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2015 (11) TMI 1512 - ITAT AHMEDABAD

2015 (11) TMI 1512 - ITAT AHMEDABAD - TMI - Addition on account of membership fee income - whether so called security deposit was inextricably linked to grant of membership? - Held that:- In the present case, the assessee-club had received refundable non-interest bearing security deposit would remain liability for the assessee-club. Member by giving security deposit entitles himself for the concessional rate services provided by the assessee-club. The assessee would entitle for spreading over th .....

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at the security deposits as received by the assessee-club cannot be subjected to tax - Decided in favour of assessee - I.T.A.No.2337/Ahd/2011 & I.T.A.No.2054/Ahd/2011 - Dated:- 30-11-2015 - SHRI KUL BHARAT, JUDICIAL MEMBER And SHRI MANISH BORAD, ACCOUNTANT MEMBER Appellant by : Shri Narendra Singh, Sr.DR Respondent by : Shri S.N. Soparkar, AR ORDER PER SHRI KUL BHARAT, JUDICIAL MEMBER : These cross-appeals by the Revenue and the Assessee are directed against the order of the Ld.Commissioner of I .....

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fee income without appreciating fact that the so called security deposit was inextricably linked to grant of membership. 2. On the facts and in the circumstances of the case, the ld.CIT(A) ought to have upheld the order of the Assessing Officer. 3. It is, therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent. 3. Briefly stated facts giving rise to the present appeal are that the assessment u/s.143(3) r.w.s.144A of .....

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e submissions of the assessee partly allowed the appeal. Aggrieved by the order of the ld.CIT(A), now both the Revenue and Assessee have filed the crossappeals before us. 4. The effective ground (i.e.ground No.1) raised by the Revenue in this appeal is against deletion of addition of ₹ 1,75,15,680/- on account of membership fee income. The ld.Sr.DR Shri Narendra Singh vehemently argued that the ld.CIT(A) was not justified in deleting the addition. He supported the orders of the AO. He supp .....

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(Patna). In support of the contention that the security deposits were required to be taxed. 4.1. On the contrary, ld.Sr.counsel for the assessee submitted that the approach of the ld.CIT(A) is not justified. He placed reliance on the judgement of Hon ble Supreme Court rendered in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd. vs. CIT reported at [2004] 270 ITR 1 = 139 Taxman 434 (SC). He submitted that the deposits would not partake the character of income as the same requires to be refun .....

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18/12/2014. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The Revenue has not disputed that the security deposits were refundable to the Members. It is also not in dispute that in some of the cases the assessee-club has refunded the amount. Under these facts, we are unable to accept the finding of the AO that the amount would be subjected to income-tax and would partake the income of the assessee-club. We a .....

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in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd. reported at 270 ITR 1 (SC) and also the judgement of Hon ble Jurisdictional High Court in the case of Unique Mercantile Services Pvt.Ltd. in Tax Appeal Nos.1471 to 1478 of 2005, wherein the Hon ble High Court has confirmed the view of the Tribunal holding that the assessee would entitle for spreading over the non-refundable fee on accrual basis, undisputedly the one time security deposit is refundable. The Hon ble Supreme Court in the cas .....

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e is rejected. 6. Ground Nos.2 & 3 are general in nature which require no independent adjudication. 7. In the result, Revenue s appeal in ITA No.2337/Ahd/2011 for AY 2008-09 is dismissed. 8. Now, we take up the assessee s appeal in ITA No.2054/Ahd/2011 for AY 2008-09, wherein following grounds have been taken by the assessee:- 1. The ld.CIT(A) grossly erred in law and on facts in confirming the view taken by AO pursuant to the directions of Addl.CIT u/s.144A of the Act that the interest - fr .....

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ed. 2. The ld.CIT(A) erred in law and on facts in considering the security deposits as the membership fees for the period of entire 25 years and further directing AO to treat 1/25th of the security deposits as taxable in the year under consideration. This action of ld.CIT(A) holding future liabilities as income is completely against the principles of accountancy and provisions of law that ought to be quashed. 3. The ld.CIT(A) erred in law and on facts in dismissing the alternate plea of the appe .....

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plying provisions of section 14A of the Act. Both the lower authorities have failed to consider various explanation and submissions of the appellant. Ld.CIT(A) ought to have deleted such disallowance made by AO. 5. The ld.CIT(A) has erred in not issuing any direction in respect of non-allowance of set off of carried forward depreciation of ₹ 32,03,575/- as well short term capital loss of ₹ 2,83,869/- of A.Y. 2007/08 though the rectification application being filed by the appellant. 6 .....

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dvanced in the ground No.1 of Revenue s appeal(supra),wherein we have rejected the Revenue s appeal by observing as under:- 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The Revenue has not disputed that the security deposits were refundable to the Members. It is also not in dispute that in some of the cases the assessee-club has refunded the amount. Under these facts, we are unable to accept the finding of .....

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re, looking to the totality of the facts of the case and in view of the judgement of the Hon ble Supreme Court in the case of Siddheshwar Sahakari Sakhar Karkhana Ltd. reported at 270 ITR 1 (SC) and also the judgement of Hon ble Jurisdictional High Court in the case of Unique Mercantile Services Pvt.Ltd. in Tax Appeal Nos.1471 to 1478 of 2005, wherein the Hon ble High Court has confirmed the view of the Tribunal holding that the assessee would entitle for spreading over the non-refundable fee on .....

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ssee-club cannot be subjected to tax. Accordingly, we find no merit in this ground of the Revenue s appeal, same is rejected. 12.1 Since we have held that the refundable security cannot be subjected to Income Tax, therefore the ground Nos.1 to 3 raised in the Assessee s appeal are allowed. 13. Ground No.4 is against confirming disallowance of ₹ 2,60,570/- made by AO applying provisions of section 14A of the Act. The ld.counsel for the assessee submitted that the AO was not justified in mak .....

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