Hon'ble Prakash Krishna,J.
(Delivered by Prakash Krishna, J.) The only issue involved in the present appeal is whether the receipt of Rs.2,72,000/- received by the appellant assessee herein by way of subscription of magazine known as Akhand Jyoti from life members is revenue receipt or was a deposit for membership.
The facts of the case lie in a narrow compass and are not much in dispute.
The appellant herein is publishing monthly magazine known as Akhand Jyoti. He received annual subscription as well as subscription for lifetime for the aforesaid magazine from its readers. During the assessment year 1991-1992 the Assessing Officer found that a sum of Rs.2,72,000/- was received as life membership by the assessee towards the subscription of the said magazine and the said amount according to the Assessing Officer was revenue receipt. He added the said amount in the income of the assessee. The case of the assessee was that the said amount of Rs.2,72,000/- was received by way of life membership on the agreement between the parties that the amount is refundable to the subscriber as and when any subscriber so desires. In other words, the case of the assessee in brief was that the amount being refundable was not a revenue receipt which was not accepted by the Assessing Officer.
However, the matter was carried in appeal and the CIT (A) allowed the appeal and set aside the addition made in the income of the assessee.
The department carried the matter in further appeal being ITA no.5223/Del/94 before the Income Tax Appellate Tribunal, Agra Bench, Agra. The Tribunal by the order under appeal has allowed it and restored the assessment order by the order dated 11th September, 2002.
The appeal has been admitted on the following substantial questions of law:-
(i) Whether on the facts and in the circumstances of the case, Tribunal is legally justified in treating a sum of Rs.2,72,000.00 received as a deposit for Membership as a revenue receipt and the income for the year under consideration?
(ii) Whether the view of the Tribunal treating the deposit of Rs.2,72,000.00 as a revenue receipt is based on relevant consideration?
Shri V.B. Upadhyaya, learned senior counsel appeared along with Shri R.R. Kapoor for the appellant and submitted that the receipt was in the nature of deposit and as such, the Tribunal erred in law in holding the same as revenue receipt. Reliance was placed upon CIT Vs. Mantra Tantra Yantra Vigyan, (2008) 300 ITR 140 (Rajasthan).
The learned counsel for the department, on the other hand, supported the order of the Tribunal.
Considered the respective submissions of the learned counsel for the parties and perused the record. The Assessing Officer has noticed that in the earlier years, the assessee received the annual subscription as well as lump-sum subscription for ten years. One tenth of the subscription for ten years was treated by the assessee as revenue receipt. It has been further found that the assessee is maintaining only one account with regard to its receipts and expenses incurred in printing, publishing and distribution of the said magazine. The assessee is not maintaining any separate account of expenditure of printing, publishing and distributing the magazine to its life members. It has been further noticed that the assessee could not produce any evidence to show that the amount received from the life members was other than the subscription amount. The assessee could not produce any contract between him and the life members to show that the amount received from the life members was refundable. In the last fifteen years, the amount was not refunded even to a single life member.
The CIT (A) has disposed of the said issue vide para 1.4 of his order. The same, for the sake of convenience, is reproduced below:-
"The contentions filed by the appellant before me have been considered and the replies given before the A.O. have also been perused. It has been found that the amount is being received by the appellant from year to year for the last 15 years and the same is always been treated as capital receipt there is no change in the facts during the year under consideration. Therefore the A.O. was not justified in assessing this amount as revenue receipts during the year under consideration in view of the fact that evidences placed before him that the amount was refundable to the subscribers and was being utilised by the assessee for his business purposes and the magazine was being supplied on account of interest which may be earned on the said amount or the interest paid by the assessee on the funds borrowed."
While reversing the order of CIT(A), the Tribunal has observed that the CIT(A) did not make any attempt to work out the average expenditure of the magazine supplied to the life members to arrive at the conclusion whether the interest accrued on paltry sum of Rs.150/- was sufficient to meet the expenses attributable to paper used, ink used, expenditure of proofreading, royalty payment, printing expenditure, distribution expenses etc., which has been debited to to profit and loss account against the other receipts. The Tribunal has further noticed that the ten years subscription and annual subscription are considered as revenue receipt and there is no justification to give any other treatment to the subscription given by the life members.
The question whether a receipt is or is not a trading receipt has to be judged with reference to the circumstance present at the moment the receipt was received. If at the moment it was a trading receipt it cannot be turned out to be a receipt other than the trading receipt after lapse of time. How the amount was collected is not relevant. But what was the obligation to collect the amount is relevant.
In Kamal Bihari Lal Singha's case, (1971) 82 ITR 460, the Apex Court has made the following observation:-
"It is now well settled that in order to find where a receipt is a capital receipt or a revenue receipt one has to see what it is in the hands of the receiver and not its nature in the hands of the payer. In other words, the nature of the receipt is determined entirely by its character in the hands of the receiver and the source from which the payment is made has no bearing on the question.................................."
The assessee has utterly failed to prove that the subscription amount which was received from the life members was in the nature of deposit. No such case appears to have been set up before the Assessing Officer. It was developed subsequently at the first appellate stage and even CIT(A) without examining the said plea on merits allowed the appeal.
It was not disputed that the assessee did receive the subscription for life membership in the capacity of businessman. The Tribunal has correctly observed that the annual subscription and ten years subscription are revenue receipts. There is absolutely no justification for not treating the amount received from life members as subscription as revenue receipt. There is no iota of evidence on record to show that the amount received from life members as subscription is refundable. As noticed by the Assessing Officer, no such agreement could be produced by the assessee.
