Jennys Residency P Ltd., CHENNAI V. DCIT, CHENNAI

ITA 747/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9232 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 28-03-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Keywords: Revenue expenditure

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 747 /MDS/2016 / ASSESSMENT YEAR :20 12 - 1 3 M/S. JENNEYS RESIDENCY P. LTD., SOORYA FOUNDATION, FLAT NO. A - 1, 1 ST FLOOR, NO. 152 (OLD 104) HABIBULLAH ROAD, T. NAGAR, CHENNAI 600 017. [PAN: A A BCJ3735D ] V S. THE DEPUTY COMMISSIONER OF INCOME TAX , CORPORATE CIRCLE 2(2) CHENNAI 600 0 34 . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI A. V. SREEKANTH , J CIT / DATE OF HEARING : 30 . 0 5 .201 6 / DATE OF P RONOUNCEMENT : 31 . 0 5 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX (APPEALS) 6 , CHENNAI , DATED 17 . 02 .20 1 6 RELEVANT TO THE ASSESSMENT YEAR 20 12 - 1 3 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO CONFIRMATION OF ADDITION TOWARDS MEMBERSHIP FEES OF .47,48,447/ - . I.T.A. NO . 747 /M/ 16 2 2. AT THE TIME OF HEARING , THE LD. DR HAS SUBMITTED THAT SIMILAR CLAIM OF THE ASSESSEE FOR ASSESSMENT YEARS 2008 - 09 AND 2010 - 11, THE APPEALS FILED BY THE ASSESSEE WERE DISMISSED BY THE TRIBUNAL IN I.T.A. NO. 1426 & 1427/MDS/2014 DATED 30.06.2015. ACCORDINGLY, BY FOLLOWIN G THE ABOVE DECISION OF THE TRIBUNAL, FOR THE ASSESSMENT YEAR 2012 - 13 ALSO, THE APPEAL FILED BY THE ASSESSEE SHOULD BE DISMISSED. 3. THOUGH THERE WAS NO REPRESENTATION FROM ASSESSEE S SIDE, THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY VIDE ITS LETTER 2 5.05.2016, BY FAIRLY AGREEING TO THE DECISION OF THE TRIBUNAL, FILED COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09 AND 2010 - 11 FOR THE INFORMATION OF BENCH FOR DECIDING THE APPEAL FILED BY THE ASSESSEE FOR THE ASS ESSMENT YEAR 2012 - 13. 4. WE HAVE HEARD LD. DR, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE TRIBUNAL VIDE ITS ORDER DATED 30.06.2015 FOR THE ASSESSMENT YEARS 2008 - 09 AND 2010 - 11 IN ASSESSEE S OWN CASE, IN SIMILAR SET OF FACTS ON IDENTICAL ISSUE, THE TRIBUNAL HAS OBSERVED AS UNDER: 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE IS RUNNING HOTEL INDUSTRY AND ALSO ME MBERS CLUB. THE ASSESSEE HAS COLLECTED MEMBERSHIP FEES FROM MEMBERS, WHO ARE ENROLLED IN THE CLUB. MEMBERSHIP FEES COLLECTED DURING THE FINANCIAL YEARS 2007 - 08 AND 2009 - 10 WERE .6,35,75,990/ - AND .4,48,61,207/ - RESPECTIVELY. THIS MEMBERSHIP FEES IS ONE - TIME PAYMENT AT THE TIME OF ENROLLING OF THE MEMBER. THE MEMBERSHIP FEE SO COLLECTED BY THE I.T.A. NO . 747 /M/ 16 3 ASSESSEE WAS OFFERED FOR TAXATION @ 10%, BY SPREADING THE RECEIPTS OVER A PERIOD OF 10 YEARS. THE CASE OF THE ASSESSEE IS THAT THOUGH THE MEMBERSHIP FEES WAS COLLECTED AT THE TIME OF ENROLLING THE MEMBER, IT HAS TO CATER TO THE NEEDS OF THE SAID MEMBERS THROUGHOUT THEIR MEMBERSHIP PERIOD, WHICH IS PERMANENT (LIFE TIME). ACCORDINGLY, MEMBERS HIP FEES COLLECTED WAS SPREAD OVER A PERIOD OF 10 YEARS AND ACCORDINGLY RECOGNIZED 10% OF THE RECEIPTS AS REVENUE RECEIPTS DURING THE YEAR OF RECEIPT AND OFFERED TO TAX AND THE BALANCE WAS BEING OFFERED TO TAX IN THE SUBSEQUENT 9 YEARS. