TMI Blog2011 (7) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... turn 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, authorized representative Shri Adesh Gupta and Shri S.K. Sharma appeared before the Assessing Officer and submitted requisite details. On scrutiny of the accounts, it revealed to the Assessing Officer that auditor in the audit report at serial No.7 of schedule 23 has shown membership fees i.e., subscription fee is recognized on a time proportion basis. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to submit that this subscription/membership fees received from customers is in respect of a Golf Club. 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 annual 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 member joins the Golf Club on 1st 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 financial year as income because his membership fees is valid for the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to year basis. Appellant company recognize this annual charges in the books of account on accrual basis based on time proportion basis. For example, if a member joins the Golf Club on 1st October, 2005, his annual charges for six month s is taken in the financial year 2005-06 (assessment year 2006-07) as income and balance 6 months annual charges is taken in the next financial year as income. 4. On the strength of above explanation, it was submitted that order of the ITAT in the case of Sterling Holidays Resorts (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 case of ACIT Vs. Mahindra Holiday and Resort reported in 131 TTJ page 1. Learned First Appellate A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts 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 receipts cannot be recognized as a revenue receipts at the time of receipt. On the other hand, case of the revenue is that there is no obligation upon the assessee to refund those amounts to the ultimate customers, hence, an absolute right to retain the money has been crystallized under some of the conditions of providing membership. Therefore, it is taxable in the year under which these amounts have been received. We find that issue in dispute is squarely covered in favour of the assessee by the judgment of Hon ble Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has recognized 40% of the total cost of membership towards accommodation and 60% towards facilities. It offered 40% of the receipts of tax in the year of receipt of the membership fees. The dispute arose between the assessee and the revenue is, whether entire amount of timeshare membership fees receivable by the assessee upfront at the time of an enrolment is an income chargeable to tax in the initial year when there is a contractual obligation fastened to the receipt to 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 upfront at the time of enrolment of a member is not the income ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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