Income Tax Appellate Tribunal - Panji
The Andheri Recreation Club, Mumbai vs Ito (E) -1, Mumbai on 13 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL"A" BENCH, MUMBAI
BEFORE SHRI R. C. SHARMA, AM AND SHRI AMARJIT SINGH, JM
I.T.A. Nos.5059/M/2015 &71/M/2017
Assessment Years: 2011-12 & 2012-13)
The Andheri Recreation Vs. ITO (E) 2(4)
Club Dadabhai RD, Near R.No. 503, 5 t h floor, Piramal
Bhavans, College Andheri Chambers, Lalbaug,
(W) Mumbai. Mumbai.
Pin: 400012
Pin: 400058
स्थायीले खासं ./जीआइआरसं ./PAN/GIR No. : AAATT3379H
(Appellant) .. (Respondent)
Assessee by: Shri Rajesh Sanghvi (AR)
Department by: Shri V. Jenardhanan (DR)
Date of Hearing: 13.07.2017
Date of Pronouncement: 13.09.2017
ORDER
PER AMARJIT SINGH, JM:
The assessee has filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax (Appeals)- 1, Mumbai [hereinafter referred to as the "CIT(A)"] relevant to the assessment years2011-12 & 2012-13.
ITA NO.5059/M/2015:-
2. The assessee has raised the following grounds:-ITA Nos. 5059/Mum/2015
71/Mum/2017 A.Y. 2010-11 & 2011-12 "1.In the facts of the case and in Law, the learned AO (Exemption] erred in denying exemption U/s II & the Commissioner of Income Tax [Appeal] also erred in confirming the same denial a. By overlooking the fact that the registration of the Appellant us 12A was valid and subsisting and wrongly holding that the Appellant Trust was not having any primary objective of charitable nature and that its activities are commercial activities and not tbr charitable purpose and public at large u/s 2(15)rws 3(8].
b By erroneously holding that the most has not spent income on the object of me trust mid that the trust is set up mainly for the benefit of their members and thereby overlooking the fact that promotion of trade & commcerce is also qualifies u's 2(1) r w s 13[81 as charitable object and also overlooking the fact that amended provisions of section 2[15] were applicable only to cover those organizations which were tide associations only for the benefit of business, By not appreciating the fact that provision of facilities of recreation, restaurants, gymnasium and sports facilities for a charge by itself does not amount to non-charitable proposes and that similar exemption was allowed in the earlier year. Without prejudice to the above and alternatively. 1 In the facts of the case mid in Law, the learned Assessing officer erred in disregarding the fact that the Appellant being a club was also eligible to be treated as mutual concern and therefore income ought to be exempted on the basis of principles of mutuality, I GENERAL This appeal is filed in time. The appellant reserves the rights to add alter or delete any portion of this appeal before its conclusion."
3. The brief facts of the case are that the assessee filed its return of income on 29.09.2011 along with the income and expenditure account, balance-sheet and audit report in form no. 10B declaring total income to the tune of Rs. Nil. The trust is registered as a Charitable Organization with DIT(E), Mumbai u/s 12A under Registration No. INS/703 and with Charity Commissioner, (Mumbai). Vide Registration no. F-1892 (Mumbai). The case was selected for scrutiny, 2 ITA Nos. 5059/Mum/2015 71/Mum/2017 A.Y. 2010-11 & 2011-12 therefore, notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. On verification of income and expenditure account for the A.Y. 2011-12. The assessee has received the total receipts to the tune of Rs.2,67,87,641/- under the various heads which is herby mentioned below.:-
Particular Amount(Rs.) Interest income on saving and fixed deposit 60,88,905 Interest on Income tax refund 1,25,440 Income from club house activities 2,05,73,296 Total Amount 2,67,87,641
4. The assessee received the income from Club House Activities to the tune of Rs.2,05,73,296/- as mentioned below.:-
Particular Amount(Rs.)
Receipt from Members and Guests 81,25,708
Fees from members & Guest 1,03,44,491
Compensation from caterers 16,98,000
Locker rent 60,300
Sundry receipts 3,44,797
Total Amount 2,05,73,296
5. The assessee claimed income as exempt u/s 11 of the Act being charitable in nature. The Assessing Officer examined the record and 3 ITA Nos. 5059/Mum/2015 71/Mum/2017 A.Y. 2010-11 & 2011-12 was of the view that the case of the assessee falls within the fourth limb of the Section 2(15) of the I.T. Act being the assessee was engaged in the commercial activities of running a recreation club, catering and restaurant etc. having chargeable facilities like gymnasium and sports facilities for members & non-members (guest of members). Assessing Officer was also of the view that the expenses on account of Badminton, Billiards, Card Room, lawn Tennis, Swimming. and Entertainment Programme etc. were not charitable in nature. Therefore, the Assessing Officer declined the claimed of the assessee u/s 11 r.w.s 13(8) of the Act and assessed the income to the tune of Rs.1,59,64,670/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who confirmed the order, therefore, the assessee has filed the present appeal before us.
