THE ITO 8(1)-2, MUMBAI V. M/S. CLUBLINK (INDIA) PVT. LTD, MUMBAI

ITA 7658/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0997 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 28-12-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SINHA
• Assessee Lawyers: N AVNEET KUMAR ARORA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFPRE SHRI D. MANMOHAN (VICE-PRESIDENT) AND SHRI RAJENDRA SINGH (ACCOUNTANT MEMBER) I.T.A.NO.7658/MUM/2007 (A.Y. 2004-05) INCOME-TAX OFFICER-8(1)-2, R.NO.205, 2 ND FLOOR, AAYKAR BHAVAN, M.K.ROAD,MUMBAI-400 020. VS. M/S. CLUBLINK (INDIA) P.LTD., 5 & 6, BLUEMOON ESTATE, NEW LINK RD., ANDHERI (W), MUMBAI400 053. PAN: AABCC8207D APPELLANT RESPONDENT APPELLANT BY SHR I AJIT KUMAR SINHA RESPONDENT BY SHRI N AVNEET KUMAR ARORA. O R D E R PER D. MANMOHAN, VICE PRESIDENT : THIS IS AN APPEAL FILED AT THE INSTANCE OF THE ASSE SSEE AND IT PERTAINS TO ASSTT. YEAR 2004-05. THE ONLY GROUND RAISED BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.4,16,6 8,493/- BEING MEMBERSHIP FEES SHOWN AS ADVANCE FROM MEMBERS T REATED BY THE ASSESSING OFFICER AS INCOME WITHOUT APPRECIATING TH E FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 2. WE HAVE HEARD THE LD. D.R. AS WELL AS THE LD. CO UNSEL ON THE SUBJECT MATTER OF DISPUTE AND CAREFULLY PERUSED THE RECORD. 3. FACTS NECESSARY FOR THE DISPOSAL OF THE APPEAL A RE STATED IN BRIEF. THE ASSESSEE COMPANY, WHICH IS ENGAGED IN HOSPITALITY B USINESS, IS RUN IN THE NAME & STYLE OF CLUBLINK (INDIA) PVT. LTD. BEING A PRIVA TE CLUB, IT ENROLLS MEMBERS UNDER DIFFERENT CATEGORIES SUCH AS CLUBLINK MEMBERSHIP , BARTER MEMBERSHIP, SYNERGY MEMBERSHIP ETC. THERE IS NO LIFE MEMBERSH IP IN THE CLUB AND ALL THE ITA 7658/M/07 CLUBLINK(I) P.LTD. 2 MEMBERS ARE PROVIDED MEMBERSHIP FOR A STIPULATED PE RIOD, THE TERM OF WHICH VARIES FROM 1 YEAR TO 25 YEARS; THERE IS NO SCHEME BEYOND 25 YEARS. THE ASSESSEE COMPANY COLLECTS MEMBERSHIP FEES CAPTIONED AS NON REFUNDABLE MEMBERSHIP FEES AND REFUNDABLE MEMBERSHIP FEES. THE ASSESSEE HAS SPREAD OVER THE AMOUNTS OF REFUNDABLE AND NON REFUNDABLE M EMBERSHIP FEES OVER THE PERIOD OF THE PARTICULAR TERM THAT THE MEMBER HAD O PTED AND PROPORTIONATE AMOUNT PERTAINING TO THE ASSESSMENT YEAR WAS CREDI TED TO P & L ACCOUNT. THERE IS NO DISPUTE WITH REGARD TO REFUND OF MEMBERSHIP F EES. THERE IS ALSO NO DISPUTE WITH REGARD TO THE NATURE OF RECEIPT OF NON REFUND ABLE MEMBERSHIP FEES; THE