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10. The assessee is a public charitable trust registered u/s 12A of the Income-tax Act, 1961. Its main objects are promotion of sports and focused on swimming. The assessee is carrying out its activities in accordance with its objects. The assessee is operating a separate Pransukhlal Mafatlal Hindu Swimming Bath & Boat Club Trust swimming pool for gents and ladies. There is no observation from the AO that the assessee's objects are not charitable in nature. The AO also not pointed out any activities which are not in the nature of charitable activities. The AO denied the benefit merely on the basis of collection of fees from non members on the allegation that the activities of the assessee are in the nature of trade, commerce or business which is hit by provisions to section 2(15) of the Act. The AOs action is based on the fact that the DIT (Exemption) has withdrawn registration granted u/s 12A of the Income-tax Act, 1961. The registration granted u/s 12A has been restored by the ITAT with the observations that there is no recording of satisfaction by the AO that the activities of the assessee are not genuine and are not being carried out in accordance with the objects of the trust. The assessee is continued to enjoy the benefit of registration 12A. Once the assessee continued to enjoy the benefit of registration , the benefit of exemption u/s 11 can be denied only when the objects of the assessee trust are not charitable in nature and its activities are not carried out in accordance with its objects. The Proviso to section 2(15) of the Income-tax Act is applicable to a case where the trusts are carrying out its activities on commercial basis with an intention to earn profit. In this case, on perusal of the details available on record, there is no finding from the lower authorities that the assessee is carrying out its activities for the purpose of earning profit. The allegation Pransukhlal Mafatlal Hindu Swimming Bath & Boat Club Trust of the lower authorities is only with its fees collections from guests and learn to swim programme which is in excess of the prescribed limit provided u/s 2(15) and which is hit by the Proviso, therefore, the activities of the assessee are in the nature of trade, commerce or business.

• Thus, in sum and substance, the Assessing Officer has denied assessee's claim of exemption under section 11 by treating it as a mutual concern of the members. However, this is not the first time the revenue has treated the assessee as a mutual concern while denying claim of exemption under section

11. The dispute arose for the first time in assessment years 1996-97 and continued in the subsequent assessment years. It is necessary to observe, while completing assessment for those assessment years, the Assessing Officer took a completely identical view by holding that the assessee was a mutual concern, hence, receipts from non-members by way of canteen fee, interest, coaching, etc., is taxable. However, the Tribunal while deciding the appeals of the assessee for assessment years 1996-97 to 2000-01, held that as per the object of the trust, it is to be considered as a charitable organisation as the objects show that the assessee-trust was engaged in the broad areas of games and sports as well as in promotion and/or management of social intercourse or athletic sport and cultural and educational activities for its members.

Considering the objects and activities of the assessee, the Tribunal held that it Pransukhlal Mafatlal Hindu Swimming Bath & Boat Club Trust is in the nature of general public utility as it is for the well being of a section of public at large. While dealing with the objection of the revenue that there is restriction on the membership admission, the Tribunal held that so long as members admission into the club is not arbitrary, the committee's discretion to restrict the membership does not interfere with the object of public utility. The Tribunal, while dealing with the allegation of the department that the assessee is a mutual concern, concluded that the object of the trust of providing for land and building as well as for promotion or management of social intercourse or athletic sports and cultural and educational activities for its members constitute object of general public utility. Hence, the trust is charitable organisation. The Tribunal further observed, the members of the trust represent a cross section of public at large and it is not for group of private families or private members alone. Hence, the principle of - mutuality will not apply to the assessee's case. With the aforesaid observation, the Tribunal allowed assessee's claim of exemption under section 11. The aforesaid decision of the Tribunal was upheld by the High Court. [Para 7] • The Assessing Officer in the assessment order nor has not brought any material to demonstrate that there is any change in the object of the trust in the impugned assessment year as compared to earlier assessment years, wherein, the issue has been decided in favour of the assessee. That being the case, consistent with the view of the Tribunal and the High Court in assessee's own case it has to be held that the assessee is entitled to exemption under section 11 as a charitable trust. [Para 8] • At this stage, it is necessary to deal with the submissions of the revenue that in view of the first proviso to section 2(15), as it existed in the statute book at the relevant time, the assessee cannot be considered to be existing for charitable purpose. Firstly, the Assessing Officer in the assessment order, has not recorded any factual finding that the assessee has derived income by engaging itself in any trade, business or commercial activity. The Assessing Officer has proceeded on the footing that the assessee being a mutual concern, the receipts derived from the members for user of facilities is not taxable, whereas, receipts from non-members for user or facilities is taxable. In this context, the Assessing Officer has passed the impugned assessment, order, thus, it has to be assumed that the Assessing Officer while completing the assessment was conscious of the first proviso to section 2(15), which has come to the statute book by that time. In spite of that the Assessing Officer has not recorded any finding that the objects of the assessee are not for charitable purpose in view of the first proviso to section 2(15). On the contrary, the Assessing Officer by treating the assessee as a mutual concern, has brought to tax the receipt from non-members only. For invoking the first proviso to section 2(15), it is necessary and incumbent on the part of the Assessing Officer to give a factual finding that the assessee has derived income by engaging itself in trade, business or commercial activity. In the absence of any such finding the first proviso to section 2(15) cannot be attracted. More so, when the Tribunal and the High Court in the preceding assessment years have held that the objects of the assessee qualify the object of general public utility, hence, is existing for charitable purpose as per section 2(15).

• In view of the aforesaid, the Commissioner (Appeals) was justified in allowing assessee's claim of exemption under section 11."

13. The assessee also relied upon the decision of ITAT, Mumbai Bench in the case of Dahisar Sports Foundation vs ITO (supra) wherein it was Pransukhlal Mafatlal Hindu Swimming Bath & Boat Club Trust held that where main object or purpose of assessee's charitable trust was promotion of sports and games, merely because trust collected certain charges from coaching campus meant for promotion of sports and games, could not alter its character of being charitable. The relevant portion of the order is extracted below:-