TaxTMI 
TaxTMI 
2020 (1) TMI 21
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....ng and findings of CIT (A) that the assessee is a charitable institution and its income has to be computed under Sections 11, 12 and 13 of the Act. 6. Briefly the facts of the present case are that the assessee filed its return for AY 2012-13 on 28.09.2012 in status of 'Trust', declaring "Nil Income". Assessment was framed vide order dated 30.03.2015 under Section 143 (3), computing total income as Rs. 5,86,85,490/-and holding that the activities of the assessee are hybrid in nature; partly covered by provisions of section 11 read with Section 2(15) and partly by principle of mutuality. It was held that since the assessee is not maintaining separate books of accounts, income cannot be bifurcated under the principle of mutuality or otherwise. Entire surplus in I&E account, amounting to Rs. 5,83,92,860/- was treated as taxable income of the assessee. The CIT (A) vide order dated 28.01.2016, allowed the appeal of the assessee by relying upon the judgment of this Court in assessee's own case, dated 12.10.2011 for AY 1988-89 to 2006-07 and the decision of Hon'ble Supreme Court in the case of Radha Soami Satsang V. CIT,(193 ITR 321). 7. Revenue's appeal against the aforesaid order of C....
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.... earned by the assessee on fixed deposits from its member bank would not be exempted from tax on the basis of doctrine of mutuality. The income of Rs. 1,20,14,708/- earned as interest during the concerned year is clearly taxable in view of the decision in the case of Bangalore Club vs. CIT,(2013) 350 ITR 509 (SC)/ Manu/SC/0030/2013. ITAT has not considered the aforesaid decision and other judgements relied upon by the Revenue in support of the aforesaid proposition. The relevant portion of Bangalore Club (supra) as relied upon by Mr. Sharma, reads as under:- "13. On this aspect of the doctrine, especially with regard to the non-members, Halsbury's Laws of England, 4th Edition, Reissue, Vol. 23, paras 161 and 162 (pp. 130 and 132) states: "Where the trade or activity is mutual, the fact that, as regards certain activities, certain members only of the association take advantage of the facilities which it offers does not affect the mutuality of the enterprise. ** ** ** Members' clubs are an example of a mutual undertaking; but, where a club extends facilities to non-members, to that extent the element of mutuality is wanting...." 14. Simon's Taxes, Vol.....
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....he test of mutuality does not require that the contributors to the common fund should willy-nilly distribute the surplus amongst themselves : it is enough if they have a right of disposal over the surplus, and in exercise of that right they may agree that on winding up the surplus will be transferred to a similar association or used for some charitable objects...." 12. We have given our thoughtful consideration to the submissions advanced by Mr. Ajit Sharma. Before adverting to the contentions urged by Mr. Sharma, it would also be appropriate to take note of the reasoning and findings of CIT (A) which read as under: "Findings 6.3 It is quite clear from the facts that the IHC has not generated any surplus for anyone - members or non members. All its activities are geared towards providing services for its members with the bulk of the expenditure going towards maintaining the complex and thus providing the physical environment that it was expected to do. It is also not correct to state that the assessee has claimed partially relief as a charitable organization and partly as a mutual association. The assessee has claimed both and therefore it is not correct that the assessee shou....
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....allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." This principle has again been noticed and followed by the Hon'ble Supreme Court in CIT vs Excel Industries Ltd., 358 ITR (SC). ITNS-55APPEALNO. 23/2015-16 7.3 In the High Court Judgment delivered on 12/10/2011 also the principle of consistency was applied to IHC. There is no fundamental change in the nature of activities of IHC for the period prior to AY 2008-09 and subsequent years. Accordingly based on the aforesaid High Court Judgments and the fact that he assessing officers have consistently from AY 2008-09 treated IHC as a mutual association IHC has to begiven the befit of mutuality. Thus the Grounds of appeal at numbers 1 -10 are allowed. 8. On the issue of concealment of income/furnishing inaccurate particulars I find that the assessee's contention is pre-matured since penalty is not yet imposed. 9. In view of the foregoing it is not necessary to examine ground 12-14 10. In the result, the appeal is allowed." [Emphasis Supplied] 13. The ITAT dismissed the appeal of the Revenue by holding that th....
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....and the parties have allowed that position to be sustained by not challenging the order, it would not be at all proper to allow the position to be changed in a subsequent year. 14. As noted above, there has never been any dispute as to the continuation of the same set of facts in all these years, right from the AY 1990-91 at different level either it is at the first appellate authority stage or the Tribunal or the Hon'ble High Court, the consistent view has been that the assessee is a charitable institution and its income has to be computed u/s 11 12 & 13 of the Act. Unless and until, any change in the fundamental facts is brought on the record, we find it difficult to take a different view for this assessment year. Our this view is well fortified by the decisions of the Hon'ble jurisdictional High Court in the assessee's own case for the earlier assessment year so also the consistent view taken by the Tribunal for the AYs 2008-09 and 2009-10. 15. With this view of the matter, we find no irregularity or illegality either in the reasoning or in the conclusion reached by the learned CIT(A) and, therefore, accordingly find that the appeal of the revenue is devoid of merit ....
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.... and partly by principle of mutuality. The CIT(A) after examining the records has given a categorical finding that the activities of the centre falls within the meaning of the definition of 'charitable activities' as provided under Section 2(15) of the Act. It has been further observed that the proviso to the definition is not applicable and the AO has erred by relying on the same. Further, it has been held that even if the assessee's activities do not fall in the first limb, since the assessee is promoting activities of general public utility, it would be covered by the second limb of the definition. 17. Applying the test of profit motive, it was held that the surpluses generated by the assessee are not being appropriated by any individual or group of individuals. Merely because the assessee is charging for certain goods and services, it does not render such activities as commercial activities and the fact that the AO has accepted that the assessee is promoting public interest as provided in the proviso to Section 2(15), there cannot be any doubt that the assessee should be regarded as charitable organisation and given the full benefit of exemption provided to such organisations ....