The ACIT,(OSD)-, Circle-4, Ahmedabad V. Karnavati Club Ltd., Ahmedabad

ITA 93/AHD/2012

• Counselvise Citation: 9320514 RSA 2012
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K S PANDYA
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Capital receipt
• Section: 143(3)

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI MUKUL KR. SHRAWAT- JM AND SHRI T R MEENA AM ITA NO.93/AHD/2012 (ASSESSMENT YEAR:-2008-09) THE ASST. COMMISSIONER OF INCOME-TAX (OSD)-I, C-4, AHMEDABAD V/S KARNAVATI CLUB LIMITED, S. G. HIGHWAY, AHMEDABAD PAN: AAACK 7865 Q [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI B K S PANDYA, CIT DR ASSESSEE BY:- SHRI SUNIL H TALATI, AR DATE OF HEARING:- 13-03-2012 DATE OF PRONOUNCEMENT:- 16-03-2012 O R D E R PER MUKUL KR. SHRAWAT (JM) :- THIS IS AN APPEAL OF THE REVENUE ARISING FROM THE ORDER OF CIT(A)-VIII, AHME DABAD DATED 24-10-2011 FOR ASSESSMENT YEAR 2008-09 AND TH E SUBSTANTIVE GROUND IS REPRODUCED BELOW:- THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING DISALLOWANCE OF RS.11,89,28,500/- MADE BY THE AO ON ACCOUNT OF ENTRANCE FEES, WITHOUT PROPERLY APPRECIATING THE FA CTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2 THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPOND ING ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME-TA X ACT, DATED 29-12-2010 ARE THAT THE ASSESSEE-COMPANY IS RUNNING A RECREATION CLUB. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAS RECEIVED ENTRANCE FEES OF RS.11,89,28,500/- WHICH WAS TREA TED AS 2 CAPITAL RECEIPT BY THE ASSESSEE. IT WAS INFORMED THAT THE SAID ENTRANCE FEES WAS A NON-REFUNDABLE DEPOSIT AND AG AINST THAT ALLOWS ITS MEMBER TO AVAIL CLUB FACILITIES LIKE SWI MMING POOL, RESTAURANTS AND OTHER SPORTS FACILITIES, ETC. THE A O WAS NOT CONVINCED AND THE ENTIRE AMOUNT OF ENTRANCE FEES WAS TAXED IN THE HANDS OF THE ASSESSEE. THE MATTER WAS CARRIED B EFORE THE FIRST APPELLATE AUTHORITY. 3 THE LEARNED CIT(A) HAS CONSIDERED THE PAST HISTOR Y IN THIS REGARD AND REFERRED FEW DECISIONS OF THE TRIBUNAL V IDE FOLLOWING PARAGRAPHS:- 2.3 IT IS SEEN THAT IN THIS CASE IDENTICAL ISSUE H AS BEEN DECIDED BY THE CIT(A), FOR ASSESSMENT YEAR 1994-95 & 1998- 99 AGAINST WHICH DEPARTMENT WENT IN APPEAL BEFORE THE ITAT. THE ITAT , 'B' & 'A' BENCH AHMEDABAD DECIDED THE ISSUE IN ITA NUMBER 268 2/AHD/2000 FOR A.Y 1994-95 DATED 28/06/2006 AND ITA NUMBER 233 7/AHD/2002 FOR A.Y 1998-99 DATED 10/10/2006 RESPECTIVELY, IN F AVOUR OF THE APPELLANT. 2.4 THE RELEVANT PORTION OF THE ITAT'S ORDER DATED 10/10/2006 IS REPRODUCED HEREUNDER: 'THE ISSUE IS DIRECTLY COVERED IN FAVOUR OF THE ASS ESSEE BY THE AFOREMENTIONED DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DINERS BUSINESS SERVICES PVT. LTD. (SUP RA), AS IN THE SAID CASE, THE ENTRANCE FEE WAS CHARGED BY THE ASSE SSEE FOR ENROLLMENT OF ITS CUSTOMER'S AS MEMBERS OF 'EXECUTI VE CENTRE'. THE ENTRANCE FEE WAS A ONETIME FEE AND ONLY MEMBERS WERE ELIGIBLE TO AVAIL OF THE FACILITIES AVAILABLE IN TH E 'EXECUTIVE CENTRE' AND THE ENTRANCE FEE WAS NON-REFUNDABLE. FO LLOWING THE DECISION IN THE CASE OF CIT V/S W.I. A. A. CLUB LTD ., 136 -ITR- 569, IT IS HELD BY THE BOMBAY HIGH COURT THAT THE E NTRANCE FEES WERE PAID TO THE CLUB IN ORDER TO ACQUIRE THE RIGHT TO AVAIL THE SERVICES AND FACILITIES EXTENDED BY THE CLUB AND TH EREFORE THE RECEIPTS CONSTITUTED CAPITAL RECEIPTS. 