TMI Blog2015 (11) TMI 1890X X X X Extracts X X X X X X X X Extracts X X X X ..... of five years instead of assessing the same in one assessment year. The second issue of enhancement stands decided against assessee. We follow suit in these facts and want of distinction being pointed out in the above stated decision. The assessee s first ground accordingly is remitted back to Assessing Officer. Second substantive ground fail . - Shri Pramod Kumar, Accountant Member and Shri S. S. Godara, Judicial Member For the Revenue : Shri Samir Vahil, Sr. D.R. For the Assessee : Shri Manish J. Shah, A.R. ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- These two cross appeals filed by assessee and Revenue for A.Y. 2009-10, arise from order of the CIT(A)-I, Baroda dated 20-04- 2012 in appeal no. CAB-I/201/11-12, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The assessee s appeal ITA 1420/Ahd/2012 raised two substantive grounds. First one challenges both the lower authorities action in assessing whole of the membership contribution of Rs. 2,09,76,612/- resulting in the impugned addition of Rs. 13 lacs after setting off brought forward amount of Rs. 1,70,76,612/-. Its second substantive ground challenges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to remain as member or opted out and one time contribution was charged for services to be rendered by the appellant in future. Hon'ble ITAT, Ahmedabad in ITA No. 4280/Ahd/2007 for AY 2001-02 in appellant's case held that though what appellant received is termed as capital contribution by the members, it is a revenue receipt in the hands of appellant company. Hon'ble ITAT observed that quid pro quo of one time payment was giving right to the members to use the effluent discharge channel according to the capacity purchased by them and thus by making one time payment, members were made eligible to utilize the present capital set up of the appellant company as well as further expansion thereof, if any, or modification thereof, if made by the appellant company in future. ITAT further observed that appellant company gave a clear right to its members to utilize its capital facilities for discharge of agreed quantities of effluent and the one time membership fee was return for any obligation or services rendered by the appellant in future. 4.1 One time contributions received from members are neither compensation for loss of any profit making apparatus nor a considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.1,70,76,612/- was includible in taxable income of AY 08-09, AY 09-10 etc., which has not been done. Show cause notice u/s.251(2) for enhancing the assessment for AY 2009-10 by Rs. 17,25,648/-, being the deferred amount pertaining to FY 2004-05 to FY 2006-07 was therefore issued on 10.4.2012 providing opportunity to the appellant against such enhancement. 5.1 Appellant filed following reply to the show cause notice and was heard: The amount of Rs. 17, 25,648/- proposed to be added by your honour is erroneous. Your honors attention is drawn to the fact that the company, with effect from financial year 2007-08(A.Y.2008-09) changed the method of accounting in as much as the entire amount received as capital contribution has been treated as capital receipt for various reasons stated in our earlier submission dated 14th march 2012 with full convention that such a capital receipt is not a income at all, although in earlier years, offering of some percentage of income for taxation was a voluntary gesture which cannot form a base for computing a taxable income of the company. Under the circumstances we respectfully object to your any such addition. Our stand is ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt. It has to be performed in ensuing year and incur expenditure for such performance. Therefore entire receipt of membership fees cannot be taxed in the year. The substance of the matter is income reliance is also placed on the decision of special bench Chennai Tribunal in the case of ACIT Vs. Mahindra Holidays resorts (India) ltd. (2010) 131 TTJ1. it has been held that a debt is created in favour of the assessee immediately on execution of the agreement for time-sharing. However, it cannot be said that corresponding services have been fully rendered by the assessee. The assessee is required to furnish accommodation to the members for one week every year till the continuation of membership. Therefore, till this obligation is fulfilled, the domain of money is not complete as the failure to provide the accommodation in terms of agreement entails liability to pay liquidated damages. A distinction has to be made between the terms of receipt' and income . What is liable to be taxed is income and not the receipt. Therefore, only that amount which is received as income can be brought to tax. Capital contribution received had not become richer as there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntribution is a capital receipt by any standard of accounting principle and cannot be taxed as such. There is, therefore, no scope for taxing such capital contribution as revenue receipt. 5.2 I have considered the submissions, which are identical to submissions in appeal (Para 3 of this order). Appellant's contention that w.e.f. FY 2007-08, method of accounting was changed by treating one time contribution as capital sum received is not acceptable. As held by the ITAT and as discussed in paras 4 4.1 above, one time contributions are revenue receipts taxable as appellant's income. In any case, irrespective of the treatment of one time contributions received in FY 2007-08 FY 2008-09 in its books by appellant as per the so called changed perception; for earlier years, appellant itself had treated the amounts received in those years to be revenue receipts taxable on deferred basis over a period of 5 years. ITAT, Ahmedabad by following decision of ITAT's Special Bench in the case of Mahindra Holidays and Resort (I) Ltd (2010), 131 TTJ (Chennai) (SB) and by referring to AS-9, accepted offer by the appellant to tax capital contributions received from members on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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