HC Allows Deferral of Time-Share Membership Fees Over Membership Tenure

  • Blog|News|Income Tax|
  • 3 Min Read
  • By Taxmann
  • |
  • Last Updated on 20 May, 2026

Latest from Taxmann

time share membership fees

Case Details: Commissioner of Income-tax - LTU vs. Mahindra Holidays and Resorts (India) Ltd. - [2026] 186 taxmann.com 146 (Madras)

Judiciary and Counsel Details

  • Dr. G. Jayachandran & Shamim Ahmed, JJ.
  • V. Pushpa, Senior Standing Counsel for the Appellant.
  • Arvind P. Datar, Senior Counsel, Sandeep Bagmar & Rahul Unnikrishnan for the Respondent.

Facts of the Case

The assessee was engaged in selling time-share units and providing holiday facilities to members for a specified week each year over a fixed tenure, in return for membership fees collected either upfront or in instalments. The assessee offered 60% of the membership fee as income in the year of admission and spread the remaining 40% equally over the membership period. Annual Maintenance Charges and utility charges were collected separately. The Assessing Officer held that the entire membership fee was taxable in the year of receipt, as the assessee had claimed full expenditure while deferring part of the income, contrary to the matching principle. However, the Commissioner (Appeals), following earlier orders in the assessee’s own case, accepted the deferred revenue concept, and the Tribunal upheld the same.

High Court Held

The matter reached the High Court. The Court held that the Time-share Agreement and Membership Rules were valid and observed that the membership fee was not merely an entrance fee but was linked to continuing obligations to provide accommodation and holiday facilities throughout the membership period. The agreement specifically provided that 40% of the fee represented accommodation costs, while 60% represented an Advance Payment towards Facilities (APF) to be apportioned equally over the membership tenure. The Court held that the assessee had an ongoing obligation to provide assured accommodation and related facilities. Therefore, the receipts could not be treated as income entirely accruing in the year of receipt.

Further, Annual Maintenance Charges and utility charges were independent of membership fees and could not be linked to them. Accordingly, the Court upheld the assessee’s method of accounting and answered the substantial questions of law in favour of the assessee.

List of Cases Reviewed

  • CIT v. Shyam Telelink Ltd. [2019] 101 taxmann.com 218/260 Taxman 402/410 ITR 31 (Delhi) (para 16) followed
  • Order of Tribunal, Chennai, dated 06.07.2010 in I.T.A.No.1705/Mds/2008 (para 23) affirmed

List of Cases Referred to

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied