TMI Blog2017 (2) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... life style. Thus the activity of depositing money in the bank and earning interest would not constitute trade, commerce or business within the meaning of section 2(15) r.w. proviso thereof. Thus, in so far as interest income is concerned, we find no merit in the stand of the lower authorities. For the other three categories of income namely, compensation from the Caterer(restaurant), compensation from Decorator for gymkhana functions and Miscellaneous income are concerned, herein also it cannot be said that the same involve carrying on of any activity in the nature of trade, commerce or business. It is quite clear that the scope and ambit of the exemption envisaged in sections 11 & 12 of the Act relate to the receipt of income derived from the property held under trust for charitable or religious purposes to the extent to which such income is applied to such purposes in India. Before proceeding further, we may reiterate that there is no charge against the assessee at any stage that there is an application of income for any purpose other than the objects of the assessee trust. Much has been made out by the lower authorities to the fact that assessee has charged a fee for allowing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... captioned assessment years, whereas the CIT(A) has upheld the claim of the assessee for assessment years 2005-06, 2006-07, 2007-08 and 2008-09, but for assessment year 2009-10, the CIT(A) has sustained the action of the Assessing Officer. Resultantly, for assessment years 2005-06 to 2008-09 Revenue is in appeal against the order of the CIT(A) allowing exemption under sections 11 12 of the Act, whereas for assessment year 2009-10 assessee is in appeal challenging the order of the CIT(A) denying exemption under sections 11 12 of the Act. 3. Before proceeding further, we may refer to the appeal for assessment year 2005-06 as the lead case in order to appreciate the controversy. This appeal by the Revenue is directed against an order passed by CIT(A)-1, Mumbai dated 30/10/2009 which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 31/12/2007. In this appeal, Revenue has raised the following Grounds of appeal:- 1. On the facts and in the circumstances of the case, and in law, the Ld. CIT (A) erred in holding that the assessee trust is not covered by the principle of mutuality thereby v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer, the entire spectrum of income and expenditure of the assessee showed that there was no charity for public at large and most of the expenditure is spent on the benefits provided to the members of the assessee-trust. As per the Assessing Officer the activities undertaken by the assessee showed that the dominant object of the Trust was to provide service to its members, though to some extent the facilities were also being provided to non-members. As per the Assessing Officer, since assessee was existing for the benefit of its members, its true nature and character was that of a mutual concern and, therefore, any income arising to it in dealing with non-members will naturally be taxable. Ultimately the Assessing Officer held that assessee is not an association created/established for charitable purpose within the meaning of the Provisions of Section 2(15) of the I.T.Act . In this manner, the Assessing Officer computed the income of the assessee by denying exemption under section 11 of the Act. Accordingly, total income was assessed at ₹ 79,04,208/-. 5. In appeal before the CIT(A), assessee raised various grounds assailing the decision of the Assessing Officer. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2004-05 dated 19/08/2005, wherein similar issue was decided in favour of the assessee. In this background, Revenue is in appeal before the Tribunal against the decision of CIT(A). 6. At the time of hearing, the Ld. Representative for the assessee pointed out that the said appeal by the Revenue is misplaced inasmuch as the order of the CIT(A) for assessment year 2004-05 dated 19/08/2008 to the similar effect has been accepted by the Revenue as it has not filed any further appeal before the Tribunal. There is no rebuttal to the aforesaid assertion made by the Ld. Representative for the assessee. In this context, we have perused the order of the CIT(A) dated 19/08/2008 for assessment year 2004-05 a copy of which is placed in the Paper Book at pages 95 to 114. The controversy dealt with by the CIT(A) in 2004-05 is on the same lines as the controversy in the instant assessment year. In assessment year 2004-05 also, the Assessing Officer had treated the assessee as a mutual association and treated the income from transactions with non-members as taxable, while holding the assessee ineligible for exemption under sections 11 12 of the Act on the ground that assessee could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004-05, especially considering that no change in facts or law has been brought out by the Revenue . Thus, the order of the CIT(A) is hereby affirmed and the appeal of the Revenue for assessment year 2005-06 is dismissed. 7. Now, we may take up the appeal of the Revenue for assessment year 2006-07, which is directed against an order passed by CIT(A)-1, Mumbai dated 31/03/2013, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short the Act ) dated 29/12/2011. 8. The Grounds of appeal raised by the Revenue read as follows:- 1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that reopening u/s 147 of the IT Act was bad in law because it was made on covered issues and no fresh material was there for reopening, without appreciating the facts that the assessee had claimed excessive allowance or relief 1 double deduction in its return of income. 2 That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to allow the claim of deficit of ₹ 71,91,831/- and carry forward of deficit of ₹ 5,37,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act for the similar reasons noted by us while dealing with the appeal of the Revenue for earlier assessment year 2005-06. The Assessing Officer has also disagreed with the assessee on the issue of calculation and carry forward of deficit. The total income was assessed at ₹ 99,80,482/- which comprised of interest income, compensation from caterer, Gymkhana Function Income, etc. The said assessment was carried in appeal before the CIT(A) both on facts and in law. On the plea of the assessee challenging the validity of the assessment reopened under section 147/148 of the Act, the CIT(A) held the action of the Assessing Officer as bad in law on the ground that there was no fresh material with the Assessing Officer to reopen the assessment. Further, in so far as the issue of allowing exemption under sections 11 12 of the Act was concerned, the CIT(A) followed the orders of his predecessor for the assessment years 2004-05, 2005-06 and 2007-08 and allowed the claim of the assessee. Thirdly, with regard to the issue of deficit of ₹ 71,91,931/-, carry forward of deficit of ₹ 5,35,46,926/- on account of deprecation on assets cost of which was already allowed as dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT vs. Orient Craft Ltd., 354 ITR 536(Del), wherein it has been held that the finality of intimation under section 143(1) of the Act can be disturbed under section 147/148 of the Act only if the Assessing Officer has reason to believe that certain income chargeable to tax has been escaped. The Hon'ble Delhi High Court duly considered the judgment of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra) and held that the intimation under section 143(1) of the Act can be disturbed only after complying with the requirements of section 147(1) of the Act. 9.4 In the present case, it is quite evident that the reasons recorded to reopen the intimation under section 143(1) of the Act are similar to those recorded by the Assessing Officer while reopening the assessment for assessment year 2005-06. The validity of the proceedings initiated under section 147/148 of the Act for assessment year 2005-06 has already been adjudicated by the Tribunal in its order dated 30/10/2015(supra), whereby the same has been found to be untenable in law. In view of the said decision, the reopening of assessment in the present year has been rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2005-06, the appeals of the Revenue for the assessment years 2007-08 and 2008-09 are also dismissed. 12. The only other appeal left for our consideration is the appeal for assessment year 2009-09, wherein the assessee is in appeal. This appeal is directed against an order passed by the CIT(A)-1,Mumbai dated 31/03/2013, which in turn, arises out of an order passed by the Assessing Officer under section 143(3) dated 28/12/2011. Grounds of appeal raised by the assessee in this appeal read as under:- GROUNDS OF APPEAL I. TREATING OF THE CHARITABLE TRUST AS MUTUAL CONCERN AND THEREBY DENYING EXEMPTION U/S 11: 1. The Learned CIT(A) erred in confirming the appellant ,a Charitable Trust as a Mutual Association and applying the principles of mutuality for taxation and thereby denying exemption u/s 11. 2. The Learned CIT(A) failed to appreciate the fact that i) the trust is granted registration u/s 12A which is not withdrawn; ii) the activities of trust are covered u/s 2(15) of the I .T Act, 1961 iii) the trust is eligible for benefits u/s 11 iv) the CIT(A) in earlier years have accepted the appellant as Charitable Trust u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Learned CIT(A) erred in confirming that appellant is not eligible for exemption u/s 11 and directing the A.O. to determining the income as per provisions of Chapter IV of the Income Tax Act, 1961. 2. The Learned CIT(A) ought to have given specific direction to allow set off carried forward losses/ unabsorbed depreciation. VIII. NON ACCEPTANCE OF REVISED WORKING FOR COMPUTAION OF INCOME 1. The Learned CIT(A) erred in non-accepting the revised working for computation of income made during the course of assessment proceeding and directing the A.O. to determining the income as per provisions of Chapter IV of the Income Tax Act, 1961 2. The Learned CIT(A) ought to have given specific direction to consider the revised computation of income furnished during the course of assessment proceedings. 12.1 Before we proceed to adjudicate the respective Grounds of appeal, a brief background of the dispute can be summarized as follows. In assessment year 2009-10 also, the Assessing Officer denied assessee s claim for exemption under section 11 12 of the Act. In this assessment year, the Assessing Officer held that the assessee is a Mutual Association not eligible fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc. and, therefore, such activities are hit by the proviso to section 2(15) of the Act and the same cannot be treated as charitable in nature. In this manner, the CIT(A) upheld the stand of the Assessing Officer to deny assessee s claim for exemption under section 11 12 of the Act and simultaneously also affirmed the action of the Assessing Officer in treating the assessee as a Mutual concern thereby implying that the following incomes out of transactions with the non-members were liable to be taxed:- (i) interest income - ₹ 2,36,07,023/-; (ii)compensation from the restaurant - ₹ 16,23,656/-; (iii) compensation from the decorator ₹ 1,65,630/-; and, (iv) miscellaneous - ₹ 20,074/-. 