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March 2023

Income — Capital or revenue receipt — Race club — Membership fees received from members — Capital receipt

By K. B. Bhujle, Advocate
Reading Time 2 mins
82 Principal CIT vs. Royal Western India Turf Club Ltd [2023] 450 ITR 707 (Bom) A. Y. 2009-10 Date of order: 22nd December, 2021 Section 4 of ITA 1961 Income — Capital or revenue receipt — Race club — Membership fees received from members — Capital receipt   The assessee ran a race course. It received membership fees from its members. For the A. Y. 2009-10, the AO disallowed the amount credited by the assessee as general reserve and claimed to be capital receipt, by treating it as revenue receipt. The Commissioner (Appeals) held it to be capital receipt. The Tribunal held that from the date of incorporation of the assessee in the year 1925 onwards, the entrance fees received from the members of the assessee were treated as capital in nature and majority of these orders were passed under section 143(3) of the Income-tax Act, 1961 and relying on the judgment in CIT vs. Diners Business Services Pvt Ltd [2003] 263 ITR 1 (Bom) held that any sum paid by a member to acquire the rights of a club was a capital receipt. On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under: “The Tribunal had not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances were properly analysed and correct test was app
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