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TMI Blog2021 (2) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Bangalore Club Vs CIT 350 ITR 509 (SC)." 2. We have heard the Learned Representative of both the parties through video conferencing and perused the material available on record. 3. Brief facts of the case are that return of income for the assessment year under appeal was filed on 30.09.2014 disclosing NIL income. The assessee-society is registered under Section 12A of the Income Tax Act, 1961 vide Order Dated 13.01.1989 and also granted approval under Section 80G(5)(vi) of the Income-Tax Act, 1961 vide Order Dated 19.07.2011. The A.O. reproduced the primary aims and objects of the assessee-society in the assessment Order and found that after declaring total income and deducting the expenditure, assessee has net balance of Rs. 4,61,08,034/-. The assessee submitted before the A.O. that its income is covered by the principle of mutuality as it is a Members Association. Therefore, income from mutual activity is considered exempt by the assessee-society. The A.O, however, noted that the activities of the assessee-society are hybrid, partly covered by provisions of Section 11 read with Section 2(15) and partly by principle of mutuality. It is noted that assessee-soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of General Public Utility. The detailed submissions on these issues are reproduced in the appellate order. It was also explained that the position of the same have been accepted by the Ld. CIT(A)-40 (Exemption) for A.Ys. 2011- 2012 to 2013-2014. It was also explained that the assessee-society also satisfied the requirement of principal of maturity, therefore, no income is taxable under the Law. It was submitted that assessee-society has conducted all the activities as per the aims and objects of the Centre. The Ld. CIT(A) in earlier assessment years 2008-2009, 2009-2010, 2011-2012, 2012-2013 and 2013-2014 has held that the activities of the assessee-society are charitable in nature. In respect of A.Y. 2008-2009 the Revenue Department filed an appeal before the Hon'ble Delhi High Court against the Order of the ITAT upholding the Order of the Ld. CIT(A), but, the Revenue Department did not succeed. 5. The Ld. CIT(A) considered the assessment Order and submissions of the assessee-society and found that his predecessor for the A.Ys. 2011-2012, 2012-2013, and 2013- 2014 has allowed the claim of assessee-society on the same grounds as have been under consideration for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mutuality, therefore, Ld. CIT(A) should not have granted benefit to assessee-society of mutuality. 7. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below and also filed synopsis of his written submissions which is taken on record. He has submitted that as per the objects of the Memorandum of Association, all the objects of the assessee-society are charitable in nature and all income of the assessee-society has to be applied to the objects of the assessee-society. The assessee-society is registered under Section 12A of Income Tax Act, 1961 as well as under Section 80(G) of the I.T. Act, 1961. The assessee-society was established to promote the habitat concept. Its aims and objects broadly are to promote sustainable habitat through inter-linkages between Institutions having physical space in the complex, work in various ways on environmental issues and spread awareness about the same, develop an integrated physical environment for different professions and institutions dealing habitat/environmental issues and maintain residential hostels, restaurants and other amenities for its Members. There were 37 institutions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritable institution, then, its income cannot be computed on the principle of mutuality. The Order of the Tribunal has been affirmed by the Hon'ble Delhi High Court vide Judgment Dated 11.12.2017 in ITA. No.1131/2017 [PB-111]. 7.3. In A.Y. 2010-2011, the A.O. though rejected the assessee's claim of exemption under Section 11 of the Act, but, had allowed the principle of mutuality and treated the interest income as not taxable. This Order of the A.O. was set aside by the DIT(E) vide Order Dated 27.03.2015 under Section 263 of the Income Tax Act, 1961. However, the ITAT vide Order Dated 18.03.2016 in ITA.No.2390/Del./2015 had cancelled the Order of DIT (Exemption) under Section 263 of the Income Tax Act, 1961. The Order of the Tribunal has been upheld by the Hon'ble Delhi High Court vide its Order Dated 06.02.2017. Further appeal of the Department before the ITAT in ITA.No.4187/Del./2017 for the same year have been recently heard by the Tribunal. 7.4. In A.Y. 2011-2012, the A.O. passed the Order thereby rejecting the claim of assessee-society under Section 11 of the Income-Tax Act, 1961 on the ground that within the meaning of amended provision of Section 2(15) of the I.T. Act read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le- Trust, it's income cannot be computed on principle of mutuality but requires to be computed under Section 11 of the Income Tax Act, 1961. The Order of the ITAT was challenged by the Revenue before the Hon'ble Delhi High Court which is decided vide Judgment Dated 27.11.2019 in ITA.No.964/2019 and Departmental appeal has been dismissed [PB-98]. The Hon'ble Delhi High Court while dismissing the Departmental appeal has considered the proviso to Section 2(15) of the Act which was relied upon by the Revenue Department and held that if any surplus has been generated on account of some of the activities of the assessee, it would not ipso facto be determinative of the fact that there was an element of the profit motive. The Hon'ble Delhi High Court also dismissed the claim of Revenue about taxing the Bank interest on principle of mutuality. 