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TMI Blog2025 (5) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in directing the AO to allow the benefit of exemption u/s 11 of the I.T. Act ignoring the fact that the objects of assessee falls under the category of "advancement of any other object of general public utility"? 2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing the AO to allow the benefit of exemption u/s 11 of the Act ignoring the fact that once the assessee is hit by the proviso to section 2(15) of the I.T. Act, its objects are no more charitable objects. 3. Whether on the facts and circumstances of the case and in law and in light of the law laid down by Hon'ble Supreme Court in the case of New Noble Educational Society vs Chief Commissioner of Income Tax [2022] 143 taxmann.com 276 (SC) and in Civil Appeal No.21762 of 2017 in various batch of appeals and SLP's [lead case ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 (SC)], the Ld. CIT(A) erred in not appreciating that even if the activities of the assessee are held to be covered under residuary part of section 2(15) as "advancement of any other object of general public utility" even then it is not ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is basically an organization of members and therefore is a mutual organization with commercial objectives and hence no charitable benefits to the society ensure as such?" 3. In both the appeals, the issue involved is common. From the perusal of grounds of appeal, the core issue arising for consideration of the Tribunal is whether the proviso to section 2(15) of the Act, dis- entitles the assessee from availing exemption u/s. 11 and 12 despite it being registered u/s. 12A. 4. Before we delve on the issue raised before us, it would be appropriate to take note of the historical back ground of the assessee and its activities. Assessee was formed as a public charitable trust in the year 1970 with the following main objects: i. To construct, establish, operate and maintain swimming pools and other sports facilities for the benefit of persons of all communities and castes in such manner and subject to such terms and conditions as the trustees may decide; ii. To promote aquatic sports and pastimes of all kinds including swimming, diving, water skiing, boating, fishing and all other activities associated with the same. 4.1. Considering the above objects, Government of Maharashtra vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer in the Assessment Year 1985-86 and 1991-92. While deciding assessee's appeal in ITA no.5576/Bom/1993 and ITA no.6413/Bom/1994, dated 23.08.2001, the Coordinate Bench relying upon the decision of Hon'ble Special Bench decision in Breach Candy Swimming Bath Club held that assessee's income from Swimming Pool, other sports activities, Bar and Restaurants, etc. are from the activities carried out towards the object of the assessee, except, income from facilities provided for playing Cards for stakes. Thus, the Coordinate Bench ultimately concluded that the assessee is entitled for exemption under section 11 of the Act in respect of all of its income except the income from providing facilities of play cards. Similar view was expressed by the Coordinate Bench in the subsequent assessment years. Decision of the Coordinate Bench in Assessment Years 2004-05, 2006-07 and 2007-08, have also been upheld by the Hon'ble Jurisdictional High Court of Bombay, wherein appeals filed by the Revenue were dismissed. Even the SLP filed by the Revenue against the decision of the Hon'ble Jurisdictional High Court in Assessment Year 2004-05, 2006-07 and 2007-08 were dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be from the activities of carrying out the object of general public utility, hence, entitled exemption under section 11 of the Act. v. It is also relevant to observe, the decision of the Tribunal allowing assessee's claim of exemption under section 11 of the Act in the assessment years 2004- 05, 2006-07 and 2007-08, have also been upheld by the Hon'ble Jurisdictional High Court. vi. In fact, while deciding Revenue's appeal for the assessment year 2007-08 in Income Tax Appeal no. 200 of 2013, dated 19th January 2015, the Hon'ble Jurisdictional High Court expressed its displeasure with the approach of the Department in repeatedly filing appeals when the issue has been decided in favour of the assessee not only by the Tribunal, but by the Hon'ble Jurisdictional High Court in the preceding assessment years. years. vii. There is no dispute between the parties that the objects on the basis of which the assessee trust was created remained unchanged even in the impugned assessment year. Even, the activities carried on by the assessee are in similar lines and there is no major change in the activities of the assessee. viii. From the materials placed before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of the Department that the assessee is carrying on any business or commercial activity in organized manner. Rather the sale of liquor, food stuff, letting of rooms, etc., is incidental to its main activity of constructing, maintaining and providing facilities of swimming pool and other sports to general public at large. 4.5. It is important to note the findings of the Coordinate Bench in the Order for AY 2009-10 to 2013-14, wherein it is noted that "It is not the case of the Department that the assessee is carrying on any business or commercial activity in organized manner. Rather the sale of liquor, food stuff, letting of rooms, etc., is incidental to its main activity of constructing, maintaining and providing facilities of swimming pool and other sports to general public at large." Even in the current year the Assessing Officer has not disputed that the activities are not commercial and in fact held that they satisfy the test of mutuality. Therefore, on no account these activities could be said to be in the nature of trade, commerce or business. 5. Since the facts and issues arising in both the appeals are same, reference is made to the facts for Assessment Year 2014-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Before deciding this issue, it is incumbent to understand whether the activities of the assessee for which it has been granted registration u/s. 12A per se falls in the category of carrying out any activity in the nature of trade, commerce or business as contained in proviso to section 2(15), since only when assessee carries any other activity which falls in such nature of trade, commerce or business then, it would trigger proviso to section 2(15). 6. From the submission by the assessee in its written note, details of activities pursued by the assessee for year under consideration, including financial statistics are as under: i. The benefit of its sports facilities is also available to non-members as the assessee hosts camps with multiple batches in summer and autumn vacations. It also hosts competitions in various formats including the Inter-Club Swim meet. The schools in its locality use the swimming pool to provide training to their students. It also trains mentally challenged kids for Special Olympics. In a similar manner, it is activities (detailed write up in respect of this encouraging other sports activities is reproduced by the ld. CIT(A) as a part of assessee's s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Factual Paper book and Schedule relating to establishment expenses is at page 36 thereof all of which are also extracted below: 6.1. Fees/charges collected by the assessee, among other things, in respect of its sports activities as furnished in its written submission is as under: SWIMMING POOL Rate Period Member Nil Cap 10 per session Playing Member 200 per month Towel 10 each Soap 5 each GYMNASIUM Rate Period Members - 60 to 70 years 50% Members - Above 70 years Free Member - Gents & Ladies 40 per entry Maximum 400 per month SQUASH Rate Period Member 40 per 1/2 hrs Maximum 400 per month Marker fees 25 per 1/2 hrs Playing Member 200 per month BRIDGE ROOM Rate Period Member 15 per session Maximum 225 per month Couple maximum charges 450 per month Playing Member Bridge 300 per month BILLIARDS ROOM Rate Period Member 15 per session Maximum 225 per month Marker Fees 10 per 1/2 hrs Playing Member Billiards 200 per month 6.2. Swimming pool Maintenance for Corporate & Temporary Members Rs. 40/-per month. Game Charges for Corporate & Temporary Membe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olidated appellate order dated 07.08.2019 for the Assessment Years 2009-10 to 2013-14 had remanded this issue to the ld. Assessing Officer to re-consider the assessee's claim for exemption under section 11 of the Act with respect to this activity. By order dated 19.07.2024 giving effect to the said appellate order of the Tribunal, ld. Assessing Officer has accepted the assessee's claim for exemption in respect of the fees collected for this facility. Observations of ld. Assessing Officer in the said order while accepting the claim are extracted below: "On perusal of the submissions made by the assessee and alter factually verifying the assessee's claim, it is found that the assessee is eligible to claim exemption s 11 of the IT Act with respect to the income derived from Bridge tournaments. Accordingly, The income of the assessee is revised as under:- Particulars Amount (Rs.) Total taxable income as per order u/s 154 rws 143(3) dt 13.02.2017 4,55.52,080/- Less:- Relief allowed by Hon'ble ITAT's order no. ΙTΑ Nо. 1551/Mum./2015 dt. 07/08/2019 Benefit of exemption u's 11 and 12 of the IT Act to be grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense and as known in common parlance. The word 'trade' would mean exchange of goods for goods or for money. The word 'business', though, has been defined under section 2(13) of the Act, however, is generic. 'Business' in its ordinary sense would mean an occupation, or profession which occupies time, attention or labour of a person and is generally undertaken with a profit motive. The word 'commerce' again is of same connotation as 'trade' or 'business'. 