ACIT, New Delhi v. M/s DLF Commercial Developers Ltd., New Delhi

ITA 2064/DEL/2011 | 2006-2007
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 206420114 RSA 2011
Assessee PAN AABCD4619C
Bench Delhi
Appeal Number ITA 2064/DEL/2011
Duration Of Justice 2 month(s) 12 day(s)
Appellant ACIT, New Delhi
Respondent M/s DLF Commercial Developers Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 08-07-2011
Assessment Year 2006-2007
Appeal Filed On 26-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A. NO.2064/D/2011 ASSESSMENT YEAR :2006-07 A.C.I.T. VS. M/S DLF COMMERCIAL DEVELOPERS CIRCLE 10(1) LTD. 9-DLF CENTRE 9 TH FLOOR NEW DELHI SANSAD MARG NEW DELHI PAN/GIR NO.AABCD 4619 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KRISHNA CIT-DR RESPONDENT BY : SHRI R.K. KAPOOR FCA ORDER PER RAJPAL YADAV: JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER O F LEARNED CIT(A) DATED 3 RD JANUARY 2011 PASSED FOR ASSESSMENT YEAR 2006-07. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF `3 66 25 722/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAS FILED ITS RETURN OF INCOME ON 29.11.2006 DECLARING TOTAL INCOME OF ` 263 44 56 700/-. THE ASSESSING OFFICER HAD ISSUED NOTICE U/S 143(2) AND 142 (1) OF THE INCOME-TAX ACT. IN RESPONSE TO THE NOTICE AUTHORIZE D REPRESENTATIVE SHRI ADESH GUPTA AND SHRI S.K. SHARMA APPEARED BEFOR E THE ASSESSING OFFICER AND SUBMITTED REQUISITE DETAILS. ON SCRUTINY O F THE ACCOUNTS IT REVEALED TO THE ASSESSING OFFICER THAT AUDITOR IN THE A UDIT REPORT AT SERIAL NO.7 OF SCHEDULE 23 HAS SHOWN MEMBERSHIP FEES I.E. SUBSCRIPTION FEE IS RECOGNIZED ON A TIME PROPORTION BA SIS. THE ASSESSING OFFICER HAS DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY TOTAL MEMBERSHIP FEES RECEIVED BY IT HAS NOT BEEN RECOGNIZED AS REVENUE RECEIPTS. IT EMERGES OUT THAT ASSESSEE HAS RECEIVED A SUM OF 2064-2011-DLFCD 2 `7 42 62 250/- TOWARDS NON-REFUNDABLE MEMBERSHIP FEES. IT HAS RECOGNIZED A SUM OF `3 76 36 528/- AS REVENUE RECEIPT S. THE LEARNED ASSESSING OFFICER MADE A DETAILED ANALYSIS OF THE CONDITI ONS FOR MAKING THE MEMBER IN THE GOLF CLUB AND FOLLOWING THE DECISI ON OF ITAT CHENNAI IN THE CASE OF STERLING HOLIDAYS RESORTS (INDIA) LIMITE D VS. ACIT REPORTED IN 295 ITR AT PAGE 162 (2007) HAS HELD THA T TOTAL RECEIPTS RECEIVED BY THE ASSESSEE TOWARDS NON-REFUNDABLE MEMBERSHI P FEE HAS TO BE RECOGNIZED AS REVENUE RECEIPTS IN THIS ASSESSMENT YE AR. HE MADE AN ADDITION OF THE BALANCE AMOUNT I.E. `3 66 2 5 722/- IN THE TOTAL INCOME OF THE ASSESSEE. 