3 IN VIEW OF THE ABOVE DISCUSSION, ACCEPTING THE ARGU MENT OF THE ASSESSEE THAT THE RECEIPTS ON ACCOUNT OF ENTRANCE F EES AND LIFE MEMBERSHIP FEES RECEIVED BY THE ASSESSEE FROM ITS M EMBERS, WAS NOT A REVENUE OR TRADING RECEIPT AND THEREFORE CANNOT BE INCLUDED IN THE ASSESSABLE INCOME, WE HOLD THAT THE ADDITION ON THIS ACCOUNT HAS RIGHTLY BEEN DELETED BY THE LD. CI T (A) AND WE CONFIRM HIS ORDER TO THAT EXTENT. IN VIEW OF THE ABOVE CONSISTENT WITH THE VIEW TAKEN BY THE ITAT AS REFERRED TO ABOVE, WE HOLD THAT ADDITION ON THIS ACCOUNT HAS RIGHTLY BEEN DELETED BY THE CIT (A). THE ORDER OF THE CIT (A) ON THIS POINT IS THEREFORE CONFIRMED AND THE AP PEAL OF THE REVENUE IS DISMISSED.' 2.5 IT IS ALSO SEEN FROM THE RECORDS THAT THE ITAT AHMEDABAD HAS DECIDED THE SAME ISSUE FOR AY 06-07 IN ASSESSEE'S F AVOUR VIDE ORDER ITA NO.2983/AHD/2009 DATED 5/2/2010. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE ITAT'S ORDERS (SUPRA), T HE ADDITION MADE BY THE ASSESSING OFFICER OF RS.11,89,28,500/- ON ACCOU NT OF ENTRANCE FEES IS DELETED. 4 WITH THIS BACKGROUND, WE HAVE HEARD BOTH THE SIDE S. NOW BEFORE US FEW ORDERS OF THE RESPECTED CO-ORDINATE B ENCHES ARE REFERRED AS FOLLOWS:- (I) ITO VS. KARNAVATI CLUB LTD. [ITA NO.2682/AHD/2000 FOR AY 1994-95, ORDER DATED 28-06-2006 (II) ACIT VS. KARNAVATI CLUB LTD. [ITA NO.2337/AHD/2002 FOR AY 1998-99, ORDER DATED 10- 10-2006 (III) ACIT VS. M/S KARNAVATI CLUB LTD. [ITA NO.3278/AHD/2010 FOR AY 2007-08, ORDER DATED 29- 07-2011] (IV) ACIT VS. KARNAVATI CLUB LTD. [ITA NO.2136/AHD/2010 FOR AY 2006-07, ORDER DATED 22- 03-2011] 4 (V) ACIT VS. KARNAVATI CLUB LTD. [ITA NO.2135/AHD/2010 FOR AY 2002-03, ORDER DATED 04- 02-2011] SINCE IN ASSESSEES OWN CASE IN THE PAST THIS ISSUE ON ENTRANCE FEES HAS BEEN DECIDED IN ASSESSEES FAVOUR, THEREF ORE, JUDICIAL PROPRIETY REQUIRES ONE BENCH OF THE TRIBUNAL TO FOL LOW THE DECISION OF ANOTHER CO-ORDINATE BENCH TO MAINTAIN T HE CONSISTENCY IN LEGAL PROCEEDINGS. RESPECTFULLY FOLLOWING THOSE DECISIONS; FOR THIS YEAR AS WELL WE HEREBY UPHOLD THE VIEW TAKEN B Y THE LEARNED CIT(A) AND DISMISS THE GROUND THIS GROUND. 5 IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 16-03-2012 SD/- SD/- (T R MEENA) ACCOUNTANT MEMBER (MUKUL KR. SHRAWAT) JUDICIAL MEMBER DATE : 16-03-2012 COPY OF THE ORDER FORWARDED TO: 1. KARNAVATI CLUB LIMITED, S. G. HIGHWAY, AHMEDABAD 2. THE ASST. COMMISSIONER OF INCOME-TAX (OSD)-I, C- 4, AHMEDABAD, NAVJIVAN TRUST BLDG., OFF. ASHRAM ROAD, AHMEDABAD-380058 3. CIT CONCERNED 4. CIT(A)-VIII, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-B, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD