IN THE BOOKS OF ACCOUNT WAS CAPITAL RECEIPT OR REVENUE RECEIPT. TH EREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THE ISSUE TO THE FILE OF THE AO TO EXAMINE THE NATURE OF RECEIPT OF THESE AMOUNTS AND HOW THE AMOUNTS ARE CA LCULATED AND THE RATIO THEREON, TO DECIDE THE ISSUE WHETHER THE AMOUNT DO PERTAIN TO REVENUE IN NATURE. ISSUE IS ACCORDINGLY REMITTED TO THE FILE OF THE AO AND ORDERS OF THE AO AND CIT (A) ON THIS ISSUE ARE SET ASIDE FOR REDOING ACCORDING TO FACTS AND LAW. 7. IN THE RESULT, THESE TWO APPEALS ARE ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON SD/- 11 TH JULY,2012. SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 11 TH JULY 2012. OKK 4 ITA NO.7114/M/2010 ITA NO.7006/M/2011 COPY TO: 1. THANE BHARAT SAHAKRI BANK LTD., THANE. 2. ACIT, CIR-3,THANE. 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, E BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI