ITAT rules members voluntary contribution to club's infrastructure not liable to tax

ITAT rules members voluntary contribution to club's infrastructure not liable to tax

The revenue department was unable to point out any change in the facts from the assessees' return of income from other assessment years

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the voluntary contribution received from the members of the club towards infrastructure facilities was received for a specific purpose and should be treated as a capital receipt.

The Coram of Aby T. Varkey (judicial member) and Gagan Goyal (accountant member) maintained that the contributions could not be charged to tax under the provisions of the Income Tax Act.

The assessee submitted that the issue regarding the treatment of entrance fees received from the members was held by the assessing officer (AO) as revenue receipts. He claimed that it was a capital receipt, hence not taxable.

Aggrieved by the action of the AO, he filed an appeal before the Commissioner of Income Tax (Appeals), who upheld the claim of the assessee, stating it was a capital receipt.

The assessee raised the issue of whether the entrance fees received from its members could be treated as capital receipts as against revenue receipts. He also questioned whether a member's contributions to infrastructure facilities could be considered capital receipts.

The tribunal noted that in the assessee's own case for the Assessment Year 2009-2010, the tribunal's decision that the entrance fees received by the assessee were to be treated as a capital receipt had been upheld. The department could not point out any change in the facts or law in respect of any of the assessment years.

Thus, the bench held that the contributions were capital receipts and hence, not taxable.