ISSUE NO.1:-
6. We have heard the argument advanced by the Ld. Ld. representative of the parties and perused the record. The Ld. representative of the assessee has argued that the assessee club has been registered as charitable u/s 12A of the I.T. Act, 1961 on account of promotion of various activities and games for charitable purpose as mentioned in Circular No. 395 dated 24.09.1984 and in all the past years the club has been granted exempted u/s 11 of the I.T. Act and the status of the assessee was held as charity in nature in appeal also for the A.Y. 1996-97, 1997-98 & 1998-99. but in the present year the 4 ITA Nos. 5059/Mum/2015 71/Mum/2017 A.Y. 2010-11 & 2011-12 claim of the assessee has wrongly denied therefore the finding of the CIT(A) is wrong and against the law and fact and is liable to be set aside. It is also argued that the present case is the case of the A.Y. 2011-12 while in the case of A.Y. 2010-11 the order has been passed u/s 143(3) in which the exemption u/s 11 of the Act has been granted to the assessee but declined in the present year as well as in an another year i.e., 2012-13 wrongly and illegally without differentiating the facts, therefore, in the said circumstances the claim of the exemption u/s 11 of the Act is liable to be allowed in the interest of justice. It is also argued that the same view has been taken by the Hon'ble ITAT in the case title as ITO Vs. Chembur Gymkhana (2017) 80 taxmann.com 354 Mumbai Tribunal. It is specifically argued that the while declining the claim of the assessee u/s 11 r.w.s 13(8) of the Act, no transaction of any kind was discussed by the AO which was in nature of trade business and commerce, therefore, the Assessing Officer has wrongly declined the claim of the assessee, hence, the finding of the CIT(A) is liable to be set aside and the claim of the assessee is liable to be allowed. In support of these contention the Ld. representative of the assessee has also relied upon the following law :-
1. Calcutta Cricket & Footbal Club Vs. Ito Exemption In ITA. Nos 466/Kol/2016 dated 05.08.2016 for A.Y. 2011-12
2. Navi Mumbai Gymkhana ITAT Mumbai ITA No. 196/Mum/2013 dated 21.05.2014 for A.Y. 2009-10.5 ITA Nos. 5059/Mum/2015
71/Mum/2017 A.Y. 2010-11 & 2011-12
3. Chembur Gymkhana Mumbai ITAT ITA Nos. 3033/Mum/2015 Dated 08.03.2017 for A.Y. 2010-11.
4. Chembur gymkhana Bombay High Court 70 ITR 163 for A.Y. 1996-97 dated 13.02.2012
5. Surat Art Silk Cloth Mfrs Assn (SC) 121 ITR 1 Dated 19.11.1979
6. PHD Chambers of Commerce & Industry Delhi High Court IT Nos. 368 369/2012 Dated 19.01.12
7. Shree Nasik Panchvati Panjrapole Bombay High Court IT No. 1695/2014 Dated 20.03.2017.
7. On the other hand, the Ld. representative of the department has strongly relied upon the order passed by the CIT(A) in question. With due to regard to the contention raised by the Ld. Representative of the parties and perusing the record. We noticed that the Assessing Officer has declined the claim of the assessee u/s 11 of the Act mainly on the basis of the exception of the Section 2(15) of the Act. We deemed it necessary to reproduce the clause 3 of the memorandum of association which explained the object of the assessee :-
"(a) To take over the assets, properties and engagements of the present unregistered institution known as' The Andheri Recreation Club'
(b) To provide, establish, endow, maintain, control and manage grounds, Schools, Colleges and other Educational Institutions and to do all acts and things necessary for or conducive to the promotion of Schools of the Montessori and Kindergarten types,Primary secondary, Higher, Commercial, technical and Industrial Education in the area of "K" Ward (i.e. Jogeshwari, Andheri And Versova areas) and elsewhere and for this purpose, to start, establish, Conduct, maintain and manage Reading Rooms, 6 ITA Nos. 5059/Mum/2015 71/Mum/2017 A.Y. 2010-11 & 2011-12 class Rooms, Swimming Pools, Libraries, Laboratories, Gymnasioums, Workshops, Publishing Houses, Hostels. Residential Quarters and the like.
(c)To facilitate and spread education by starting, affiliating, established and maintaining of assisting in establishing and maintaining at "K" Ward i.e. Jogeshwari, Andheri and Versova areas of elsewhere Schools, Colleges and Academics for imparting Primary, Secondary and Higher industrial or other education with a view to train up ideal citizens."