ASSESSEE SPREAD OVER NON REFUNDABLE FEES OVER THE S PECIFIC PERIOD BY TAKING IT AS A REVENUE RECEIPT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE BEING A PRIVATE CLUB, THE RE IS NO CONCEPT OF MUTUALITY INVOLVED IN THIS CASE AND HENCE THE ENTIRE AMOUNT R ECEIVED BY THE ASSESSEE FROM ITS MEMBERS IS ASSESSABLE TO TAX EITHER ON RECEIPT BASIS OR ON ACCRUAL BASIS DURING THIS YEAR. THE VIEW OF THE ASSESSING OFFICER WAS TH AT IF AN AMOUNT OF RECEIPT IS REASONABLY EXPECTED, THEN REVENUE MUST BE RECOGNIZE D IN THE YEAR OF ITS ACCRUAL AND HENCE THERE IS NO LOGIC IN THE CLAIM OF THE ASS ESSEE THAT NON REFUNDABLE MEMBERSHIP FEES SHOULD BE TAXED ON DEFERRED REVENU E RECEIPT BASIS. 5. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESS EE SUBMITTED THAT MEMBERS ARE OFFERED MEMBERSHIP OF THE CLUB FOR A SP ECIFIC PERIOD NOT EXCEEDING 25 YEARS AND HENCE APPROPRIATION OF THE MEMBERSHIP FEES BY SPREADING OVER THE ENTIRE FEES WITH REFERENCE TO THE PERIOD OF MEMBERS HIP AND TAKING THE SAME INTO REVENUE ACCOUNT IS AS PER THE ACCOUNTING STANDARD ( AS-9) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. ITA 7658/M/07 CLUBLINK(I) P.LTD. 3 6. THE ASSESSING OFFICER WAS, HOWEVER, OF THE OPINI ON THAT AS-9, FAR FROM SUPPORTING THE STAND OF THE ASSESSEE, SUPPORTS THE STAND OF THE REVENUE INASMUCH AS ITEM NO.6 OF APPENDIX-B SPEAKS OF REVEN UE RECOGNITION IN THE YEAR IN WHICH IT IS RECEIVED/ACCRUED AND IN THIS REGARD THE ASSESSING OFFICER HIGHLIGHTED THE FOLLOWING LINES FROM THE AFORESAID ITEM: IF THE MEMBERSHIP FEES PERMITS ONLY MEMBERSHIP AND ALL OTHER SERVICES OR PRODUCTS ARE PAID FOR SEPARATELY, OF IF THERE IS A SEPARATE ANNUAL SUBSCRIPTION, THE FEE SHOULD BE RECOGNIZED W HEN RECEIVED. THE ASSESSING OFFICER HAS TAKEN NOTE OF CLAUSE 23(C ) OF THE BOOKLET CONTAINING RULES AND REGULATIONS FOR INDIVIDUALS/CORPORATE MEMBERSHIP WHICH READS AS UNDER : APART FROM THE MEMBERSHIP FEE, THE MEMBER WILL BE REQUIRED TO PAY ADDITIONAL CHARGES OF YEARLY MAINTENANCE FEE AND FE ES FOR THE OTHER FACILITIES LIKE BADMINTON, TENNIS, SQUASH, BILLIARD S AND SNOOKER, CARD ROOM, HEALTH AND FITNESS CLUB, SWIMMING POOL, MEALS AND BEVERAGES AND FOR ITS CONSUMABLE LIKE SHUTTLES, TE NNIS BALLS, ETC. THE SAID ADDITIONAL CHARGES WILL BE AS DETERMINED B Y THE MANAGEMENT FROM TIME TO TIME. HE HAS ALSO TAKEN NOTE OF THE DECLARATION TO BE GIV EN BY THE MEMBERS TO HIGHLIGHT THAT ALL THE MEMBERS ARE BOUND BY THE RUL ES & REGULATIONS IN FORCE, AS AMENDED FROM TIME TO TIME, AND THE DECISION OF THE CLUB ON THESE MATTERS WOULD BE FINAL. THE ASSESSING OFFICER THEN REFERRED TO AS -9 (REVENUE RECOGNITION) TO DRAW THE CONCLUSION THAT A NON REFUNDABLE MEMBERSHI P FEE HAS TO BE RECOGNIZED WHEN IT IS RECEIVED, SINCE THERE IS NO LIABILITY/OB LIGATION UPON THE CLUB TO REFUND THE AMOUNT IN ANY EVENTUALITY; THUS, IT CANNOT BE A PPORTIONED FOR THE PERIOD OF TIME. HE, THEREFORE, BROUGHT THE ENTIRE AMOUNT OF R S.4,16,68,493/-, REFERABLE TO NON REFUNDABLE FEES, AS INCOME OF THE ASSESSEE IN T HE YEAR UNDER CONSIDERATION. 7. AGGRIEVED, THE ASSESSEE CONTENDED BEFORE THE CIT (A) THAT MEMBERSHIP IS COLLECTED DEPENDING UPON THE TENURE OF THE MEMBERSH IP. THE CLUB CONTINUES TO BE IN EXISTENCE AND IT IS NOT WOUND UP IN WHICH EVENT IT HAS TO BE ASSUMED THAT THE ITA 7658/M/07 CLUBLINK(I) P.LTD. 4 ASSESSEE WAS UNDER AN OBLIGATION TO RENDER SERVICES TO THE MEMBERS ON CONTINUING BASIS IN THE FUTURE YEARS. IN THE CIRCUM STANCES OF THE CASE, TAXABILITY OF A RECEIPT REQUIRES TO BE POSTPONED WHEN THE SA ME ENTAILS A LIABILITY TO BE MET IN FUTURE YEARS. IN OTHER WORDS, THE ENTIRE AMOUNT RECEIVED AS MEMBERSHIP FEES CANNOT BE SAID TO HAVE ACCRUED IN THE YEAR OF RECEI PT. IT WAS ALSO CONTENDED THAT AS-9 SUPPORTS THE STAND OF THE ASSESSEE SINCE IT SP EAKS OF RECOGNIZING REVENUE ON A SYSTEMATIC AND RATIONAL BASIS HAVING REGARD TO THE TIMING AND NATURE OF SERVICES PROVIDED IN FUTURE. RELIANCE WAS PLACED ON THE DECISION OF ITAT, HYDERABAD, IN THE CASE OF TREASURE ISLAND RESORT (P ) LTD. VS. DCIT (90 ITD 814), WHERE THE BENCH OBSERVED AS UNDER : PARA 43 OF THE ABOVE CASE LAW STATE THAT LIFE MEMB ERSHIP FEES COLLECTED WAS SPREAD OVER FIVE YEARS. IN CASE OF TE MPORARY MEMBERSHIP WHOSE PERIOD OF MEMBERSHIP WAS TWO YEARS , THE SPREAD OVER WAS RESTRICTED TO TWO YEARS. SUCH AN ALLOCATIO N WAS QUITE RATIONAL AND IN CONFORMITY WITH THE AS-9 AS THE LIA BILITY TO PROVIDE SERVICE SUBSISTS ON A CONTINUOUS BASIS ALMOST INDEF INITELY. AS THE ENTIRE AMOUNT WAS OFFERED TO TAX THOUGH OVER THE PE RIOD OF FIVE YEARS, IT MADE NO DIFFERENCE WHETHER THE AMOUNT WAS REFUNDABLE OR NOT. PARA 44 OF THE ABOVE CASE LAW STATE IN THE CASE OF MEERA & CEIKO PUMPS P. LTD. [IT APPEAL NO.652(HYD) OF 2001 DATED 21-6-2002] OF THE ASSESSMENT YEAR 1994-95, IT WAS OBSERVED THAT E VEN WHEN THE METHOD OF ACCOUNTING ADOPTED IS MERCANTILE SYSTEM, TAXABILITY TO BE MET IN