Entrance fee / onetime fee from new members is capital receipts

Entrance fee / onetime fee from new members is capital receipts. Similarly  donation towards corpus fund were also eligible for the exemption

ABCAUS Case Law Citation:
ABCAUS 2947 (2019) (05) ITAT

Important Case Laws Cited/relied upon by the parties
CIT vs. W.I.A.A. Club Ltd. [1982] 136 ITR 569

The assessee was charitable institution and had filed the appeal against the order of Commissioner of Income Tax (Appeals) in the assessment framed by the Assessing Officer (AO) under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

One of the issues of dispute were two inter-connected issues as regards to the taxability of one time membership fee received from the member and the amount paid towards corpus fund.

The Tribunal observed that the entrance fee received from members i.e. onetime fee from new members and same was being recorded under corpus fund was being in the nature of capital receipt.

The Tribunal noted that this issue had been decided in favour of assessee by the decision of Hon’ble High court wherein Hon’ble Bombay High Court held that entrance fee was a fee in the nature of return for vesting their right of membership and hence, the same would be in the nature of capital receipt not liable to tax.

Similarly, it was held that the corpus donation taken towards corpus fund by the assessee and therefore eligible for the claim of exemption under section 11(1)(b) of the Act and hence, the corpus donation could not be taxed.

The Tribunal opined that the entrance fee received by assessee being onetime membership fee could not be taxed. Hence, it was held that these two items were not taxable and assessee association was allowable for exemption under section 11 of the Act.

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