TMI Blog2020 (3) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 12A of the Act. Since, assessee was carried on its affairs not keeping separate data for its members as well as non members and also we take note of the object clause para 1 of Memorandum of Association based on which, even Ld. CIT(E) has granted registration u/s 12A recognizing it as a charitable institution. We notice that AO has invoked the ratio of Banglore Club [ 2013 (1) TMI 343 - SUPREME COURT] simply considering the fact that assessee has filed its return of income based on mutuality concept overlooking the actual facts. We are inclined to remit this issue back to the file of AO to verify the books of accounts and analyze with its objects and re-do the assessment as per law. It is not necessary that the assessment should be completed based on the return of income filed by the assessee or what stand taken by the assessee and we direct the AO to complete the assessment as per law. Therefore, we direct the AO to evaluate the facts of the case by considering the complete facts on record like assessee was granted registration u/s 12A of the Act and also assessee carried on activities based on its charitable objectives and needless to say, assessee should be given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oftware installed for developing website of the company and software for development of corporate bond reporting platform. Accordingly, assessee revised its working to declare the taxable income of ₹ 26,61,337/- instead of the income already declared by assessee at ₹ 14,99,273/-. 4. Subsequently, assessee filed another letter dated 17/03/2015, as per which assessee claimed that assessee company is formed to carry out charitable activities and even though there is amendment in section 2(15) w.e.f. AY 2009-10, still assessee company is not affected by such insertion of amending proviso of section 2(15) and assessee requested the AO to assess the income of the assessee u/s 11 of the Act and ignore the earlier claim of the assessee on mutuality concept and in this respect, assessee relied on few case law. 5. After considering the submission of the assessee, AO rejected the contention of the assessee and completed the assessment based on the mutuality concept and further notice that assessee has declared interest and miscellaneous income received from banks. AO by relying on the case of Bangalore Club vrs. CIT, the interest income and misc. income received are trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... development of the securities market. The problems faced by the market participants are taken up with the Govt. and Regulators like RBI/SEBI. iii. The appellant also submitted that fair valuation of investment portfolio by the banks and primary dealers is very important because it affects the profit and taxable Income of the Investor banks. FIMMDA has developed valuation methods for valuing G-Secs, State Loans, Corporate bonds, tax free bonds and other investments. RBI has mandated all banks and PDs to value their investments as per the valuation given by FIMMDA on its website, So, providing fair valuation is one of the main activities of FIMMDA. The valuations are arrived at on a daily basis after the markets close at 5.00 p.m. The valuations are published on FIMMDA website and picked up by the banks and other market participants. Website serves as an effective and quick way of disseminating the valuations. For this purpose, FIMMDA has launched its website. Commercial non-members are charged a small fee to cover the cost Involved in valuation and website maintenance. Though this activity generates some income, it is an activity being undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the fees. Sometimes there will be surplus. During the year ended 31st March 2012, the direct expenses and income were as under; Training and seminar direct expenses: ₹ 24,98,144/- Fees received from participants : Rs,,28,46,096/- The fees collected from the participants are just to cover the direct costs. If proportionate administrative expenses are considered, this activity is not an income generating activity. vi. Appellant also contended that conferences are held to discuss the current topics-relevant to the securities markets and find out ways for the further development of the markets. Here also, delegate fees are collected from participants to cover the cost of holding the conference. There is no profit motive in. offering this service and/or deciding the delegate fees. During conferences, the expenses are partly covered by voluntary sponsorship. During the relevant year the total Income from the delegates and sponsors together was to the tune of ₹ 261,32 lakh w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving and receiving nothing in return Is outdated. Charity is driven by altruism and desire to serve others, though element of self-preservation may be present. For charity, benevolence should be omnipresent and demonstrable but it is not equivalent to self-sacrifice and abnegation. On the contrary, a business activity is one which is undertaken with profit motive and on sound or recognized business principles. 7. After considering the submissions of the assessee, Ld. CIT(A) rejected the contentions of the assessee with the following observations:- I. The appellant submitted that Reserve Bank of India bestows responsibility on it to function as quasi regulator and hence its object being charitable it is exempt u/s. 11. In this regard it is mentioned that merely because RBI has assigned a particular work to the company Is not sufficient to claim exemption u/s. 11. in the case of Entertainment Society of Goa Vs. CIT (2013) 23 ITR 549 Hon'ble ITAT Mumbai have held that ''the proviso to section 2(15) will also apply to a regulatory body or a body incorporated by Government as the section does not provide any exception under the proviso. The contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/- was made during the year, Against this fees of ₹ 28,46,096/- was received from participants which makes it a profit making activity. The appellant has made profit even out of this activity and hence proviso of section 2(15) is applicable. Hon'ble ITAT Cochin while deciding a similar issue In case of State Forum of Bankers Club 56 taxmann.com 172 held that where assessee-trust was rendering service to banks by organizing lectures and seminars for benefit of bank employees, same was not charitable activity and assessee was not entitled for recognition under section 2(15). vi. In view of above facts it is held that proviso to section 2(15) squarely applied to the appellant since it is rendering services in the nature of business for a fee. As per the proviso to section 2(15) if a charitable organization carrying out objects of advancement of general public utility is involved in carrying on any activity in the nature of trade, commerce/ business or is charging fees for services in relation to any trade, commerce, business, is excluded from being charitable.' The case of the appellant is excluded from being charitable also becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-compute its total income accordingly. 2 :0 Re.: Applicability of the proviso to section 2(15) of the Act: 2 : 1 The Commissioner of Income-tax (Appeals) has erred in holding that the proviso to section 2(15) of the Act was applicable in the case of the Appellant. 2 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the proviso to section 2(15) of the Act is not applicable in its case and the Commissioner of Income-tax (Appeals) ought to have held as such. 3 : 0 Re.: Without prejudice, deduction of all expenses debited to the Profit Loss Account be granted while computing income under the principle of mutuality in the ratio of receipts from members vis-a-vis non-members 3 : 1 The Assessing Officer has erred in not considering all the expenses debited to the Profit Loss account while assessing the Appellant's income. 3 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the Assessing Officer be directed to grant deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is engaged in carrying on activities as per its object clause of MOA registered under Companies Act and the duty entrusted by RBI on prescribing uniform market practices. In the interest of maintaining integrity and orderly conditions G-sec market and assessee was given the task of developing code of conduct for the users of NDS-OM platform. In order to bring uniform application, the roles and responsibilities as defined by FIMMDA. In order to bring uniformity, assessee has developed F-Trac platform, accordingly it was carrying on training and development activities and usage of such software programmes for a fee. Since the goal of the assessee is to bring uniformity in market in carrying out trading in the market and it involves in activities which is available to its members as well as non members. We notice that assessee was declaring income based on the mutuality concept, based on the reasons best known to the assessee or by professional advice. However, in our considered view, when the assessee was providing services to its members as well as non members, it can never be categorized under mutuality concept. The mutuality concept can be applied only when a mutu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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