FUTURE YEAR. IN VIEW OF THE MATTER IN THE IN STANT CASE ALL THE AMOUNT RECEIVED BY THE ASSESSEE AS A MEMBERSHIP FEE S DID NOT ACCRUE AS INCOME IN THE SAME YEAR IN VIEW OF THE CO NTINUING LIABILITY, ALLOCATION OF INCOME OVER DIFFERENT YEAR WAS PERMIS SIBLE. PARA 48 OF THE ABOVE CASE LAW STATE THAT IF THE ENT IRE MEMBERSHIP FEES COLLECTED WAS SHOWN IN THE PRESENT ASSESSMENT YEAR, THERE WOULD BE SUBSTANTIAL DEFICIT IN FUTURE YEARS WHEN T HE ASSESSEE HAD TO INCUR EXPENDITURE FOR THE PROVISION OF THE VARIO US SERVICES TO THE MEMBERS WITHOUT MATCHING RECEIPT. THAT WOULD GIVE A TOTALLY DISTORTED PICTURE OF THE WORKING RESULT OF THE ASSE SSEE WHILE SUBSTANTIAL PROFIT WOULD BE TAXED IN THE YEAR UNDER APPEAL THERE WOULD BE SUBSTANTIAL LOSSES IN SUBSEQUENT YEAR. THE REVENUE MIGHT SEEK SUCH RESULTS BUT THERE WAS NO REASON TO ALLOW IT. SINCE OUR CASE IS DIRECTLY RELATED TO THE ABOVE SET TLED CASE WE STRONGLY PRAY TO SET ASIDE IN TOTO THE ORDER PASSED BY THE LEARNED ITO AND CONSEQUENTIAL RELIEF SHOULD BE ALLOWED TO U S. ITA 7658/M/07 CLUBLINK(I) P.LTD. 5 IT WAS REITERATED THAT MEMBERS ARE ENROLLED UNDER VARIOUS CATEGORIES I.E. 1 YEAR MEMBERSHIP TO 25 YEARS MEMBERSHIP AND MEMBERS HAVE AN ADVANTAGE AGAINST THE NON MEMBERS/GUESTS WITH REGARD TO CHARGES COLLE CTED AND FACILITIES AVAILABLE IN THE CLUB; MEMBERS ARE CHARGED AT REDUCED RATE FO R ALL THE FACILITIES AVAILABLE IN THE CLUB. IN PARTICULAR, IT WAS POINTED OUT AS UNDE R : 1. SWIMMING POOL IS FREE FOR MEMBERS WHILE WE CHAR GE TO NON- MEMBERS ON DAILY BASIS. 2. RESTAURANT FOOD WE GIVE 15% DISCOUNTS TO MEMBERS WH ILE OUTSIDERS ARE CHARGED FULL RATE. 3. FOR GYMNASIUM MEMBERS WE CHARGE RS.10000/- FOR THE YEAR FOR ENTIRE FAMILY WHILE NON-MEMBERS WE CHARGE RS.15 00/- PER MONTH PER PERSONS. 4. FOR THE BANQUET FACILITY WE GIVE 15% DISCOUNTS TO M EMBERS WHILE TO NON-MEMBERS NO DISCOUNT IN THE CLUB. BESIDE THE ABOVE REDUCED RATE SERVICES IN THE CLUB TO THE MEMBERS WE ARE MAKING THE ANNUAL EXPENDITURE IN THE CLUB FOR THE VARIOUS EXPENDITURE, WHICH WE ARE NOT CHARGING TO THE MEMBERS 1. REPAIR AND MAINTENANCE OF THE CLUB. 2. PROPERTY TAX PAYABLE TO BMC BY THE CLUB. 3. AUDIT FEES EXPENDITURE. 4. BANK INTEREST PAYABLE ON TERM LOANS. 5. INSURANCE CHARGES. 6. PROFESSIONAL CHARGES. 7. TELEPHONE CHARGES. 