7.6. In Assessment year 2013-2014, on identical grounds, the A.O. passed the Order. The Ld. CIT(A), however, allowed the claim of assessee-society and the Tribunal vide its Order Dated 06.06.2019 in ITA.No.,3911/ Del./ 2016 dismissed the Departmental appeal [PB-77]. 7.7. Learned Counsel for the Assessee referring to the above Orders in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is directed against the order dated 28.01.2016 in Appeal No.23/2015-16 passed by the Learned Commissioner of Income Tax (Appeals)-40, New Delhi {"CIT(A)"} in relation to Assessment Year 2012-13. 2. Brief facts of the case are that the assessee is a Society registered under the Societies Act, 1860. The Society is registered under section 12 of the Incometax Act, 1961 ("the Act") vide order dated 13.1.1989. It has also been granted approval under section 80G(5)(vi) of the Act vide approval dated 19.7.2011. The Society was established to promote the Habitat concept. 16. In the result, appeal of the Revenue is dismissed." 8.1. The aforesaid Order of the Tribunal Dated 28.02.2019 was challenged by the Revenue before the Hon'ble Delhi High Court in ITA 964/2019. However, the Departmental appeal have been dismissed by the Hon'ble Delhi High Court vide Judgment Dated 27.11.2019 in which it was held that assessee-society is entitled to claim relief under sections 11, 12 and 13 of the I.T. Act. It was, therefore, held that in view of the above fact that activities of the assessee-society are charitable, therefore, principle of mutuality becomes superfluous. The Judgment of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of mutuality. The assessee claimed deduction under Section 11 on part of its income and applied principle of mutuality on remaining income, and that is impermissible. 9. He further argued that ITAT was not justified in allowing the exemption under Section 11 and 12 of the Act, without considering the new facts and findings brought on record by the AO. The assessee earns income from cultural and intellectual activities, open to general public and earns income from such activities. There is no common identity between the contributors and participants. The sale of food and beverages are controlled by outsourcing agencies. Particularly, no separate books of accounts have been maintained for these activities. The assessee can have income from different heads or different sources but it cannot have its income and expenditure from same source apportioned on the basis of the principles of mutuality. 10. Learned counsel for Revenue also referred to the decision of this Court in Director of Income Tax v. India Habitat Centre, ITA No. 226/2015, decided on 12.10.2011 to urge that reliance upon the said decision by ITAT was misplaced. In the said case, the Court was concerned with entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods were sold or the services rendered.... ** ** * It has been held that a company conducting a members' (and not a proprietary) club, the members of the company and of the club being identical, was not carrying on a trade or business or undertaking of a similar character for purposes of the former corporation profits tax. ** ** ** A members' club is assessable, however, in respect of profits derived from affording its facilities to non-members. Thus, in Carlisle and Silloth Golf Club v. Smith, [1913] 3 K.B. 75, where a members' golf club admitted non-members to play on payment of green fees it was held that it was carrying on a business which could be isolated and defined, and the profit of which was assessable to income tax. But there is no liability in respect of profits made from members who avail themselves of the facilities provided for members." (Emphasis supplied) 15. In short, there has to be a complete identity between the class of participators and class of contributors; the particular label or form by which the mutual association is known is of no consequence. Kanga & Palkhivala explain this concept in "The Law and Practic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of Section 11/12 of the Act was given to the Centre. It is only from Assessment Year 2008-2009 that the AO came to hold that the activities of the Centre are not charitable in nature and applied the Principle of Mutuality. The Commissioner (Appeals) in respect of Assessment Years 2008-2009, 2009-20l0 and 20112012 has held that the activities of the Centre are charitable in nature. In respect of AY 2008-09 the Income Tax Department had filed an appeal to the High Court against the order of the IT AT upholding the order of the Commissioner Appeals. In view of this position the assessee has argued that it should be given the benefits of charitable status as well as benefits of the principle of Continuity. 