Supreme Court Dismisses Department's SLP Against HC Decision Holding That Entrance Fees Received By Club From Its Member Is Capital Receipts

The Supreme Court bench of Chief Justice of India, Justice D.Y. Chandrachud, and Justice Hima Kohli has dismissed the special leave petition of the department challenging the decision of the Bombay High Court. The Bombay High Court has held that any sum paid by a member of a club to acquire the rights of a club is a capital receipt and not a revenue receipt.

The assessee or respondent runs the race course in Bombay. During the assessment year 2009-10 and in the years prior, the assessee used to receive entrance fee amounts from life members, club and stand members, service members, and local members. It was found that the assessee had credited an amount to the General Reserves and had not offered it for taxation, claiming it to be a capital receipt.

The Assessing Officer disallowed it and added it to the heads of income as revenue receipts.

The assessee appealed before the CIT (A). The CIT(A) granted the assessee's appeal and determined that the entrance fees were a capital receipt.

The department challenged the order before the ITAT. The ITAT noted that right from practically the date of incorporation, the entrance fee from the members was treated as capital in nature, and the majority of the orders were passed under Section 143(3) of the Income Tax Act, 1961.

The department further appealed to the Bombay High Court. The court dismissed the department's appeal and held that the Tribunal had not committed any perversity or applied incorrect principles.

The department filed the special leave petition before the Apex Court.

The court dismissed the petition filed under Article 136 of the Constitution.

Case Title: PCIT Versus Royal Western India Turf Club

Citation: SLP (Civil) 25686/2022

Date: 11.11.2022

Counsel For Appellant: Advocates Balbir Singh, Monica Benjamin, Rajeev Ranjan, Rupender Sinhmar, Shyam Gopal, Raj Bahadur Yadav

Counsel For Respondent: Advocates Salil Kapoor, Sumit Lalchandani, Ananya Kapoor, Shivam Yadav, Dawneesh Shaktivats, Mini Gangadharan, Praveen Swarup

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