8. WATER CHARGES ETC. X X X X X X X X WE STRONGLY PLEAD THAT IF THE ENTIRE AMOUNT OF MEMB ERSHIP IS TREATED AS INCOME IN ONE YEAR, THERE WOULD BE A BIG LOSS IN THE SUBSEQUENT YEARS WHEN THERE WOULD BE SUBSTANTIAL EX PENDITURE IN THE SUBSEQUENT YEAR WITHOUT MATCHING INCOME. WE HEREBY CLAIM THAT SUCH A SITUATION DEPICTS DISTO RTED RESULTS OF THE ASSESSEE WITH THE HUGE INCOME IN THE YEAR UNDER APP EAL, AND HUGE LOSSES IN THE SUBSEQUENT YEAR AND IT WOULD BE TOTAL LY UNFAIR TO THE ASSESSEE AND WOULD RENDER SERIOUS INJUSTICE FROM RE VENUE ANGLE. ITA 7658/M/07 CLUBLINK(I) P.LTD. 6 8. THE LD. CIT(A) EXAMINED THE FACTS AND CIRCUMSTAN CES OF THE CASE, IN THE BACKDROP OF THE PRINCIPLES LAID DOWN IN VARIOUS DEC ISIONS OF APEX COURT, HIGH COURTS AND TRIBUNAL AS WELL AS UPON ANALYSING ACCOU NTING STANDARD I.E. AS-9. IT WAS CONCLUDED THAT THE METHOD FOLLOWED BY THE ASSES SEE WAS IN ACCORDANCE WITH LAW SINCE IT HELPS IN REFLECTING THE TRUE AND CORRE CT INCOME OF THE ASSESSEE FROM YEAR TO YEAR. THE OPERATIVE PORTION OF THE ORDER OF THE CIT(A) IS EXTRACTED FOR IMMEDIATE REFERENCE : NOW, COMING TO THE FACTS OF THE CASE OF THE APPELLA NT, IT IS ABUNDANTLY CLEAR THAT THE APPELLANT CLUB COLLECTS MEMBERSHIP FEES FOR VARIOUS DURATIONS, THE DETAILS OF WHICH HAVE BE EN GIVEN IN THE ASSESSMENT ORDER ITSELF, AND IS BOUND TO PROVIDE SE RVICES AND FACILITIES DURING THE ENTIRE TENURE OF MEMBERSHIP A ND FOR SUCH FACILITIES, THE CLUB WOULD BE PROVIDING NECESSARY I NFRASTRUCTURE IN THE FORM OF BADMINTON, TENNIS, SQUASH, BILLIARDS, SWIMM ING POOL, HEALTH AND FITNESS CLUB FACILITIES. THE FACTS CLEARLY SHOW S THAT THE MEMBERS OF THE CLUB HAVE A CLEAR ADVANTAGE VIS--VIS OTHER NON-MEMBERS IN VARIOUS FACILITIES PROVIDED BY THE APPELLANT CLUB W HICH INCLUDES THE SWIMMING POOL FACILITY WHICH IS FREE FOR THE MEMBER S WHERE THE RESTAURANT, THE GYMNASIUM AND THE BANQUET FACILITIE S ARE ON A DISCOUNTED RATE. FURTHER, IT ALSO CANNOT BE IN DISP UTE THAT ALL OTHER CHARGES WHICH THE APPELLANT IS REQUIRED TO INCUR IN THE FORM OF REPAIR AND MAINTENANCE OF THE CLUB, PROPERTY AX PAYABLE TO BMC BY THE CLUB, AUDIT FEES EXPENDITURE, BANK INTEREST PAYABLE ON TERM LOANS, INSURANCE CHARGES, PROFESSIONAL CHARGES, TELEPHONE CHARGES AND WATER CHARGES IS A LIABILITY ON A CONTINUING BASIS WHICH IS INCURRED FOR THE SERVICES WHICH ARE BEING PROVIDED TO THE MEMBER S OF THE CLUB. THUS, IT IS APPARENT THAT THE APPELLANT IS SADDLED WITH A CONTINUING LIABILITY BOTH IN THE FORM OF PROVIDING VARIOUS SER VICES TO THE MEMBERS EITHER FREE OR ON A DISCOUNTED RATE AS ALSO IN THE NATURE OF