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2016 (9) TMI 696 - ITAT CHENNAI

2016 (9) TMI 696 - ITAT CHENNAI - TMI - Eligible for exemption u/s.11 denied - contention of the ld. Departmental Representative that the activities are not charitable - Held that:- Denial of exemption treating as Association of Person(AOP) is not appropriate considering the status and objects of this Sabha which is in existence for morethan three decades and rendering services to the society with Music and Arts, we are of the opinion that society is not be affected by the amendment to Sec. 2(15 .....

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or free, it was engaged in ‘’business’’ without considering whether it was engaged in ‘’trade, commerce or business’’ within the meaning of first proviso to Sec. 2(15) and further without considering the plea of assessee that it had not violated Sec. 11(5) or third proviso to Sec. 10 (23C) (iv) of the Act. So, considering the judicial aspects and objectives, we are of the opinion that the activities are within the ambit of charitable purpose and we upheld the order of Commissioner of Income Tax .....

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ORDER PER G. PAVAN KUMAR, JUDICIAL MEMBER: The appeal filed by the Department is directed against order of the Commissioner of Income-tax (Appeals)-17, Chennai in ITA No.405A/14-15, dated 24.04.2015 for the assessment year 2012-2013 passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as the Act ). 2. The Revenue has raised the following grounds of appeal:- 2.1 The Id CIT(A) erred in holding that the assessee is eligible for exemption u/s.11 of the Act and the objects .....

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s; 3.2 The Id CIT(A) erred in law and in facts in making this artificial distinction of 'subservient activities' and 'dominant activities' when the Income-tax Act does not recognise such distinction; 4.1 The Id. CIT (A) erred in holding that there is no profit derived from these activities; 4.2 The Id. CIT (A) failed to appreciate that the Trust loses its character of 'charitable purpose', when the receipt exceeds ₹ 25 lakhs; 5. The Id. CIT (A) ought to have appreci .....

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the case on hand; 8.1 The Id. CIT (A) erred in deleting the corpus donation of ₹ 46.87 lakhs without taking cognizance to the provisions of Section 13(8) of the Act; 8.2 The Id. CIT (A) failed to appreciate that the donations were received from the users of the hall in lieu of the rent; 9. The Id CIT(A) erred in deleting the addition made towards depreciation claimed by the assessee to the extent of ₹ 7.90 lakhs . 3. The Brief facts of the case are that the assessee is a Society regi .....

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pinion that consequent to amended provisions of Sec.2(15) of the Act w.e.f. 01.04.2009, there is a radical departure u/s.2(15) of the Act excluding those trust and institutions with object of general public unity having any activity in the nature of trade or commerce or doing service in relation to trade and commerce. The ld. Assessing Officer in the assessment proceedings, found the activities and objects of the assessee as under:- a) To promote the advancement of music and other form of fine a .....

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ip among members; f) To promote the art of dramatics and the purpose to organize a dramatic wing called "sri thyaga brahma gana saba amateurers"; g) To do all other things as are incidental or conducive to the attainment of the above mentioned objectives . and assessee society generating income through sponsorship, gate collection, organization of music festivals, subscriptions, interest income etc. The ld. Assessing Officer alleged that assessee society owns two halls which are let ou .....

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uthorised Representative has filed submissions in assessment proceedings and clarified through letter dated 29.09.2014 that for the assessment year 2010-2011, the ld. Commissioner of Income Tax (Appeals)-VII, dated 14.08.2013 in ITA No.294/12-13 observed that the assessee s society falls within the ambit of residual of Sec. 2(15) of the Act and allowed appeal in favour of the assessee and ld. Authorised Representative also relied on the decisions. (i) Mylapore Fine Arts Club in ITA No.1706/Mds/1 .....

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n recipient of corpus donations during the financial year and claimed exemption u/s.11(1)(d) of the act. This corpus donations are received from the user of the hall in the form of collections for usage of hall and relied on the provisions of Sec.13(8) of the Act and assessee has claimed entire cost of asset claimed as application of income in earlier years at the time of purchase. The ld. Assessing Officer has disallowed depreciation claimed on such asset during the year and allowed depreciatio .....

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rieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 4. In the appellate proceedings, the ld. Authorised Representative of assessee argued the grounds and explained that the action of the ld. Assessing Officer is bad in law on invoking provisions of Sec. 2(15) and Sec. 12A(a) of the Act. The ld. Commissioner of Income Tax (Appeals) considering the findings of the ld. Assessing Officer, submissions and judicial decisions has discussed elaborately at page .....

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and treated the entire corpus donations of ₹ 46,87,530/- as taxable income, when the society continued to enjoy registration and recognition respectively u/s 12A(a) and 80G of the IT Act, 1961. On the contrary she should have initiated appropriate action to cancel the registration granted to the society u/s 12AA and 80G of the IT Act, 1961 as a pre-requisite before passing the assessment order u/s 143(3) of the IT Act, 1961 on 10.11.2014, whereas the AO has failed to do the same. The Hon& .....

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r be considered as an activity in the nature of trade, commerce of business. Even if the activity is of general public utility, still it is entitled to exemption u/s 11 of the Act if it does not involve running of an activity for profit. 4.5 Perusal of income and expenditure alc shows net profit of _2,91,528/-. The receipts include interest receipt of ₹ 19,81,405/- during the year under consideration. If the interest receipts are taken out, it will result in a loss of more than ₹ 15 .....

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of the Act. In view of all the ratio delineated above the assessment order dated 10.11.2014 of the AO passed u/s 143(3) of the IT Act is not valid, proper, just and maintainable. Since the society is entitled for exemption u/s 11 of the Act as discussed above, the additions on account of corpus donation and depreciation got deleted automatically and no separate adjudication is required on the two issues. The contribution to the CM's relief fund is treated as application of income and hence .....

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d the grounds and reiterated the submissions and explained that the ld.CIT(A) erred in directing the ld. Assessing Officer to delete the addition irrespective of the facts that the activates of the trust are in the nature of carrying on trade and activities with profit motive and the receipts are more than F25,00,000/-. The ld. Commissioner of Income Tax (Appeals) has allowed the appeal relying on the decisions of jurisdictional High Court and Tribunal in the case of M/s. Mylapore Fine Arts Club .....

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horised Representative relied on the orders of Commissioner of Income Tax (Appeals) and vehemently opposed to the grounds. 7. We heard the rival submissions, perused the material on records and judicial decisions. The ld. Departmental Representative contention that subsequent to amendment on 01.04.2009 , there is a radical departure on the definition of Sec. 2(15) of the Act were the object of general public utility is in the nature of trade, business, commerce or service does not qualify for de .....

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enue has been accepting their accounts, we found similar issue was considered by the Co-ordinate Bench of the Tribunal in the case of M/s. Hamasadhwani vs. DIT (E) in ITA No.494/Md/2011, dated 16.01.2012 wherein it was held as under:- 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 .....

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n 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. 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 o .....

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ection 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: Provided that the advancement of any other object of general public utility shall not be a charitable .....

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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 Rs. 10 lakhs. The question .....

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e, 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 .....

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ty 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. 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 Rs. 10 lakhs. We also note that the assessee has been registered under .....

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