3. DISSATISFIED WITH THE ADDITION ASSESSEE CARRIED THE MA TTER IN APPEAL BEFORE THE LEARNED CIT(A). IT HAD FILED A W RITTEN SUBMISSION DEMONSTRATING THE CONDITIONS OF GIVING MEMBERSHIP IN I TS GOLF CLUB. THE LEARNED CIT(A) HAS NOTICED THE SUBMISSIONS OF ASSESSEE O N PAGE 3 OF THE IMPUGNED ORDER. THE RELEVANT PORTION EXHIBI TING TYPE OF MEMBERSHIP OFFERED BY THE ASSESSEE IS WORTH TO NOTE AND I T READ AS UNDER:- 9. REGARDING THESE GROUNDS WE WISH TO RESPECTFULLY SUBMIT THAT THERE IS AN ACCOUNTING POLICY FOLLOWED BY THE APPELLANT COMPANY BEING MENTIONED AT POINT NO.6 (E) OF SCHEDULE 24 SIGNIFICANT ACCOUNTING POLICIES FORMIN G PART OF THE FINANCIAL STATEMENTS FOR THE YEAR UNDER CONSIDERATION IN WHICH IT IS STATED THAT MEMBERSHIP FEES/SUBSCRIPTION FEES IS TO BE RECOGNIZED ON A TIME PROPORTION BASIS. WE ALSO WISH TO SUBMIT THAT THIS SUBSCRIPTION/MEMBERSHIP FEES RECEIVED FROM CUSTOMERS IS IN RESPECT OF A GOLF CLU B. THIS GOLD CLUB IS OFFERING THE MEMBERSHIP FOR ONE YEAR TWO YEARS AND FIVE YEARS AS UNDER:- A) MEMBERSHIP FOR ONE YEAR:- IN THIS CASE THE CLUB CHARGES A SUM OF `60 000/- AS ANN UAL MEMBERSHIP FEES. THE FEES RECEIVED FROM THE MEMBERS AS MEMBERSHIP FEES ARE TAKEN IN PROFIT AND LOSS ACCOUNT BASED ON THE TIME PROPORTION BASIS. FOR EXAMPLE IF A 2064-2011-DLFCD 3 MEMBER JOINS THE GOLF CLUB ON 1 ST OCTOBER 2005 HIS SIX MONTHLY MEMBERSHIP FEES IS TAKEN IN THE FINANCIAL YEAR 2005-06 (ASSESSMENT YEAR 2006-07) AS INCOME AND BALANCE SIX MONTHLY FEES IS TAKEN IN THE NEXT FINANCIA L YEAR AS INCOME BECAUSE HIS MEMBERSHIP FEES IS VALID FOR THE PERIOD FROM 1 ST OCTOBER 2005 TO 30 TH SEPTEMBER 2006. B) MEMBERSHIP FOR TWO YEARS:- THIS MEMBERSHIP IS APPLICABLE ONLY IN THE CASE OF FOREIGNERS. IN THIS CASE THE CLUB CHARGES A SUM $4 500 /- AS MEMBERSHIP FEES. MEMBERSHIP FEES ARE TAKEN IN PROFIT AND LOSS ACCOUNT ON ACCRUAL BASIS BASED ON THE TIME PROPORTION BASIS. FOR EXAMPLE IF A MEMBER JOINS THE G OLF CLUB ON 1 ST OCTOBER 2005 HIS SIX MONTHLY MEMBERSHIP FEES IS TAKEN IN THE FINANCIAL YEAR 2005-06 (ASSESSMENT YEAR 2006-07) AS INCOME AND BALANCE EIGHTEEN MONTHS FEES IS TAKEN IN THE NEXT FINANCIAL YEARS AS INCOME BEC AUSE HIS MEMBERSHIP FEES IS VALID FOR THE PERIOD FROM 1 ST OCTOBER 2005 TO 30 TH SEPTEMBER 2007. C) FOR FIVE YEARS MEMBERSHIP FEES OF `3 LACS FOR NEW MEMBERS AND `2 LACS FOR EXISTING MEMBERS ON RENEWAL WHICH IS TERMED AS NON REFUNDABLE MEMBERSHIP FEES IS CHARGED FROM THE MEMBERS. APPELLANT RECOGNIZES THIS MEMBERSHIP FEES IN THE BOOKS OF ACCOUNTS ON ACCRUAL BASIS BASED ON TIME PROPORTION BASIS. FOR EXAMPLE IF A MEMBER JOINS THE GOLF CLUB ON 1 ST OCTOBER 2005 HIS SIX MONTHLY MEMBERSHIP FEES IS TAKEN IN THE FINANCIAL YEAR 2005-06 (ASSESSMENT YEAR 2006-07) AS INCOME AND BALANCE 54 MONTHS FEES IS TAKEN IN THE NEXT FINANCIAL YEARS AS INCOME BECAUSE HIS MEMBERSHIP FEES IS VALID FOR THE PERIOD FROM 1 ST OCTOBER 2005 TO 30 TH SEPTEMBER 2010. IN ADDITION TO THIS THE MEMBERS OF THIS CATEGORY ARE ALSO REQUIRED TO PAY ANNUAL CHARGES OF `18 000/- WHICH IS PAYABLE BY HIM ON YEAR TO YEAR BASIS. APPELLANT COMP ANY RECOGNIZE THIS ANNUAL CHARGES IN THE BOOKS OF ACCOUNT ON ACCRUAL BASIS BASED ON TIME PROPORTION BASIS. FOR EXAMP LE IF A MEMBER JOINS THE GOLF CLUB ON 1 ST OCTOBER 2005 HIS ANNUAL CHARGES FOR SIX MONTHS IS TAKEN IN THE FINANCIA L YEAR 2005-06 (ASSESSMENT YEAR 2006-07) AS INCOME AND BALANCE 6 MONTHS ANNUAL CHARGES IS TAKEN IN THE NEXT FINANCIAL YEAR AS INCOME. 