LIABILITY FOR VARIOUS EXPENSES WHICH IS INEXTRICABL Y LINKED WITH THE SERVICES PROVIDED TO THE MEMBERS. THE DECISION BY T HE HONBLE SUPREME COURT IN THE CASE OF CALCUTTA COMPANY LTD. VS. CIT [1959] 37 IYTR 1 CLEARLY TAKES INTO ACCOUNT THE FACTS PRES ENT IN THE CASE OF THE APPELLANT WHEN THE LIABILITY CAN BE DISCHARGED AT SOME FUTURE DATE. FURTHER, THE LAW CLEARLY SUPPORTS THE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT WHEN THE RECEIPT FOR THE P URPOSES OF TAXABILITY IS TO BE POSTPONED WHEN SUCH A RECEIPT E NTAILS A LIABILITY TO BE MET IN THE FUTURE YEARS. HAVING CONSIDERED THE SPECIFIC FACTS OF THE CASE A ND THE DECISION OF THE HONBLE HYDERABAD TRIBUNAL IN THE C ASE OF M/S. TREASURE ISLAND RESORTS (P) LTD. VS. DCIT [2004] 90 ITD 814 (HYD.) WHICH IS A DETAILED ORDER ON THE ISSUES RAISED IN T HIS APPEAL, I AM OF THE VIEW THAT THE ASSESSING OFFICER COMMITTED AN E RROR IN LAW AS WELL AS ON FACTS IN TREATING THE ENTIRE MEMBERSHIP FEES AS INCOME OF ITA 7658/M/07 CLUBLINK(I) P.LTD. 7 THE YEAR. THIS ACTION OF THE ASSESSING OFFICER, IN MY VIEW, CANNOT BE APPROVED AND THE ADDITION MADE ON THIS ACCOUNT STAN DS, THEREFORE, DELETED. 9. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. T HE LD. D.R. SUBMITTED THAT THE DECISION OF HYDERABAD BENCH OF ITAT IN THE CAS E OF M/S. TREASURE ISLAND RESORTS (P) LTD. (SUPRA) IS DISTINGUISHABLE ON FACT S INASMUCH AS, IN THE AFORESTATED DECISION, A MEMBER WAS PROVIDED MANY FA CILITIES FREE OF COST EVEN IN THE FUTURE YEARS, WHEREAS IN THE INSTANT CASE, ALL THE SERVICES WERE SEPARATELY CHARGED IN ADDITION TO THE YEARLY MAINTENANCE FEES COLLECTED FROM EACH MEMBER. HE HAS ALSO ADVERTED OUR ATTENTION TO THE ORDER PAS SED BY THE ASSESSING OFFICER TO SUBMIT THAT RULES AND REGULATIONS FOR INDIVIDUA L/CORPORATE MEMBERSHIP PRODUCED BEFORE THE ASSESSING OFFICER WAS DIFFERENT FROM THE RULES BOOK PROVIDED BEFORE THE TRIBUNAL. IN THE BOOK NOW FURNISHED BEFO RE THE TRIBUNAL, IT IS STATED AS RULES & REGULATIONS FOR MEMBERS AND SIGNIFICANTLY THE WORD CORPORATE IS ABSENT. SIMILARLY, IN THE RULES FURNISHED BEFORE TH E ASSESSING OFFICER, IT REFERS TO ADDITIONAL CHARGES TO BE DETERMINED BY THE MANAGEME NT FOR ROUTINE SERVICES LIKE SWIMMING POOL, HEALTH CLUB, ETC. AND HENCE THE ONE TIME NON REFUNDABLE MEMBERSHIP FEES HAS NO CONNECTION WHATSOEVER WITH T HE FUTURE LIABILITY. THE RULES AND REGULATIONS PRODUCED BEFORE THE TRIBUNAL CONTAINS AN ANALOGOUS