Non-refundable membership fee has to be apportioned and taxed during period of membership

Non-refundable membership fee has to be apportioned and taxed during period of membership, rules Gujarat High Court

[2015] 56 taxmann.com 429 (Gujarat)

HIGH COURT OF GUJARAT

Commissioner of Income-tax

v.

Unique Mercantile Service (P.) Ltd

Section 28(i) of the Income-tax Act, 1961 - Business income - Year in which chargeable (Membership fee) - Assessment years 1989-90 to 2001-02 - Assessee-company engaged in business of providing facility cards to members on payment of one-time fee, apportioned membership fee over entire period of their membership - Assessing Officer rejected claim of spreading over of membership fee and brought to tax entire receipt in year in which cards were issued - Whether where services were rendered partially, revenue earning was to be proportionate to degree of completion of service - Held, yes - Whether, therefore, assessee was justified in spreading over amount of membership fee and expenses - Held, yes [Para 7][In favour of assessee]