TMI Blog2021 (11) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... o poor, education, medical relief etc. As long as object of the institution is charitable, as in our considered view, in this case, exemption cannot be declined merely on the ground that the assessee has received consideration for sale of training material or journal etc. incidental to furtherance of it s objective of imparting education. Thus we uphold the plea of the assessee. The Assessing Officer is, accordingly, directed to allow exemption under section 11 in respect of income of the assessee. - ITA No. 2623/Mum/2019 - - - Dated:- 3-3-2021 - Justice P. P. Bhatt (President) And Pramod Kumar (Vice President) For the Appellant : Nitesh Joshi For the Respondent : Brajendra Kumar ORDER PER BENCH: 1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 23rd January 2019, passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act 1961, for the assessment year 2011-12. 2. Grievance raised by the appellant is as follows:- The learned Commissioner of Income Tax (Appeals) { Ld. CIT(A) }has erred in confirming the action of the Ld. Assessing Officer in considering the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would not fall under the purview of the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealings with non-members, their claim to be charitable organizations would now be governed by the additional conditions stipulated in the proviso to section 2 (15). ii. The assessee has described its objects as solidarity and endowment to its members only. Thus, all the persons of the society do not utilize the benefit of the trust. It is benefited to limited person i.e. Members of the assessee trust only. Even the submission of the assessee could not suffice as to how the activity of the assessee is beneficial to general public. iii. The cardinal requirement is that all the contributors to the common fund must be entitled to participate in the surplus and all the participators in the surplus must be contributors to the common fund; i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But, if such receipts are from sources other than members then no exemption can be claimed in respect of such receipts on the plea of mutuality. vi. The careful examination of the assessee's actual activities as well as the perusal of objects and objects incidental or ancillary to the attainment of the main object show that the dominant or rather the predominant object of the assessee is to provide benefit to its members. vii. It is pertinent to make mention here the famous case of Cricket Club of India, Bombay. The CCI has been conducting world class matches, test matches and Ranji Trophy Matches and other similar tournaments, from generations. The CCI is registered u/s.25 of Companies Act and was earlier assessed to tax in this Range only and it was also claiming Exemption u/s. 11 12 of the Income Tax Act, 1961. In this case, it has been held by the Hon'ble Supreme Court that it is mutual organization (refer the case of Bankipur Club Ltd. 226 ITR 97 wherein the CCI Club was also a party). The object of solidarity and endowment for its members clearly show that the dominant object of the assessee is to provide amenities and facilities to the members of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed for a charitable purpose, whereas in the trust he had subscribed for the primary purpose of protecting himself or his family in periods of age, sickness or distress. Secondly, in a mutual society a member can claim benefits as of right in return for his own and his considered-member's subscription. Charity must be by way of bounty, it cannot be by way of bargain. Under this act a mutual association would be non charitable on the further ground that the benefit of the subscribing members is not public benefit, whereas the definition in sec. 2(15) requires charity to be a public character. 7. In view of the facts mentioned above, the assessee is a mutual association and not a charitable one. Respectfully, following Apex Court decision in the case of CIT vs. Bankipur Club Ltd. 226 ITR 97, applying the doctrine of mutuality, assessee's receipts from non members and other sources such as interest income and royalty etc. are treated as income of the assessee during the year and taxed accordingly. The assessee is an organization, which is limited to the benefits of its members. By virtue of which principal of mutuality applies. In this regard, it is pertinent to ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discussion at length in preceding paras, the receipts from non-members hit by the 6th limb of the amended proviso to section 2(15) of the IT Act. Therefore I find the AO is right in rejecting the claim of exemption u/s. 11 of the IT Act. And treated the same i.e. ₹ 1,04,48,660/- as business income within the meaning of the proviso to section 2(15) of the IT Act. 5. The assessee is aggrieved and is in further appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position. 7. We have noted that while the Assesssing Officer has categorically observed that the object of the assessee trust is solidarity and endowment to it s members (emphasis supplied by us), and that this object extends to encourage and advance the knowledge, study and practice of the science of medicine in all ways among members (emphasis supplied by us), the aims and objectives of the assessee trust make no mention about restricting the beneficiaries to the members of the assessee trust. The aims and objectives of the assessee trust are as evident from the trust deed on record, are as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities. 4.12 To promote esprit de corps among persons studying or practicing the science of medicine and good feelings between them and members of the general public or public authorities. 4.13 To co-operate with other associations or individuals to promote the objects of the Association. 4.14 To construct, provide, regulate and maintain buildings, rooms or other structures for the purpose of the Association and to alter, add to or remove any of them. 4.15 To receive any gift or legacy of moveable or immovable assets with or without conditions for promoting the objects of the Association. 4.16 To acquire by purchase, lease, or otherwise, any property, rights, or privileges for the purposes of the Association. 4.17 To improve, manage, develop, sell, mortgage, lease or let, under-lease or sub-let, dispose of, turn to account or otherwise deal with, all or any part of the property of the Association. 4.18 To act as trustees, agents or managers of property endowed by any person for objects similar to those of the Association, 4.19 To encourage formation of chapters/branches at local and state level and to appoint agents and correspondents whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritable, as in our considered view, in this case, exemption cannot be declined merely on the ground that the assessee has received consideration for sale of training material or journal etc. incidental to furtherance of it s objective of imparting education. We may, in this regard, refer to the following observations made by Hon ble Jurisdictional High Court in the case of DIT vs Samudra Institute of Maritime Studies Trust [(2014) 369 ITR 645 (Bom)] as follows:- 5. We are of the opinion that the Tribunal has applied the correct test in concluding that the exemption under section 11 of the Act can be availed of by the Respondent Assessee. In doing so, the Tribunal referred to the objects as set out in the Trust Deed of the Respondent Assessee. They are to set up, administer and maintain technical training institution at various places in India for presea and postsea training for the ships and maritime industry as a Public Charitable Institute for education. That is to provide onboard and offshore training and continuing technical education for Officers, both on the deck and engine side. One of the object was to register with the Director General of Shipping and obtain other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Safety. 5. To suggest improvements in the Central and State laws to prevent accidents. 6. To organize local Safety Centres in the State of Gujarat and to provide them organizational help and materials to promote the objects of the Safety. 7. To do all such work in the field of Safety. 11.2 Section 2(15) of the Act which defines the term charitable purpose was substituted vide Finance Act, 2008 w.e.f. 2009-10 to provide that advancement of object of general public utility shall not be a charitable purpose , if it involves carrying on of any activity in the nature of trade, commerce or business. This amendment has given rise to the present litigation. It is the case of the assessee that in order to carry on the charitable object, it is necessary to charge certain fee or consideration for the services rendered and such an act of trust cannot give colour of trade, commerce or business to the solemn objects carried out just for the reason that fee or charges are being recovered. 11.3 The courts have stated that if the activities are being carried on as part of charitable object, it cannot be said to be in the nature of trade, commerce or business. The H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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