CLAUSE I.E. CLAUSE 23(C) WHICH ALSO SPEAKS OF ADDITIONAL C HARGES TO BE LEVIED TOWARDS YEARLY MAINTENANCE AND FOR ALL CONSUMABLES. THUS, T HE AMOUNT RECEIVED BY THE ASSESSEE AS ONE TIME NON REFUNDABLE FEES IS NOT FA STENED WITH THE LIABILITY TO TAKE CARE OF THE SERVICES TO BE PROVIDED TO THE MEM BERS IN FUTURE. THE LD. D.R., THEREFORE, STRONGLY RELIED UPON THE ORDER OF THE AS SESSING OFFICER AND SUBMITTED THAT THE DECISION OF ITAT, SPECIAL BENCH, CHENNAI, IN THE CASE OF MAHINDRA HOLIDAYS & RESORT IS DISTINGUISHABLE ON FACTS. ITA 7658/M/07 CLUBLINK(I) P.LTD. 8 10. ON THE OTHER HAND, THE LD. COUNSEL SUBMITTED TH AT ADDITIONAL CHARGES OF YEARLY MAINTENANCE IS COLLECTED TOWARDS MAINTAINING THE SWIMMING POOL ETC. SINCE THE MEMBERS WERE NOT CHARGED SEPARATELY FOR U SE OF SUCH FACILITIES. REGARDING OTHER FACILITIES LIKE BADMINTON, TENNIS, ETC. (WHEREVER CONSUMABLES ARE INVOLVED), NO CLUB PROVIDES CONSUMABLE ITEMS FREE O F COST AND SUCH CHARGES ARE COLLECTED SEPARATELY. ADDITIONAL CHARGE FOR YEARLY MAINTENANCE IS COLLECTED FOR DISCOUNT GIVEN ON VARIOUS SERVICES, AS COMPARED TO NON MEMBERS. NORMAL WEAR AND TEAR OF THE CLUB PREMISES, MUNICIPAL TAX, PROPE RTY TAX, ETC. INCURRED BY THE CLUB IS BORNE OUT OF THE NON REFUNDABLE FEES COLLEC TED FROM THE MEMBERS AND THUS THE METHOD FOLLOWED BY THE ASSESSEE OF APPORTIONING THE NON REFUNDABLE FEES FOR THE NUMBER OF YEARS A MEMBER IS ENROLLED IS AN APPR OPRIATE METHOD. EVEN IN AS- 9, REVENUE RECOGNITION ON SPREAD OVER BASIS IS REC OGNIZED IF MEMBERSHIP FEES ENTITLES A MEMBER TO SERVICES IN FUTURE YEARS; ACCO UNTING STANDARD SPEAKS OF RECOGNITION ON A SYSTEMATIC AND RATIONAL BASIS HA VING REGARD TO THE TIMING AND NATURE OF ALL SERVICES PROVIDED. ADVERTING OUR ATTE NTION TO THE DECISION OF THE ITAT, SPECIAL BENCH, CHENNAI (SUPRA), IT WAS SUBMIT TED THAT UNDER NEAR IDENTICAL CIRCUMSTANCES THE SPECIAL BENCH HELD THAT IF ENTIRE FEES RECEIVED BY IT IS TREATED AS ACCRUED IN ONE YEAR, IT MAY GIVE A DISTORTED PIC TURE OF THE PROFITS OF A PARTICULAR YEAR AND UNDER SUCH CIRCUMSTANCES, HAVIN G REGARD TO THE COMPLEXITY ATTACHED TO IT, AMOUNT RECEIVED HAS TO SPREAD OVER , AS REVENUE RECEIPT, ON A SCIENTIFIC BASIS OR BASED UPON HISTORICAL DATA. IN THE INSTANT CASE, THERE IS A DEFINITE METHODOLOGY ADOPTED BY THE ASSESSEE BY SPR EADING OVER THE REVENUE, REFERABLE TO THE RECEIPTS IN THE FORM OF NON REFUND ABLE FEES, BY SPREADING IT OVER TO THE NUMBER OF YEARS