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2016 (2) TMI 598 - ITAT CHENNAI

2016 (2) TMI 598 - ITAT CHENNAI - TMI - Eligibility of exemption u/s 11 - whether collection of sponsorship fee for conducting tournament, green fee for allowing non-members to use the golf ground would be an activity in the nature of trade or commerce? - claim on the principles of mutuality - Held that:- Sponsorship fee collected for conducting tournament and green fee for use of gold ground cannot be considered to be a commercial activity and therefore, it is not in the nature of trade or comm .....

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arges etc. are incidental to the main activity of promoting the sport of golf. As rightly submitted by the ld. Representative for the assessee, the non-refundable membership fee collected at the time of admission is in the nature of capital receipt, therefore, it cannot be treated as income of the assessee. Therefore, the CIT(A) is not justified in saying that the assessee is engaged in activity which is similar to commerce or trade. This Tribunal is of the considered opinion that the assessee i .....

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identified. In fact, the object of the society enables to provide training and financial assistance to all individuals. In those circumstances, this Tribunal is of the considered opinion that the principles of mutuality is not applicable to the facts of this case.

In view of the above discussion, this Tribunal is of the considered opinion that the assessee is eligible for exemption u/s 11 of the Act as charitable institution in respect of the income generated in the course of its act .....

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A For The Respondent : Shri A B Koli, JCIT ORDER PER N.R.S.GANESAN, JUDICIAL MEMBER This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-VII, Chennai, dated 28.1.2014 and pertains to assessment year 2009-10. 2. Shri V Ravichandran, ld. Representative for the assessee submitted that the assessee-society is registered as a charitable institution u/s 12AA of the Act. The main object of the society is to promote the game of golf in the state of Tamiln .....

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as received ₹ 3,55,92,060/- under various heads in the course of its charitable activity. The Assessing Officer, by referring to proviso to sec. 2(15) of the Act, found that the activity of the assessee-society is commercial in nature and accordingly, rejected the claim of the assessee u/s 11 of the Act. The ld. Representative clarified that the assessee is not engaged in any commercial activity, the activity of the assessee is restricted to sport of golf. According to the ld. Representati .....

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ommerce or business. The activities of the assessee are incidental to the activity of promoting the sport of golf in the State of Tamilnadu, therefore, all the incomes are incidental to the charitable activity. The ld. Representative placed his reliance on the Circular issued by CBDT in Circular No.395 dated 24.9.1984 and the judgments of the Delhi High Court in India Trade Promotion Organisation vs DIT(E), 374 ITR 333, Institute of Chartered Accountants of India vs DGIT(E), 347 ITR 99, and the .....

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ntative submitted that the income of the mutual association cannot be brought to tax. Referring to green fees received from the non-members, the ld. Representative submitted that green fees was received from non-members for using the grounds maintained by the assessee-society. If at all anything is to be taxable on the principles of mutuality, the fee collected from non-members could alone be subjected to tax and not the fee received from the members. The non-refundable membership fee collected .....

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ntaining a unique ecosystem. According to the ld. Representative, the gold club is situated on the banks of Adyar River and maintaining ecology over 50 years. Thousands of birds rested in the campus and migratory birds took refuge in the winter. The assessee has also installed a treatment plant for treating the waste water. Therefore, according to the ld. Representative, the assessee is eligible for exemption u/s 11 for preserving the environment. 5. On the contrary, Shri A B Koli, ld. Departmen .....

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ution as well as mutual organization, its activities are not restricted to contribution from its members, according to the ld. Representative, the principles of mutuality is not applicable. According to the ld. Representative, the third parties who are non- members are also contributing to the corpus of the assessee, therefore, it cannot claim exemption on mutuality. According to the ld. Representative, when the assessee was dealing with non-members and collecting fees from non-members also, the .....

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2(15) would come into operation. Admittedly, the total receipt of the assessee exceeded ₹ 40 lakhs, therefore, the assessee-society cannot be construed as a charitable institution. 6. Referring to the claim of the assessee on the principles of mutuality, the ld. DR submitted that the object of the assessee-society is to provide benefits to general public in the State of Tamilnadu. There is nothing in the object to indicate that the benefits of the society would be restricted to its members .....

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n of application of principles of mutuality. Referring to the contention of the ld. Representative for the assessee that the assessee is also maintaining ecology, the ld. DR clarified that to conduct sport of golf, the assessee has to necessarily maintain the golf field. It is an incidental activity in the course of maintaining the gold club, therefore, it is not an activity for maintaining ecology system. According to the ld. DR, the assessee cannot be considered to be a charitable institution, .....

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icer has reproduced the object of the assessee-society at pages 2 & 3 of his order. This object clearly shows that the assessee is engaged in the promotion of sport of golf. In the course of carrying on its activity, the assessee collected subscription from its members towards tournament fees etc. In fact, the assessee has collected following fees: Fees collected - Type/Receipt Rs. Annual Subscription 2,01,90,350 Tournament fee 1,30,704 Sponsorship - Tournament 7,30,981 Sponsorship - Others .....

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ivity and therefore, it is not in the nature of trade or commerce. It may be a commercial advertisement for the individual or institution who is paying the sponsorship fee but as far as the assessee is concerned, the sponsorship fee received is an income incidental to the main activity of promoting golf in the state of Tamilnadu, therefore, at any stretch of imagination, the collection of sponsorship fee cannot be considered as commercial activity by the assessee. Similarly, the tournament fee, .....

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