Entrance fee received by Club capital receipt not revenue. SC dismissed SLP of Department

Entrance fee received by Club capital receipt not revenue. Supreme Court dismissed SLP of the Income Tax Department

ABCAUS Case Law Citation
ABCAUS 3634 (2023) (01) SC

Important Case Laws relied upon:
CIT vs. Diners Business Services Pvt. Ltd 263 ITR 1 (Bom.)

In the instant case. SLP was filed by the Income Tax Department challenging the decision of the Hon’ble High Court in treating the entrance fees received by a Club from its member as capital receipts as against revenue receipt.

The respondent assessee was a Club running the race course.  During the relevant assessment year and in the years prior thereto, the assessee used to receive entrance fee amounts from Life Members, Club and Stand Members, Service Members and Local Members.  

In the year in question, the assessee had credited a large amount to the General Reserves and had not offered the same for taxation claiming it to be a capital receipt.  

However, the Assessing Officer disallowed the same and added it to the heads of income as revenue receipts.

The CIT(A) allowed the appeal following the principle of judicial consistency as previously also it was held as capital receipt.

The Tribunal noted that there was no dispute to the fact that right from practically the date of incorporation, the entrance   fee from the members was treated as capital in nature and majority of these orders were passed under Section 143(3) of the Income Tax Act, 1961 (the Act).

Following High Court judgment, the Tribunal held that any sum paid by a member to acquire the rights of a club is a capital receipt.  

The Hon’ble High Court held that Tribunal had not committed any perversity or applied incorrect principles to the  given facts and when the facts and properly analysed circumstances and applied correct test to decide the issue at hand.

The Hon’ble High Court dismissed the appeal of the Revenue as lacking any substantial question of law.

Aggrieved by the order of the High Court, the Revenue filed a Special Leave Petition (SLP) before the Hon’ble Supreme Court.

However, the Hon’ble Supreme Court declined to entertain the Special Leave Petition and dismissed it.

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