FOR WHICH MEMBERSHIP IS CONF ERRED IN LIEU OF WHICH THE ASSESSEE BECOMES ENTITLED TO CERTAIN FACILITIES FRE E OF COST AND OTHER FACILITIES AT A CONCESSIONAL RATE. HE THUS STRONGLY RELIED UPON THE ORDER OF THE LD. CIT(A). ITA 7658/M/07 CLUBLINK(I) P.LTD. 9 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. AT THE OUTSET, WE MAY NOTICE THAT THOUGH TH ERE ARE MINOR CHANGES IN THE RULES & REGULATIONS FOR MEMBERS (ON A COMPARISON BE TWEEN REGULATIONS EXTRACTED BY THE ASSESSING OFFICER AND THE COPY OF REGULATIO NS FURNISHED BEFORE US), BROADLY THE INTENTION IS MADE CLEAR, IN THE FORM OF RULES & REGULATIONS, TO RECOVER COST OF CONSUMABLES AND RECURRING EXPENDITURE IN TH E FORM OF ADDITIONAL FEES APART FROM CONNECTING THE NON REFUNDABLE FEES TO TH E OVERALL WEAR AND TEAR OF THE CLUB PREMISES, INTEREST CHARGES, PROPERTY TAX, AUDI T FEES AND OTHER SUCH INCIDENTAL EXPENDITURE. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT BRINGING TO TAX THE ENTIRE NON REFUNDABLE FEES IN THE YEAR OF RECEIPT WOULD GIVE A DISTORTED PICTURE OF THE PR OFITS OF THE YEAR OF RECEIPT. IN THE LIGHT OF THE DECISION OF THE ITAT, SPECIAL BENC H, CHENNAI, IN THE CASE OF MAHINDRA HOLIDAYS & RESORT AS WELL AS THE DECISION OF ITAT, HYDERABAD, IN THE CASE OF TREASURE ISLAND RESORT (P) LTD. (WHEREIN ON E OF US IS A PARTY), WE ARE OF THE CONSIDERED OPINION THAT NON REFUNDABLE FEES WAS JUSTIFIABLY SPREAD OVER BY THE ASSESSEE ON A SYSTEMATIC AND RATIONAL BASIS AND SUCH METHODOLOGY DERIVES SANCTION FROM AS-9 FURNISHED BEFORE US. SINCE THE L D. CIT(A) HAS CONSIDERED THE ISSUE IN GREAT DETAIL, BY ANALYSING THE FACTS AS WE LL AS THE PRINCIPLES LAID DOWN IN VARIOUS CASE LAW, WE DO NOT FIND ANY INFIRMITY IN T HE ORDER PASSED BY THE CIT(A). 12. IN THE RESULT, WE UPHOLD THE ORDER OF CIT(A) AN D DISMISS THE APPEAL FILED BY THE REVENUE. ORDER PRONOUNCED ON THE 23RD DAY OF JULY, 2010. SD/- SD/- (RAJENDRA SINGH) (D. MANMOHAN) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI: 23RD JULY, 2010. ITA 7658/M/07 CLUBLINK(I) P.LTD. 10 NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-VIII,MUMBAI. 4 CIT, MC-VIII,MUMBAI. 5.DR,C BENCH,MUMBAI. 6. MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA 7658/M/07 CLUBLINK(I) P.LTD. 11 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 16-7-10 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 20-7-10 SR.PS/ 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER