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Voluntary Contributions Received From Members Of Club Towards Infrastructure Facilities Is A Capital Receipt: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT)consisting of Aby T. Varkey (Judicial Member) and Gagan Goyal (Accountant Member) has held that the voluntary contributions received from the members of the club towards infrastructure facilities were contributions received for a specific purpose and should be treated as a capital receipt.

The assessee submitted that the issue regarding the treatment of entrance fees received from the members was held by the AO as revenue receipts, whereas the assessee’s claim was that it was a capital receipt, so not taxable. The assessee was aggrieved by the action of the AO and preferred an appeal before the CIT (A), who upheld the claim of the assessee and held it to be a capital receipt.

The assessee raised the issue of whether the entrance fees received from its members can be treated as capital receipts as against revenue receipts.

Another question raised was whether member contributions to infrastructure facilities could be considered capital receipts.

The tribunal noted that in the assessee’s own case for AY 2009-10, the Tribunal’s decision that the entrance fees received by the assessee have to be treated as a capital receipt has been upheld. The department could not point out any change in facts or law in respect of any of the assessment years.

The ITAT held that the contributions are capital receipts and, hence, cannot be charged to tax under the provisions of the Income Tax Act.

Case Title: JCIT Versus M/s. Royal Western India Turf Club Ltd.

Citation: I.T.A. No.3742/Mum/2019

Date: 02/09/2022

Counsel For Petitioner: Advocate Sumit Lalchandani

Counsel For Respondent: Sr. AR Mahita Nair

Click Here To Read/Download Order

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