TMI Blog2017 (9) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... d of 25 years spread over period of time based on reasonable scientific method keeping in view business matrix and model of the assessee worked out after study of the above parameters as cited by us and also of any other relevant parameter having impact and bearing on computation of correct income of the assessee chargeable to tax. Our decision is in consonance with the recent decision of the Hon’ble Supreme Court in the case of Seagram Distilleries Private Limited (now Pernod Ricard India Limited) v. CIT-III,(2016 (7) TMI 1235 - SUPREME COURT). Appeal of Revenue is allowed for statistical purposes - ITA No.1685/Mum/2017 - - - Dated:- 14-6-2017 - SRI MAHAVIR SINGH, JM For The Revenue : Shri Purushottam Kumar, DR For The Assessee : Shri KR Laxminarayan, AR ORDER PER MAHAVIR SINGH, JM: This appeal by the Revenue is arising out of the order of CIT(A)-20, Mumbai, in appeal No. CIT(A)-20/ITO-12(1)(1)/IT-283/2015-16 dated 02-12-2016. The Assessment was framed by ITO ward 12(1)-1, Mumbai for the A.Y. 2012-13 vide order dated 30-03-2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter the Act ). 2. The only issue in this appeal of Revenue is ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embers, annual charges and also charges for various facilities and amenities provided to its members such as food, beverages, swimming pool etc. . The said refundable deposit received by the assessee at the time of admission being bulk amount i.e. 80% of club membership enrollment fund is treated as capital receipts by the Revenue and brought to tax, while non-refundable entrance fees constituting 20% of club membership enrollment fund paid by the members on being admitted to the membership of the club in our considered view in the instant case based on factual matrix of the case has close proximity and nexus to the specific services performed by the assessees club to its members which are being made available by the assessee club to members only on obtaining of membership of the club and is covered by the provisions of Section 28(i) and 28(iii) of the Act and is a revenue receipt in the hands of the assessee exigible to tax, while refundable deposit constituting bulk of payment being 80% of club membership enrollment fund appears to have close nexus with payment made for obtaining club membership in the instant case. It is not important that services rendered or performed are tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the member at the time of entering as member of association is exigible to tax wherein it was held that in case of trading association and profits being divisible as dividend amongst shareholders the same is trading receipts exigible to tax relying on decision of Kings Bench of the High Court in the case of Liverpool Corn Trade Association v. Monks(1962) 2 KB 110, wherein it was held by the Hon ble Apex court as under: - It is wholly immaterial in the circumstances of the present case to take into consideration as to how the appellant treated the amounts in question. It is not how an assessee treats any monies received but what is the nature of the receipts which is decisive of its being taxable. These amounts were received by the appellant as membership admission fees and as admission fees paid by the members on account of authorised assistants. As far as the latter payment is concerned that would fall within the decision of this court in Commissioner of Incometax v. Calcutta Stock Exchange Association Ltd. [1959] 36 ITR 222 and therefore is taxable income. The former, i.e., members' admission fees, has to be decided in accordance with the nature of the business of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax v. Royal Western India Turf Club Ltd. [1953] 24 ITR 551. this court rejected the applicability of the principle of mutuality because there was no mutual dealing between members inter se. There was no putting up a common fund for discharging a common obligation undertaken by the contributors for their mutual benefit and for this reason the case decided by the House of Lords in Styles v. New York Life Insurance Company [1889] 2 Tax Cas. 460 was held not applicable. In Commissioner of Income-tax v. Royal Western India Turf Club Ltd. [1953] 24 ITR 551 . this court rejected the applicability of the principle of mutuality because there was no mutual dealing between members inter se. There was no putting up a common fund for discharging a common obligation undertaken by the contributors for their mutual benefit and for this reason the case decided by the House of Lords in Styles v. New York Life Insurance Company [1889] 2 Tax Cas. 460 was held not applicable. lacking. It is the nature of the business of the company and the profits and the distribution thereof which are the determining factors and in this case it has not been shown that the appellant's busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the assessee has to maintain the facilities in subsequent years for which it would be required to incur expenditure without matching contribution from members based on concept of matching principles of revenue and expenditure and also considering that 70% of the facilities are completed by the end of the previous year as admitted by the assessee . We are agreeable that assessee having received advance membership fee for 25 years , concept of matching principles are to be applied while computing income under the Act and the entire amount of revenue received by the assessee cannot be brought to tax in the year of receipt itself as the assessee will be required to render services and maintain facilities in subsequent years for which expenditure will have to be necessarily incurred as per contractual obligations of the assessee with its members and hence rollover of revenue has to be undertaken which is required to be based on peculiar facts and circumstances of the case keeping in view factual matrix of the case to arrive at reasonable and fair apportionment, otherwise there will be huge income reported in the initial years when members are enrolled by the assessee while in subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court decision in the case of Madras Industrial Investment Corporation Limited v. CIT , (1997) 225 ITR 802(SC) . In our considered view, a reasonable and fair estimate under these circumstances has to be made based on reasonable scientific method keeping in view business matrix and model of the assessee after study of the by-laws, rules and regulations governing the assessees club , memorandum and articles of association, terms and conditions for the grant of membership , terms and conditions under which advance membership fee was received by the assessee, conditions for refund of membership fee, empirical experiences and a scientific working , which need to be carried out keeping in view peculiar business model and matrix of the assessee and also with respect of the assessees club. We are , therefore, inclined to set aside and restore the matter to the file of the AO for de-novo determination of the issue on merits in accordance with law to work out spread/rollover of advance membership fee collected for a period of 25 years spread over period of time based on reasonable scientific method keeping in view business matrix and model of the assessee worked out a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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