7.2 While dealing with this contention it must he noted that In Income Tax matters the principle of Res Judicata does not apply as noted in the High Court order noted above. However, it is scene that there is no fundamental change in the activities of the Centre. The Hon'ble Supreme Court In Radha Soami Satsang vs. CIT 193 ITR 321 (SC), held as under: "That, in the absence of any material change justifying the department to take a different view from that taken in earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the AY 1992-93 and 1993-94 on identical set of facts, the Tribunal accepted the contention of the assessee as to its charitable nature activities and granted relief. So also there is no dispute that in the period from 1999-2000 to 2007-08, learned AO did not raise any dispute as to the charitable nature of the activities of the assessse or the applicability of the principle of mutuality. Further, as could be seen from the order dated 17.2.2012 and 29.4.2016 passed by the coordinate benches of the Tribunal in assessee's own case for the AYS 2008-09 and 2009-10, the contentions of the assessee are upheld. A coordinate bench of this Tribunal in the order for the AY 2008-09 had reviewed all the case law on this aspect to reach a conclusion that when the assessee registered as charitable trust, it income cannot be computed on the principle of mutuality but required to be computed u/s 11,12 & 13 of the Act. This decision is followed by another coordinate bench is ITA No 4212/Del/2012 for the AY 2009-10. 13. In view of the decision of the Hon'ble Apex Court in the case of Radhasaomi Satsang, in the absence of any material change justifying the department to take a different view from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt dated 12.10.2011 in India Habitat Centre, ITA No. 226/2005 (supra), however, at the same time, it has also examined the applicability of the principle of mutuality for the computation of the income of the assessee. It is noticeable from the reading of Paragraph 12 of the decision of ITAT, extracted above, that Revenue did not raise any dispute as to charitable nature of the activities of the assessee or the applicability of the principle of mutuality for the period of 1999-2000 to2007-08. The Tribunal has followed the decision of the Co-ordinate Bench in respect of AY 2008-09, wherein it has been concluded that if the assessee is registered as a 'Charitable Trust', its income cannot be computed on the principle of mutuality and is required to be computed under Section 11, 12 and 13 of the Act. CIT (A) has also given the finding of fact that the assessee has not generated any surplus for anyone- members/non-members. Its activities are geared towards providing services for its members with the bulk of the expenditure going towards maintaining the complex. Assessee has not claimed partial relief as a charitable organization and partly as a mutual association. Since the activities o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same time, one cannot ignore the fact that there is no dispute with respect to the consistency in the nature of activities of the assessee. All the income tax authorities have held that the assessee is a charitable institution and this consistent finding of fact entitles the assessee to have its income computed under Section 11, 12 and 13 of the Act. It was imperative for the Revenue to establish that there was an element of profit motive in the activities of the assessee, to deny the benefit. If any surpluses have been generated on account of some of the activities of the assessee, it would not ipso facto be determinative of the fact that there was an element of profit motive. The contentions raised by the Revenue, do not impress this Court as no error has been pointed out with respect to the aforesaid finding of fact which would disentitle the assessee the benefit of Section 2(15) of the Act. 19. As regard to the interest income, though it has already been held hereinabove that the income of the assessee has to be computed under Section 11, 12 and 13 of the Act, however, for the sake of completeness, we may add that this Court in CIT vs. Delhi Gymkhana Club, 2010 SCC OnLi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se issues are covered by the aforesaid decisions of the Tribunal as well as Hon'ble Delhi High Court in the case of the same assessee-society. The Revenue in its grounds of appeal has referred to the decision of Hon'ble Supreme Court in the case of Bangalore Club vs., CIT 350 ITR 509 (SC) which is also considered by the Hon'ble Delhi High Court. Thus, the issue is covered by the Order of the Tribunal as well as Hon'ble Delhi High Court in favour of the assessee-society. 8.3. The history of the assessee-society as noted in the submissions of Learned Counsel for the Assessee also clearly show that all the issues raised in the Departmental appeal have been considered and decided in earlier years, therefore, principle of consistency do apply to the same facts. No material is brought on record to distinguish the facts in the case of the assessee-society considered in earlier years as well as in assessment year under appeal. In A.Y. 2010-2011, the Order under section 263 of Income Tax Act, 1961 have been set aside by the Tribunal and Departmental appeal have been dismissed by the Hon'ble Delhi High Court as well. The subsequent Order passed under section 143(3)/ 263 have become infructu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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