COMMISSIONER OF INCOME TAX Vs. PANCARD CLUBS LTD.

JUDGEMENT

(1.) This Appeal challenges the order passed by the Income Tax Appellate Tribunal dated 16th March 2011. The Revenue states that the questions of law formulated at page 4 are substantial questions of law and which arise for determination and consideration in this Appeal. In Appeal No. 2255/11, the Assessment Year in question is 2005-06. An order was made under section 143(3) on 27th April 2007 by the Assessing Officer. The loss of Rs. 480,914,236/- was assessed. The assessee is engaged in running of hotels, resorts and clubs. It offers holiday schemes for card members who are entitled to utilise the room nights at the assessee's hotels/resorts to the extent of the amounts paid as per the terms and conditions of the scheme. They are also entitled to surrender the unutilised room nights and receive back not only the deposits proportionate to the unutilised room nights, but also a premium thereon, on the expiry of the scheme period. The assessee adopted the practice of showing the advance amount of sale of room nights as liability in the balance sheet. It was to be accounted for as income only on actual utilisation of room nights whereas it claimed the provision of utilisation of room nights on pro-rata basis for expenses as well as the huge commission for procuring deposits for advance sale of room nights.

(2.) The Revenue found that the assessment order was erroneous insofar as it was prejudicial to the interest of the Revenue. Accordingly, the jurisdictional Commissioner exercised his powers under section 263 of the Income-tax Act, 1961 and directed the Assessing Officer to pass a fresh order in accordance with the directions issued by him. In compliance with the order dated 17th February 2009, the Assessing Officer was to pass the requisite order. However, the assessee aggrieved by the order of the Commissioner passed under section 263 of the Income-tax Act dated 17th February 2009 approached the Income Tax Appellate Tribunal. The Tribunal by the impugned order allowed the Appeal of the assessee as indicated therein and therefore, this Appeal by the Revenue.

(3.) Mr. Suresh Kumar, the learned counsel appearing in support of this Appeal submitted that the Appeal raises substantial questions of law. They would affect not only the present case but all such matters which are brought in by hotels and resorts. These hotels and resorts offer schemes to its members or the public at large. Merely because the advance amount collected is liable to be refunded in certain contingencies and circumstances, does not mean that it is not a receipt. It is a revenue receipt. Considering that the principal business of the assessee is to provide accommodation and other facilities to tourist members, then, a provision of the nature made cannot be said to be an allowable revenue expenditure. In such circumstances, this Appeal raises substantial questions of law and deserves to be admitted.