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Akhil Bharatiya Gandharva Mahavidyalaya Mandal Gandharva Niketan Versus ITO (E) -1 (1) , Mumbai

Life Membership Fee received - revenue receipt or capital receipt for a trust - corpus donations u/s 11 (1)(d) - Held that:- I find that the facts of this case indicate that the assessee has been capitalizing the life membership fee receipt since beginning and it has been so accepted by the Revenue earlier. - The lump sum payment was dissected into two parts. One being entrance fee and other part commuted payment in liew of annual subscriptions. It was expounded that the element of entrance .....

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charged to normal members. In such circumstances, in my considered opinion, prima facie the entire life membership fee in this case cannot be attributed to revenue receipt. However, the necessary facts towards objective/attribution of the life membership fee need to be brought on record. Hence, deem it appropriate to remit the issue to the file of the assessing officer. The assessing officer is directed to obtain the necessary information regarding the objective/ attribution of life membership f .....

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and pertains to the assessment year 2012-13. 2. The grounds of appeal reads as under: On the facts and in the circumstances of case and in law, 1. The Ld. CIT(A) has erred in confirming the action of A.O of adding Life Membership Fee received to the tune of ₹ 9,73,800/- to the income of the Trust by treating the same as revenue receipt. 2. The Ld. CIT(A) has erred in confirming the action of A.O of adding Life Membership Fee of ₹ 9,73,800/- to the income of the Trust on the ground t .....

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a trust registered with DIT(E), Mumbai u/s. 12A and 80G and with the Charity Commissioner, Mumbai. The assessee filed its return of income on 31.10.2012 along with the Income & Expenditure Account, balance sheet and audit report in Form 10B declaring total income at ₹ 90,783/-. However, the A.O. completed the assessment vide order dated 13.3.2015 u/s. 143(3) of the I.T. Act, 1961 at taxable income of ₹ 13,06,630/-. 4. In the assessment, the Assessing Officer (A.O.) inter alia he .....

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eated as income. In response to this, the assessee's representative vide its letter has stated that: Life Membership is a permanent membership far a Life & It is treated as a part of corpus of the trust and it is treated as a capital receipt & reflected under the Balance Sheet under the head Reserve & Surplus. The explanation of the assessee's representative is considered but the same is not acceptable on the following reasons:- (1) Life membership of ₹ 9,73,800/- recei .....

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lump sum payment of ₹ 2,500/- in the case of life membership has two elements in it. A part is entrance fee and the other part is consolidated commuted payment in lieu of annual subscriptions. The element of entrance fee which in this case has to be computed at ₹ 500 to maintain parity with ordinary members, is a return for vesting a right of membership and is clearly in the nature of a capital receipt. The other element of life membership, amounting to ₹ 2,000 in each case, is .....

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nthly magazine of about ₹ 30/-per copy to the members of the trust. The trust circulates such monthly magazine to life members free of cost Thus, the trust nearly spends yearly ₹ 450/- per life member on account of magazine while a fee is charged to others for the said magazine. The life members also have also voting rights. Thirdly, they have a right to attend Annual general meeting of the trust. ii. Appellant further submitted that it is a basic accounting principle that life membe .....

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ed that, for earlier assessment year i.e. A.Y. 2011- 12, there was increase of ₹ 5,38,000/- towards life membership fund which was not routed through Income & Expenditure account. Despite this fact, no addition towards life membership fees was made in the assessment completed under 143(3) for the said year. Thus, the method consistently adopted by the appellant is accepted by the department. It is worth noting that the trust is following same accounting treatment and policies year to y .....

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being discussed and decided here in under: i. Appellant submitted that Life Membership fee of ₹ 9,73,800/- is to be treated as corpus. However, nothing has been brought on record to rebut the observation of the Assessing Officer that, the same is not corpus/earmarked fund being not voluntary contribution for specific purpose which the assessee can claim exempt u/s.11(1)(d). Also claim of the appellant, that its accounting system takes care of the theory propounded by the Hon. Bombay High .....

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udicata is not applicable as each assessment year is a separate proceeding. Similar observations were made by Hon'ble Supreme Court in the case of New jehangir Vakil Mills Co Ltd Vs CIT(SC) 49 ITR 137, and Bharat Sanchar Nigam Ltd & Anr. Vs Union of India & Ors (SC) 282 ITK 273. Further in the case of CIT Vs Seshasayee Industries Ltd. (Madras) 242 2TR 691, it was held by the Hon'ble Madras High Court that the fact that if claim was not questioned in earlier years does not entitle .....

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l. Similar observations were made by Hon'ble apex court in 313 ITR 363; 307 ITR 338; 3OO ITR 336. Further, in the case of British Paints [1GS ITR 44], the Hon'ble Supreme Court has held that there cannot be estoppel against the law. Similar view was held in the cases of Luchi Ram Puranmal [177 CTR 640 (MP)]; Foss Electric 263 ITR 125] and Distributors of Baroda [118 ITR 243]. The Hon'ble Delhi High Court in CWT vs. Meattles (p) Ltd. 156 ITR 569 has held that the revenue authorities c .....

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pt earlier. Hence, the learned counsel referred to the Hon ble Apex Court decision and Hon'ble jurisdictional High Court decision, wherein it was held that due regard to be given to the maintenance of uniformity. He further referred to couple of ITAT decision in favour of treating life membership fee as capital receipt. Ld. Counsel referred to the following case laws: 1. Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC) 2. CIT vs. Gopal Purohit in ITA No.1121 of 2009 dated 6.1.2010 3. Indian .....

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t from record. Hence, the ld. DR submitted that since the decision has been made on the basis of Hon'ble jurisdictional High Court decision, the same needs to be affirmed. Furthermore, the ld. DR submitted that the Hon ble Apex Court has held that an error should not be perpetuated. 10. I have carefully considered the submissions and perused the records. I find that the facts of this case indicate that the assessee has been capitalizing the life membership fee receipt since beginning and it .....

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d commuted payment in lieu of annual subscriptions. The element of entrance fee which in this case has to be computed at ₹ 500 to maintain parity with ordinary members, is a return for vesting a right of membership and is clearly in the nature of a capital receipt. The other element of life membership, amounting to ₹ 2,000 in each case, is the consolidation of a revenue receipt, and is taxable as income . 11. A reading of the above makes it clear that the lump sum payment was dissect .....

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mine the present case on the touchstone of above said case law. I find that the assessee has made submissions before the learned CIT(A) that part of life membership fee is attributed towards subscription of magazine, which is otherwise charged to normal members. In such circumstances, in my considered opinion, prima facie the entire life membership fee in this case cannot be attributed to revenue receipt. However, the necessary facts towards objective/attribution of the life membership fee need .....

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