TMI Blog2015 (2) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... he room nights in case they are not utilised and opt for surrender value. When a customer opts for surrender value, he shall be paid in cash by the assessee, or in the alternative the customer may opt to buy or utilise the products and services of the company or group companies. The Tribunal referred to the chart and in relation to each assessment year giving a break-up of the advance amount collected showing more than 99 per cent. of the customers surrendered the room nights which is not only the amount paid but which is inclusive of a premium over and above of the collected value. Even if the refund is not made in its entirety, still that will not mean that the amount received is income. The Tribunal accepted the method adopted by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law and which arise for determination and consideration in this appeal. 2. In Appeal No. 2255 of 2011, the assessment year in question is 2005-06. An order was made under section 143(3) on April 27, 2007, by the Assessing Officer. The loss of ₹ 480,914,236 was assessed. The assessee is engaged in running of hotels, resorts and clubs. It offers holiday schemes for card members who are entitled to utilise the room nights at the assessee's hotels/resorts to the extent of the amounts paid as per the terms and conditions of the scheme. They are also entitled to surrender the unutilised room nights and receive back not only the deposits proportionate to the unutilised room nights but also a premium thereon, on the expiry of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Merely because the advance amount collected is liable to be refunded in certain contingencies and circumstances, does not mean that it is not a receipt. It is a revenue receipt. Considering that the principal business of the assessee is to provide accommodation and other facilities to tourist members, then a provision of the nature made cannot be said to be an allowable revenue expenditure. In such circumstances, this appeal raises substantial questions of law and deserves to be admitted. 5. On the other hand, Mr. J. D. Mistry, learned senior counsel appearing on behalf of the assessee, submitted that on the questions which are termed as substantial questions of law, this appeal cannot be entertained at all. The facts are not disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have perused the memo of appeal and all annexures thereto including the impugned order. The Tribunal decided the appeal of the assessee. That appeal raised several grounds. 7. We are concerned with the issue of advance sale of room nights and the provision of holiday scheme surrender value. 8. In that regard, the Tribunal noted the facts in paragraph 3 to 6. Pertinently, it noted the nature of the activities and the business of the assessee. The Tribunal noted the holiday scheme to card members which is at a discounted/special price on account of advance room nights marketed through its agents. The agents are entitled to pay commission on the offer price collected by them. The assessee had deducted tax on commission payment and paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nights must be determined having regard to the undisputed facts. The assessee had collected an advance and under promise to make available to the customers the rooms. The customer is entitled to surrender the room nights in case they are not utilised and opt for surrender value. When a customer opts for surrender value, he shall be paid in cash by the assessee, or in the alternative the customer may opt to buy or utilise the products and services of the company or group companies. The Tribunal referred to the chart and in relation to each assessment year. That gave a break-up of the advance amount collected. That chart indicated that a very negligible percentage of the customer utilised the room nights. More than 99 per cent. of the custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made by the assessee in this case for the purposes of meeting the demand for refund cannot be said to be contrary to the settled accounting standards. If the assessee was required to refund the advance and which has been demonstrably refunded in more than 99 per cent. of the cases, then the receipt has been treated not as a capital receipt. In the lengthy judgment delivered by the Tribunal on both questions, and particularly its reasoning from paragraphs 74 to 87, are essentially based on the facts and the nature and terms and conditions of the scheme. The finding of fact that the schemes oblige the assessee to refund not only the advance but also the surrendered value, then the further conclusion that the assessee incurs a liability an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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