2064-2011-DLFCD 4 4. ON THE STRENGTH OF ABOVE EXPLANATION IT WAS SUBMIT TED THAT ORDER OF THE ITAT IN THE CASE OF STERLING HOLIDAYS RE SORTS (INDIA) LIMITED VS. ACIT REPORTED IN 295 ITR (AT) PAGE 162 ( 2007) HAS BEEN OVER-RULED BY A SPECIAL BENCH OF THE ITAT IN THE CA SE OF ACIT VS. MAHINDRA HOLIDAY AND RESORT REPORTED IN 131 TTJ PAGE 1. LEARNED FIRST APPELLATE AUTHORITY HAS CONSIDERED THE ISSUE ELABORATEL Y AND AFTER FOLLOWING THE ORDER OF ITATS SPECIAL BENCH IN THE C ASE OF MAHINDRA HOLIDAYS AND RESORTS DELETED THE ADDITION. 5. LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFI CER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE I SSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY T HE ORDER OF THE ITATS SPECIAL BENCH IN THE CASE OF MAHINDRA HOLI DAYS & RESORTS. HE ALSO POINTED OUT THAT AN IDENTICAL ISSUE HAS COME UP BEFORE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DINESH KUMAR G OEL REPORTED IN 331 ITR PAGE 10. IN THIS CASE THE ISSUE WAS WHETHER TOT AL FEES RECEIVED BY THE ASSESSEE AT THE TIME OF ADMISSION FOR A C OURSE OF TWO YEARS DURATION IS TO BE RECOGNIZED AS REVENUE RECEIPTS IN THE YEAR OF RECEIPT OR IT HAS TO BE SPREAD FOR TWO YEARS. THE ASSESSI NG OFFICER TREATED THE TOTAL RECEIPTS AS TAXABLE IN THE YEAR OF RECEIPT HOWEVER LEARNED CIT(A) AS WELL AS ITAT DELETED THE ADDITION A ND ALLOWED THE ASSESSEE TO SPREAD THE RECEIPTS IN TWO YEARS. THE HONBLE HIGH COURT HAS UPHELD THE ORDER OF THE ITAT. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. IN BRIEF THE CASE OF THE ASSESSE E IS THAT AMOUNTS RECEIVED BY IT UNDER DIFFERENT MEMBERSHIP SCHEMES OF T HE GOLF CLUB ARE IN THE SHAPE OF ADVANCE. THE SERVICES AGAINST THE SAID ADVANCE WERE YET TO BE PROVIDED WHICH COULD BE RENDERED BY THE ASSESSEE IN SUBSEQUENT PERIOD AND THEREFORE INCOME QUA THOSE REC EIPTS WOULD ACCRUE ONLY IN THE LATER PERIOD. THE OBLIGATION TO PROVIDE SERVICE IS UPON THE ASSESSEE AND THERE WOULD BE OUT-FLOW OF AMOUNT FOR PROVIDING SUCH SERVICE TO THE ULTIMATE MEMBERS. HENCE TOTAL RE CEIPTS CANNOT BE 2064-2011-DLFCD 5 RECOGNIZED AS A REVENUE RECEIPTS AT THE TIME OF RECEI PT. ON THE OTHER HAND CASE OF THE REVENUE IS THAT THERE IS NO OBLIGATI ON UPON THE ASSESSEE TO REFUND THOSE AMOUNTS TO THE ULTIMATE CUSTOMERS HENCE AN ABSOLUTE RIGHT TO RETAIN THE MONEY HAS BEEN CRYSTAL LIZED UNDER SOME OF THE CONDITIONS OF PROVIDING MEMBERSHIP. THERE FORE IT IS TAXABLE IN THE YEAR UNDER WHICH THESE AMOUNTS HAVE BE EN RECEIVED. WE FIND THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF DINESH KUMAR GOEL (SUPRA). IN THIS CASE THE ASSESSEE SHRI DINESH KUMAR GOEL WAS RUNNING COACHING INSTITUTE UNDER THE N AME AND STYLE OF M/S FIITJEE. HE IS THE SOLE PROPRIETOR. AT THE TIM E OF ADMISSION OF THE STUDENT THE INSTITUTE TOOK THE FEES FOR TWO YEARS. TH E ISSUE WAS WHETHER TOTAL FEES RECEIVED BY THE ASSESSEE AT THE TIME OF ADMISSION FOR A COURSE OF TWO YEARS DURATION IS TO BE RECOGNIZED