8.3. As could be seen from the main objects of the assessee, it is not in any manner involved in any activity of trade, commerce or business. In the year under consideration, ld. Assessing Officer has not disputed that the activities are not commercial but has held that they satisfy the test of mutuality for which the Revenue has raised ground no.4 in the present appeal. Therefore, on no account these activities could be said to be in the nature of trade, commerce or business. Further, it is necessary to see whether the second condition of any activity of rendering any service in relation to any trade, commerce or business is applicable. Since the assessee itself is not carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, many institutions/organizations are actually engaged in income generating commercial activities. Therefore, to prevent misuse of the exemption provision in the statute intended for genuine charitable institutions/organizations, the proviso was introduced. 10. It is further observed that as per the proviso to section 2(15), activity of trade, commerce or business or services related thereto, must be for a cess or fee or any other consideration. In the facts of the present case, admittedly, assessee recovers only the cost incurred for providing its facilities. In this respect, the factual details have been elaborately narrated in the above paragraphs which includes financial statistics as well as fees/charges recovered by the assessee for providing various sports and other facilities. The income and expenditure statement of the assessee is in deficit if the interest earnings are excluded from the total receipts of the assessee, details of which are already extracted above. 11. This issue of proviso to section 2(15) in the case of Institutions carrying out object of General Public Utility has been dealt by Hon'ble Supreme Court in the case of Ahmedabad Urban Development Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l cost, ipso facto is not business. Likewise, providing access to low-cost hostels to weaker segments of society, where the fee or charges recovered cover the costs (including administrative expenditure) plus nominal mark up; or renting marriage halls for low amounts, again with a fee meant to cover costs; or blood bank services, again with fee to cover costs, are not activities in the nature of business. Yet, when the entity concerned charges substantial amounts over and above the cost it incuts for doing the same work, or work which is part of its object (de, publishing an expensive coffee table book on Gandhi, or in the case of the marriage hall, charging significant amounts from those who can afford to pay, by providing extra services, far above the cost-plus nominal markup) such activities are in the nature of trade, commerce, business or service in relation to them. In such case, the receipts from such latter kind of activities where higher amounts are charged, should not exceed the limit indicated by proviso (ii) to section 2(15)" .......... "253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the interpretation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its income and expenditure statement. Furthermore, ld. Assessing Officer has also not disputed this fact, who has held these to be mutual activities. 11.2. We also take note of the decision of Coordinate Bench of ITAT, Mumbai in the case of Media Research Users Council vs. ADIT [2024] 205 ITD 170 (Mum) wherein the judgement of Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) was analysed and is relevant in the present case. The analysis made by the Coordinate Bench in para-19 of its order is extracted below for ease of ready reference: "19. The Hon'ble Supreme Court after analyzing the law Wien was prevalent and applicable prior to insertion of proviso w.e.f. 01/04/2009 and amendments made thereafter, have clarified the amended position of law in the following manner:- * if at all any activity in the nature of trade, commerce or business, or a service in the nature of the same, for any form of consideration is permissible, then activity should be intrinsically linked to, or is part of the GPU category charity's object. * the test of the charity being driven by a predominant object is no longer good law. Likewise, the ambiguity w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promotion of sports including swimming, squash, gymnasium, other sports activities like yoga, aqua aerobics, table tennis, bridge, billiards and snooker. Activities carried out by the assessee has led to nurturing of talent in all these sports fields, details of which are elaborately discussed by ld. CIT(A) in his order in paragraph 7.7. Assessee has also placed on record details of performance and achievements of various sports persons in the above stated sports at national as well as international levels. Keeping the litigation history and the entire discussion made above in perspective, it is held that assessee is a charitable trust and principles of mutuality has been erroneously applied by the ld. Assessing Officer for denying the claim of exemption u/s. 11 of the Act. 12.1. Further, we note that almost for four decades, assessee has been found to be pursuing these activities for charitable purpose, which is available for the benefit of persons of all communities and castes. It is undisputed that promotion of sports falls within the charitable cause of advancement of any other object of General Public Utility. Merely because proviso has been inserted in Section 2(15), it does ..... X X X X Extracts X X X X X X X X Extracts X X X X
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