8. Now, it is to be seen whether the case of the assessee falls within the purview of exception of the Section 2(15) of the Act or not. The said amendment came in existence under finance Act, 2008 by adding a proviso which states that the advancement of any other object of general public utility charitable shall not be a charitable purpose if it involves the carrying on of any activity in the nature of trade, commerce and business or any activity of rendering any service in relation to any trade, commerce and business for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activities unless -
(1) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility, and (2) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year 7 ITA Nos. 5059/Mum/2015 71/Mum/2017 A.Y. 2010-11 & 2011-12
9. On appraisal of the finding of the Assessing Officer, we noticed that the Assessing Officer observed that the income from club house activities to the tune of Rs.2,05,73,296/- vide which the receipts were from member of guest, fees members of guest, compensation from caterers, locker rent, sundry receipts is the income which is not in nature of charitable purpose. Assessing Officer also was of the view that the expenses incurred on badminton, billiards, card room, lawn tennis swimming pool entertainment etc. are not in nature of charitable. Anyhow, on appraisal of the order passed by the AO we nowhere noticed to which it can be assumed that the assessee trust was involved any in the activities of trade, commerce and business and rendering any service related to trade, commerce and business. The receipt from member, fees from guest of members, compensation from caterers, locker rent, sundry receipts nowhere falls in the category of trade business and commerce. Nothing came into notice that the assessee has changed its object. The object of the assessee trust has duly been described in the memorandum of association and the expenditure seems to its ancillary sports activities as mentioned in the memorandum of association which fail in the nature of general public utility ancillary to a dominant object. Assessing Officer nowhere gave his finding that the trust was providing the service to the outsider also and was involved in the activity of profit and also nowhere pointed out that the service of the restaurant, swimming pool etc. was provided to the outsider other than the member and family 8 ITA Nos. 5059/Mum/2015 71/Mum/2017 A.Y. 2010-11 & 2011-12 members and guest of the members also. Since, the principle of mutuality was not violated then in the said circumstances the case of assessee is liable for exemption u/s 11 of the I.T. Act. Even a single instance is not on the file which may describe this fact that the assessee has been involved in the trade, business and commerce.In this regard we also find support of law settled in :-
1. Calcutta Cricket & Footbal Club Vs. Ito Exemption In ITA. Nos 466/Kol/2016 dated 05.08.2016 for A.Y. 2011-12
2. Navi Mumbai Gymkhana ITAT Mumbai ITA No. 196/Mum/2013 dated 21.05.2014 for A.Y. 2009-10.
3. Chembur Gymkhana Mumbai ITAT ITA Nos. 3033/Mum/2015 Dated 08.03.2017 for A.Y. 2010-11.
10. It is also came into notice that the revenue allowed the claim of the assessee in the earlier years and also allowed the claim of the assessee for the A.Y. 2010-11 u/s 143(3) of the I.T. Act, 1961.There is no factual change in the activity of assessee in the current year. Taking into account of all the facts and circumstances of the case, we are of the view that the claim of the assessee has wrongly declined, therefore, the finding of the CIT(A) is wrong and against law and facts and is not liable to be sustainable. Accordingly, we set aside the finding of the CIT(A) on these issues and allowed the claim of the assessee.
11. In the result, appeal filed by the assessee is hereby allowed.
9 ITA Nos. 5059/Mum/201571/Mum/2017 A.Y. 2010-11 & 2011-12 ITA NO.71/M/2017:-
12. The assessee has raised the following grounds:-
"1.In the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in denying the benefit u/s 11 by invoking the first proviso to sec 2(15) and by ignoring the relevant circulars and case laws as quoted.
2. In the facts & circumstances of the case and in law, the Ld. CIT(A) has erred by not treating "sports & recreational activities "
as in the nature of charitable purpose which is an inclusive definition u/s 2(15) and thus restricting the scope of said definition.
3.In the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in treating the activities of the appellant as that in the nature of commercial business, ignoring the factual realities and the audited accounts.
4. In the facts & circumstances of the case and in law, and without prejudice to the claim of Sec. 11 the Ld. CIT(A) has erred by not giving the benefit of the "Doctrine of Mutuality" coupled with charity, there being identity between the contributor & recipient as a class and by not allowing benefit u/s 11 to interest income."
13. The facts of the present case are the same as mentioned in the above mentioned appeal no 5059/M/2015 therefore, there is no need to repeat the same. However, the figure is different.
14. The matter of controversy is also the same. The claim of the assessee has been allowed in ITA. No.5059/Mum/2015 therefore, in the instant case wherein the matter of controversy is also the same, the claim of the assessee is hereby ordered to be allowed in the above stated terms.
15. In the result all the appeals filed by the assessee are hereby ordered to be allowed.
10 ITA Nos. 5059/Mum/2015 71/Mum/2017 A.Y. 2010-11 & 2011-12 Order pronounced in the open court on 13.09.2017 Sd/- Sd/- (R.C. SHARMA) (AMARJIT SINGH) लेखासदस्य / ACCOUNTANT MEMBER न्याययकसदस्य/JUDICIAL MEMBER मंबई Mumbai; यदनां कDated : 13.09. 2017 v.p. singh
आदे शकीप्रतितितिअग्रेतिि/Copy of the Order forwarded to :
1. अपीलाथी/ The Appellant
2. प्रत्यथी/ The Respondent.
3. आयकरआयक्त(अपील)/ The CIT(A)-
4. आयकरआयक्त/ CIT
5. यिभागीयप्रयियनयि,आयकरअपीलीयअयिकरण, मंबई/ DR, ITAT, Mumbai
6. गार्ड फाईल /Guard file.
आदे शानुसार/ BY ORDER, सत्यायपिप्रयि //True Copy// उि/सहायकिंजीकार (Dy./Asstt.Registrar) आयकरअिीिीयअतिकरण, मंबई / ITAT, Mumbai 11