AS REVENUE RECEIPTS IN THE YEAR OF RECEIPT OR IT HAS TO BE SPREAD OVER FOR TWO YEARS. THE LEARNED ASSESSING OFFICER TREATED THE TOTAL RECEIPT S AS TAXABLE IN THE YEAR OF RECEIPT. HOWEVER LEARNED CIT(A) AS WEL L AS THE ITAT DELETED THE ADDITION AND ALLOWED THE ASSESSEE TO SPREAD THE RECEIPTS IN TWO YEARS. HONBLE HIGH COURT HAS CONSIDERED THE SCOPE OF TOTAL INCOME PROVIDED IN SECTION 5 OF THE INCOME-TAX ACT 1961 AND HAS OBSERVED THAT INCOME WOULD ACCRUE OR ARISE OR IS DEEME D TO OCCUR OR ARISE TO AN ASSESSEE IN INDIA DURING SUCH YEAR WHEN A RIG HT TO RECEIVE CRYSTALLIZED IN FAVOUR OF THE ASSESSEE. SIMILARLY IN T HE CASE OF MAHINDRA HOLIDAYS & RESORTS (SUPRA) FACTS ARE THAT ASSESSEE HAS BEEN RECEIVING AMOUNTS FOR SELLING TIMESHARE UNIT. UNDER T HE SCHEME A PERSON CAN BECOME A MEMBER EITHER BY PAYING THE FULL AMOUNT AT A TIME OR BY PAYING INSTALMENTS. THE MEMBERS ARE ENTITL ED TO ENJOY THE HOLIDAYS ONLY AFTER 12 OR 18 MONTHS FROM THE DATE OF MEMBERSHIP. THE MEMBERSHIP WILL BE ENTITLED TO FACILITATE A STAY AT A RESORT FOR ONE WEEK IN A YEAR FOR 33/25 YEARS. THE ASSESSEE HAS RECOGNI ZED 40% OF THE TOTAL COST OF MEMBERSHIP TOWARDS ACCOMMODATION AND 60% 2064-2011-DLFCD 6 TOWARDS FACILITIES. IT OFFERED 40% OF THE RECEIPTS OF TAX IN THE YEAR OF RECEIPT OF THE MEMBERSHIP FEES. THE DISPUTE AROSE BETW EEN THE ASSESSEE AND THE REVENUE IS WHETHER ENTIRE AMOUNT OF TI MESHARE MEMBERSHIP FEES RECEIVABLE BY THE ASSESSEE UPFRONT AT THE TIME OF AN ENROLMENT IS AN INCOME CHARGEABLE TO TAX IN THE INIT IAL YEAR WHEN THERE IS A CONTRACTUAL OBLIGATION FASTENED TO THE RECEIPT T O PROVIDE THE SERVICES IN FUTURE YEAR OVER THE PERIOD OF CONTRACT? THE SPECIAL BENCH AFTER A DETAILED ANALYSIS ARRIVED AT A CONCLUSION THAT ENTIRE AMOUNT OF TIME-SHARE MEMBERSHIP FEES RECEIVED BY THE ASSESSEE UPFRON T AT THE TIME OF ENROLMENT OF A MEMBER IS NOT THE INCOME CHAR GEABLE TO TAX IN THE INITIAL YEAR AND ASSESSEE HAS RIGHTLY SPREAD OVER IT IN THE FUTURE YEAR. THE FACTS IN THE CASE BEFORE US ARE IDENTICAL. THE ASSESSEE IS ALSO ACCOUNTING THE RECEIPT FOR WHICH SERVICE IS BEING PROVIDED IN THE YEAR ITSELF AND BALANCE IS SPREAD OVER DURING THE PERI OD OF MEMBERSHIP. LEARNED FIRST APPELLATE AUTHORITY HAS APP RECIATED THE FACTS IN RIGHT PERSPECTIVE AND HAS RIGHTLY PLACED HIS R ELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF E.D. SASSOON AND COMPANY LIMITED VS. CIT 26 ITR 27 AS WELL AS OF TH E SPECIAL BENCH WE DO NOT FIND ANY ERROR IN THE ORDER OF LEARNED CI T(A) HENCE APPEAL OF THE REVENUE IS DISMISSED. 7. IN RESULT APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 08.07.2011 . SD/- SD/- ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT.08.07.2011. NS 2064-2011-DLFCD 7 COPY FORWARDED TO:- 1. A.C.I.T. CIRCLE 10(1) NEW DELHI. 2. DLF COMMERCIAL DEVELOPERS LIMITED 9-DLF CENTRE 9 TH FLOOR SANSAD MARG NEW DELHI. 3. THE CIT 4. THE CIT (A) NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. TRUE COPY BY ORDER (ITAT NEW DELHI).