12.3 In sum and substance, the action of the Assessing Officer in computing the total income of the assessee at ₹ 2,54,16,380/-, after denying the exemption under section 11 12 of the Act and holding it to be a mutual concern was affirmed by the CIT(A). Against such a decision of the CIT(A), assessee is in further appeal before us. 12.4 Before us, the Ld. Representative for the assessee has explained the nature of the incomes on which the income tax authorities h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned by the assessee have been rightly taxed as they are hit by the proviso to section 2(15) of the Act and that the Assessing Officer has correctly brought to tax such incomes as the same were earned from transactions with nonmembers, and its taxability could not be governed by the principles of mutuality. 12.6 We have considered the rival submissions. Sections 11 to 13 of the Act deal with the provisions relating to income derived properties held for charitable or religious purposes. The assessee before us is a trust registered under the Bombay Public Trust Act, 1950 and also continues to hold the registration granted to it by the Commissioner of Income Tax under section 12A of the Act since 5/12/1997 as a charitable trust. Notably, the main objects of the assessee trust are stated to be the promotion of sports, games and recreation facilities to the public at large and for the physical development and healthy life style as well as promotion of other charitable objects. The factum of the promotion of sports and games being a charitable purpose within the meaning of section 2(15) of the Act is not in dispute. In fact, the Assessing Officer also does not dispute the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proviso to section 2(15) of the Act. Notably, in the present case, there is no charge made against the assessee at any stage that such earnings have not been spent towards the objects of the assessee i.e. promotion of sports, games and recreation facilities to the general public at large and physical development and healthy life style. The decision of the Co-ordinate Bench in the case of The Bombay Presidency Golf Club Ltd.(supra) is also directly on the point where bank interest earned by a Trust having an object of providing Golf course and allied facilities for the promotion of the sport of Golf was sought to be taxed by denying the exemption under sections 11 12 of the Act. The following discussion in the order of the Tribunal is 29/02/2016(supra) is relevant:- 13. The investment in banks is not only authorised but mandated and is compulsory in so far as an entity carrying on charitable purposes concerned and in fact, under Section 13(1)( d)(ii), if the funds of a trust or institutions is invested in assets other than those specified in Section 11(5), the exemption under Sections 11 to 13 would be withdrawn. It is therefore not only inexplicable, but absurd as to why th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll. This was reiterated by the Delhi High Court in Bureau of Indian Standards v. DGIT 358 ITR 78 and in PHD Chamber of Commerce 357 ITR 296. The Gujarat High Court in DGIT Vs. Sabarmathi Ashram Gaushala Trust 44 Taxman 141 took the view that a Trust registered with the objects of breeding cattle and cows and oxen cannot be said to be carrying on activities of trade, commerce or business merely because considerable income was generated on account of production and sale of milk. The same view was taken by the Tribunal in DD!T Vs. All India Football 1 Federation 62 Taxmann.com 362 (Del Trib) dealing with a case of an Association having as its object the promoting of the game of footfall, organising tournaments, training players, coaches etc. The Tribunal held that the receipts by way of sponsorship do not alter the character of the main objects and is not affected by the proviso as it cannot be said to be engaged in any activity which is in the nature of trade, commerce or business. .......................................................................................................................... 17. In view of the above, we can safely conclude that the activity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, we may reiterate that there is no charge against the assessee at any stage that there is an application of income for any purpose other than the objects of the assessee trust. Much has been made out by the lower authorities to the fact that assessee has charged a fee for allowing use of its sports grounds, and therefore, it is asserted that such an activity is hit by the disability contained in the proviso to section 2 (15) of the Act. In our considered opinion, mere charging of fee ipso-facto would not enable an activity to be governed by the proviso to section 2(15) of the Act without establishing any profit-motive in the charging of fees. In this context, one may refer to the judgment of the Hon ble Delhi High Court in the case of GS 1 India(supra), wherein the expression trade, commerce or business was being examined in the context of situation where assessee was charging a fee for rendering services. As per the Hon ble High Court the charging of fee was necessary for carrying out the activities and the sustenance thereof, and, it would not reflect any profit-motive. The judgment of the Hon ble Gujarat High Court in the case of Sabarmati Ashram Gaushala Trust (supra) is als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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