Income Tax Appellate Tribunal - Chennai
Hamsadhwani, Chennai vs Assessee on 16 January, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI GEORGE MATHAN, JUDICIAL MEMBER
I.T.A. No. 494/Mds/2011
M/s Hamsadhwani, The Director of Income Tax
2, 8th Lane, Indira Nagar, (Exemptions),
Chennai - 600 020. v. Chennai - 600 034.
PAN : AAATH0154Q
(Appellant) (Respondent)
Appellant by : Shri V. Jagdisan, CA
Respondent by : Shri K.E.B. Rengarajan,
Junior Standing Counsel
Date of Hearing : 16.01.2012
Date of Pronouncement : 16.01.2012
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by the assessee, its grievance is that ld. DIT(Exemptions), Chennai, denied it renewal of approval under Section 80G of Income-tax Act, 1961(in short 'the Act') though it was having such an approval for the period 1.4.2006 to 31.3.2009. 2 I.T.A. No. 494/Mds/11
2. Short facts apropos are that assessee, a society formed for advancement of music, other fine arts and traditional arts, had applied for renewal of its approval under Section 80G of the Act vide application dated 10.3.2010 in Form 10G prescribed under Income- tax Rules, 1962. Assessee was already registered under Section 12AA of Income-tax Act, 1961 (in short 'the Act') vide C.No.DIT(E) 2(110)91-92 dated 9.8.1991. Ld. DIT(E) noted that receipts of the assessee from sponsorship fees, sale of tickets and music coaching for financial years 2007-08 to 2009-10 was in excess of ` 10 lakhs and assessee was put on notice why its application for renewal of approval under Section 80G of the Act should not be rejected in view of the amendment made to Section 2(15) of the Act by Finance Act, 2010 with retrospective effect from 1.4.2009 adding a second proviso thereto. Reply of the assessee was that the sponsorship fees received from its members were for paying off the artists and these were neither a business receipt nor from any adventure in the nature of trade. As per the assessee, insofar as sale of tickets was concerned, these were issued to visitors who came to see a particular programme, who were made temporary members of the society for 3 I.T.A. No. 494/Mds/11 that purpose. Insofar as music coaching was concerned, argument of the assessee was that imparting music coaching was nothing but education, and per se was charitable in nature. Apart from the decision of Hon'ble jurisdictional High Court in the case of CIT v. Sri Thyaga Brahma Gana Sabha (188 ITR 160), assessee also relied on following decisions of co-ordinate Bench of this Tribunal in support of its renewal application:-
1. Maraa v. ITO (Exemptions) 130 TTJ 489 (Chennai)
2. Cane Development Council, Mawana v. CIT 128 TTJ 316 (Delhi)
3. Himachal Pradesh Environment Protection and Pollution Control Board v. CIT 125 TTJ 98 (Chandigarh) However, the DIT(E) was of the opinion that the case laws relied on by the assessee were distinguishable and assessee was having receipts exceeding ` 10 lakhs in each year. Such receipts were in the nature of commercial/trade receipts according to him and therefore, the activities of the assessee-society were hit by the first proviso to Section 2(15) of the Act defining "charitable purpose".
According to him, assessee's reliance on the decision of Hon'ble jurisdictional High Court in the case of Sri Thyaga Brahma Gana 4 I.T.A. No. 494/Mds/11 Sabha (supra) would also not help it since advancement of music was only an object of general public utility and therefore, assessee had to satisfy the condition spelt out in first proviso to Section 2(15) of the Act which it had not done. He, therefore, rejected the application for renewal filed by the assessee.
3. Now before us, learned A.R., strongly assailing the order of DIT(E), submitted that assessee was a society engaged in encouraging classical dance and music and conducting dance and music programmes of reputed performers and musicians for advancement of music. As per learned A.R., assessee's object was development of music and other fine arts based on Indian culture and assessee was not carrying on any trade, commerce or business, when it was collecting fees from persons who were attending the programmes. As per learned A.R., the sponsorship fees received were used for paying the artists and there was no commercial intention or any flavour of trading involved of the activities of the assessee. According to him, ld. DIT(E) went wrong in concluding that sponsorship fee and fee for music coaching were all emanating from any business, trading or commercial activities when the purpose 5 I.T.A. No. 494/Mds/11 of the assessee was not commercial at all. He also submitted that the assessee was having registration under Section 12AA of the Act vide order dated 9.8.1991 and this was still continuing. According to him, denial of renewal of application under Section 80G of the Act, when its registration under Section 12AA of the Act was intact, was unjustified. Reliance was also placed on the decision of co-ordinate Bench of this Tribunal in the case of Mylapore Fine Arts Club v. DDIT(E) in I.T.A. No.1706/Mds/2010 dated 12th September, 2011.