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SUBMITTED THE DETAILS OF MEMBERSHIP FEES COLLECTED AND ALSO THE BASIS FOR OFFERING ONLY 10% OF THE MEMBERSHIP FEES COLLECTED TO TAX. IT APPEARS FROM THE ORDER OF THE LD. CIT(A) THAT MEMBERSHIP FEES COLLECTED FROM FINANCIAL YEARS 2003 - 04 TO 2007 - 08 AND WERE OFFERED 20% OF THE SAME. SO FAR AS THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS COLLECTED .1,27,15,198/ - AGAINST WHICH ONLY .42,84,668/ - WAS ADMITTED IN THE RETURN OF INCOME. THE ASSESSING OFFICER BASED ON THE EARLIER YEARS CONSIDERED AND ACCEPTED 20% MEMBERSHIP FEE SO COLLECTED AND ASSESSMENT WAS COMPLETED. THE ASSESSEE S SUBMISSION IS THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH TAMIL NADU CORPORATION FOR DEVELOPMENT OF WOMEN LTD. AND LEASED OUT FOR A PERIOD OF 33 YEARS ON 27.10.1994 AND SUBSEQUENTLY A SUPPLEMENTARY DEED DATED 29.02.1996. THEREFORE, THE ASSESSEE HAS CHANGED THE POLIC Y OF OFFERING 20% AND 10% IS OFFERED FOR TAXATION. WE FIND THAT THERE IS NO RELATION BETWEEN THE ASSESSEE S RECEIPTS AND REDUCING THE SAME FROM 20% TO 10% FOR THE AGREEMENT ENTERED INTO BY THE ASSESSEE. 8. SO FAR AS ANOTHER ARGUMENT OF THE ASSESSEE IS C ONCERNED, CHANGING OF ACCOUNTING POLICY. THE ASSESSEE HAS NOT ABLE TO PLACE ANY MATERIAL TO SHOW THAT THE ACCOUNTING PRINCIPLES OF THE COMPANY HAS BEEN CHANGED, BUT ONLY WE FIND FROM THE MATERIAL FILED BY THE ASSESSEE, THE BOARD RESOLUTION DATED 30.09.2006 , WHEREIN THE BOARD HAS DECIDED TO OFFER ONLY 10%. THIS BOARD RESOLUTION IS NOT AT ALL A BASIS FOR REDUCING 20% TO 10% WHEN THE ASSESSEE IS CONTINUOUSLY FOLLOWING BY OFFERING 20% REVENUE RECEIPTS COLLECTED FROM THE MEMBERS AND OFFERED FOR TAXATION. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND THAT THE LD. CIT(A) HAS CORRECTLY CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER AND FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). 9. SO FAR AS CASE LAW RELIED ON BY THE ASSESSEE IN THE CASE OF TAPARIA TOOLS LTD. V. JCIT (SUPRA), THE HON BLE SUPREME COURT HAS OBSERVED THAT THUS, THE FIRST THING WHICH IS TO BE NOTICED IS THAT THOUGH THE ENTIRE EXPENDITURE WAS INCURRED IN THAT YEAR, IT WAS THE ASSESSEE WHO WANTED TO SPREAD OVER. THE COURT WAS CONSCIOUS OF THE PRINCIPLE THAT NORMALLY REVENUE EXPENDITURE IS TO BE ALLOWED IN THE SAME YEAR IN WHICH IT IS INCURRED, BUT AT THE INSTANCE OF THE ASSESSEE, WHO WANTED SPREADING OVER, THE COURT AGREED TO ALLOW THE ASSESSEE THAT BENEFIT WHEN IT WAS FOUND TH AT THERE WAS A CONTINUING BENEFIT TO THE BUSINESS OF THE COMPANY OVER THE ENTIRE PERIOD. IN THE PRESENT CASE, THE ASSESSEE HAS RECEIVED LUMP - SUM AMOUNT FROM ITS MEMBERS. THE I.T.A. NO . 747 /M/ 16 4 MEMBERS IN ADDITION TO THE ABOVE ENROLLMENT FEES, HAVE TO KEEP ON PAYING ANNUAL FE ES, ANY OTHER FEES FOR UTILIZING THE FACILITIES OF THE CLUB/ORGANIZATION. THUS, THERE IS ALSO AN ANNUAL IN - FLOW OF FUNDS FROM THE MEMBERS WHICH CAN TAKE CARE OF THE RECURRING EXPENSES. WE FIND THAT THE ASSESSEE'S CLAIM OF SPREADING THE MEMBERSHIP FEE COLLE CTIONS OVER A PERIOD OF 10 YEARS AND RECOGNIZING ONLY 1/10TH OF THE MEMBERSHIP FEE RECEIPTS AS THE TAXABLE INCOME OF THE YEAR IS NOT JUSTIFIED. THEREFORE, THE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE HAS NO APPLICATION. 10. IN VIEW OF THE A BOVE FACTS AND CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 11. SO FAR AS APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11 IS CONCERNED, THE FACTS A ND THE ISSUE RAISED BEFORE THE TRIBUNAL ARE IDENTICAL AND ACCORDINGLY, BY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2008 - 09, WE DISMISS THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2010 - 11 ALSO. 5. RESPECTFULLY FOL LOWING THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09 AND 2010 - 11, THEREBY NO OBJECTION FROM ASSESSEE S SIDE, THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2012 - 13 IS DISMISSED. 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED ON THE 31 ST MAY , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 31 . 0 5 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.