The decision relied upon by the learned senior counsel for the assessee given in the CIT Vs. Mantra Tantra Yantra Vigyan (supra) has hardly any application to the facts of the present case. There the assessee was also publishing a monthly journal on Astrology and was having huge numbers of subscribers. Rs.1500/- was received according to the Revenue by way of subscription for life members, which sum was shown in the balance sheet as liability. The Assessing Officer found that only a sum of Rs.3,000/- had been refunded while a huge sum remained with the assessee. It was held that the receipt of subscription from the life members was not taxable at the hands of the assessee as it was security/Dharohar. The finding of fact was returned that the amount given by the life members was in the nature of security. The said case was decided on its own fact. There a finding of fact was returned by the Tribunal that the receipt was in the nature of deposit by the life member and was refundable. The aforesaid decision is not applicable to the facts of the case on hand and is distinguishable on facts. Here, the Tribunal, the last fact finding authority, has found that the receipt was not deposit but was towards the subscription of life membership. The amount was never refunded to any life member and there was no agreement to refund the subscription to such life member on demand.
In the case of CIT Vs. Mantra Tantra Yantra Vigyan (supra), the High Court has observed that the best and nearest case they could find is the one reported in S. Sahkari Sakhar Karkhana Ltd. Vs. CIT (2004) 270 ITR 1. Relying upon the ratio propounded therein it was held that the amount received by the assessee as subscription for life membership cannot be said to be amounting to revenue receipts liable to tax rather they are in the nature of capital receipts liable to be returned to the subscriber/member constituent. A strong reliance was placed by the senior counsel on this portion of the judgment. A close reading of the judgment of the Apex Court in the case of S. Sahkari Sakhar Karkhana Ltd. (supra) would show that it was a case where the assessee was a society and always treating the deposits as money belonging to the members, cane grovers. The assessee merely acted as an agent in collecting the amount towards the Chief Ministers Relief Fund and other such funds and remitting the same to the government. The answer was given by the Apex Court in the light of the bye laws of the society. The Court observed that the question has to be examined from various angles running in a common direction. For instance, it becomes. necessary to enquire : Do the receipts bear the character of income at the time the reach the hands of the assessee? Does the title to the money get vested with the assessee-society once and for all, the assessee exercising complete dominion over the funds in question? or, is it to be regarded as the money of depositors/members notwithstanding the custody of the society and the authority given to the Management of the Society to utilize the money for the overall advantage of the Society? Does the assessee-Society stand in the position of debtor in relation to these deposits? Is therein law an obligation to repay the amounts, i.e., by way of augmentation of share capital of members? What is the primary purpose behind the collection of the amounts as deposits? These are the various questions of overlapping nature which have been debated before us in some form or the other, and call for answers in order to resolve the crucial controversy. Though the manner in which the sums are treated by the assessee in its accounts is neither conclusive nor a sure indication of the nature and character of the receipt, yet, it is not an irrelevant factor.
After making the aforesaid observation, the Apex Court examined the question in the light of the salient features as mentioned from 1 to 9 of that case. It concluded that the deposit was convertible into shares and it was not disputed that such conversion is as good as refund. It may be another thing that conversion into additional shares was postponed till the events of repayment of loans towards the capital expenditure and the repayment of Government share capital happen.
A close reading of the judgment of the Apex Court would show that it was rendered in the peculiar facts of that case and it has no application to the facts as they exist in the case on hand. In brief, the question there was whether compulsory collection is trading receipt or not. It was found that the receipts were not for the benefit of the company, being compulsory deductions for ascertained liability to members or depositors. They continued as a liability of assessee company retained for their benefit and refundable to them in the case of death or resignation. All these features make the ratio of S. Sahkari Sakhar Karkhana Ltd. (supra) distinguishable to the facts of the case on hand and is of little help to the controversy before us.
We are of the considered view that the ratio laid down by the Apex Court in the S. Sahkari Sakhar Karkhana Ltd. (supra) cannot be applied as a precedent to the facts of the case in hand as it was given altogether in a different set of facts.
There is another aspect of the case. The assessee, as noted, is not maintaining any separate account of expenditure towards printing, inking, paper etc. incurred by it towards the publication of the copies of the magazine distributed among life members. And at the same time, the assessee contends that the sums received from such life members is not 'income'. It does appear from the account books that the assessee had absolute control over the said amounts. Though the manner in which the sums are treated by the assessee in its accounts is neither conclusive nor a sure indication of the nature and character of the receipt, yet it is not an irrelevant factor, as observed by the Apex Court in S.Sahkari Sakhar Karkhana Ltd. (supra) which negates the assessee's case.
In view of the fact that there being no evidence or contract of refund of any amount and that ten years subscription and annual subscription are considered as revenue receipt, there is no justification to treat the receipt of life membership subscription of the magazine differently other than the income receipt.
Viewed as above, we are of the view that the Tribunal was justified in treating the sum of Rs.2,72,000/- as income for the year under consideration and the finding of Tribunal in this regard is perfectly justified and warrants no interference in this appeal.
The appeal is dismissed but no order as to costs.
(Prakash Krishna, J.) (Ashok Bhushan, J.) Order Date :- 30.4.2012 LBY