4. Per contra, learned D.R. strongly supporting the order of ld. DIT(E), submitted that fees for music coaching, sale of tickets and sponsorship fee received by the assessee exceeded ` 10 lakhs and by application of second proviso to Section 2(15) of the Act, assessee went out of the definition of "charity" and hence was not eligible for renewal of approval under Section 80G of the Act. Learned D.R. pointed out that the second proviso to Section 2(15) of the Act was introduced by Finance Act, 2010 with retrospective effect from 1.4.2009 and therefore, ld. DIT(E) had rightly refused to grant a renewal based on such amended law. According to him, the 6 I.T.A. No. 494/Mds/11 argument of the assessee that there was no change in the factual situation for taking a different view in the matter when the assessee was enjoying this approval for the period from 1.4.2006 to 31.3.2009 was ill conceived in view of the amended law.
5. We have perused the order of ld. DIT(E) and heard the rival submissions. There is no dispute that assessee was engaged in the advancement of music and fine arts, which was culturally important in the State of Tamil Nadu. The objects of the assessee as mentioned in its Memorandum of Association placed at paper-book page No.2, read as follows:-
1. To promote the advancement of music and other fine arts and traditional arts.
2. In pursuance of the above objects, to hold musical entertainments, discourses, dance recitals, group singing, dramas, exhibitions, lectures, seminars, competitions, etc.
3. To arrange for the exposition of music and other arts by competent artists and to encourage deserving talent.
4. To conduct schools for imparting instructions in the above arts on correct lines and thus afford facilities for the propagation and development of such arts.
5. To do such other things or undertake activities as are incidental and are conducive to the attainment of the above objects.7 I.T.A. No. 494/Mds/11
As held by the co-ordinate Bench of this Tribunal in the case of Mylapore Fine Arts Club (supra), there cannot be two opinions that in the State of Tamil Nadu, which is a land of music, dance and classical activities promoting the advancement of such arts, can only be construed as a "charitable purpose" coming under Section 2(15) of the Act. However, as per ld. DIT(E) , receipts of the assessee exceeded ` 10 lakhs for the years 2007-08 to 2009-10. Such receipts as culled out from para 6 of DIT(E) 's order is reproduced hereunder:-
2009-10 2008-09 2007-08
` ` `
Sponsorship Fees 8,55,305 7,43,250 9,88,069
Sale of Tickets 52,300 91,800 76,750
Fees for Music
Coaching 4,25,900 4,16,350 3,90,850
TOTAL 13,33,505 12,51,400 14,55,669
If we have a look at Section 2(15) of the Act which defines "charitable purpose", it runs as under:-
2 (15) 55"charitable purpose"56 includes relief of the poor, education56, medical relief, 57[preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other 56object of general public utility:8 I.T.A. No. 494/Mds/11
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business56, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:] 58 [Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is 58a[ten lakh rupees] or less in the previous year;] No doubt, it has been specifically provided in the first proviso that advancement of any other object of general public utility shall not be a charitable purpose if it involves any activity in the nature of trade, commerce or business, or rendering any service in connection with trade, for a cess or fee or any other consideration. The third proviso excludes from the restraints imposed by first proviso, where such receipts were less than ` 10 lakhs. The question here is whether sponsorship fee, which forms substantial part of the amounts listed above, can be considered as receipt from activity in the nature of trade, commerce and business. In our opinion, advancement of traditional musical culture of Tamil Nadu and conducting music programmes for that purpose, where such music and dance programmes were sponsored by various persons and sponsorship fee so received, distributed among the artists, can never be 9 I.T.A. No. 494/Mds/11 considered as an activity in the nature of trade, commerce or business. When a person sponsors a music programme and sponsorship fee is paid to artist concerned, we cannot say that sponsorship fee is a receipt in the hands of the assessee which is in the nature of trade, commerce or business. Similarly, conducting music coaching for the purpose of advancement of various traditional music forms of State of Tamil Nadu, which is an integral part of cultural life of people of Tamil Nadu, cannot also be considered to be an activity in the nature of trade, commerce and business. This can at the best be considered as an educational pursuit. When there are colleges run for coaching music, we cannot say that training imparted in music is not education. In our opinion, the ld. DIT(E) took a very narrow view in this regard and came to a conclusion that the sponsorship fee and music coaching fee received by the assessee were from the activity in the nature of trade, commerce or business. Assessee, in our opinion, was not carrying on any activity in the nature of trade, commerce or business but was carrying on its avowed object of advancement of fine arts and traditional art forms, which cannot be considered as a commercial or business activity. 10 I.T.A. No. 494/Mds/11 The nature of receipts of the assessee, in our opinion, will not come within the purview of first proviso to Section 2(15) of the Act except for sale of tickets and the receipts from sale of tickets were well below a sum of ` 10 lakhs. We also note that the assessee has been registered under Section 12AA of the Act and such registration is still in vogue. In our opinion, assessee was eligible for renewal of approval under Section 80G of the Act without doubt. Order of DIT(E) is quashed and he is directed to grant the assessee renewal of approval under Section 80G of the Act.
6. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court after conclusion of hearing on 16th January, 2012.
sd/- sd/-
(George Mathan) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 16th January, 2012.
Kri.
Copy to: Appellant/Respondent/DIT(Exemptions), Chennai/
D.R./Guard file