TMI Blog2000 (1) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... ments by the Assessing Officer under section 147. 4. On behalf of the assessee, Shri Rasesh Shah, the learned counsel for the assessee appeared and argued the appeals. Written submissions along with paper books in two volumes have been filed. On behalf of the Department, Shri A.D. Makwana, learned Departmental Representative argued the matter. 5. At the outset, it would be useful to set out the relevant facts in brief. The assessee has been registered under the Bombay Public Charitable Trust Act, 1950 vide certificate of registration dated 24-2-1983. On the same date, the assessee trust has been registered as a Society under the Societies' Registration Act, 1860. The assessee trust has also been registered under section 12A of the I.T. Act, 1961 on 24-2-1983. It is further relevant to mention here that the assessee trust was recognised under section 80G by the CIT, Surat on 22-12-1986 for the period from 1-4-1986 to 31-3-1989. Again on 20th August, 1991 the recognition under section 80G was renewed for the further period from 2-5-1990 to 31-3-1993 by the CIT, Surat vide order dated 28-8-1991. 6. The main objects of the assessee trust, as per the Memorandum of Association are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king action under section 147 are not fulfilled. The ld. counsel submitted that the original assessment for assessment years 1988-89 was made under section 143(3) on 18-3-1991 by the Assessing Officer after making inquiries as well as collecting the relevant information from the assessee vide letters dt. 6-9-1990, 18-9-1990, 18-12-1990 and 5-2-1991. For Assessment years 1989-90 and 1990-91 assessments were made under section 143(1). The ld. counsel submitted that the Assessing Officer is not entitled to re-open these assessments without bringing on record any fresh facts or material which may form the basis of satisfaction on the part of the Assessing Officer that income has escaped assessment. The ld. counsel argued that the jurisdiction under section 147 can be invoked only if the Assessing Officer has reason to believe that income has escaped assessment. In support of his contentions, the ld. counsel relied on the following decisions : (1) Ganga Saran Sons (P.) Ltd. v. ITO [1981] 130 ITR 11 (SC) (2) Bir Arjna Enterprises (P). Ltd. v. ITO [1993] 204 ITR 258 (J K) (3) Inventors Industrial Corpn. Ltd. v. CIT [1992] 194 ITR 548 (Bom.). Relying on the decision of the Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion narrated in assessment order for assessment year 1991-92 (copy enclosed for immediate reference), the assessment for assessment year 1988-89 is proposed for action under section 263 of the Act." 13. After careful consideration of the facts and circumstances of the case as well as submissions made before us, we have no hesitation in cancelling the impugned re-assessments made by the Assessing Officer under section 147. The facts on record clearly indicate that the Assessing Officer has issued notices under section 148 for the three assessment years involved without complying with the statutory requirement of recording reasons in support thereof. Issue of notice under section 148 without recording satisfaction of the Assessing Officer regarding escapement of income and reasons in support thereof would be ab initio void and without jurisdiction. The proposal under section 263 sent by the Assessing Officer for assessment year 1988-89 to the CIT could not by any stretch of imagination be construed as compliance with the mandatory provisions for recording reasons as contained under section 148(2). On this ground alone, the re-assessments made for assessment years 1988-89 to 1990-91 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r also referred to the fact that the membership fees charged by the assessee club is very high as compared to the fees charged by Andhra Pradesh Riding Club. In support of his view, the Assessing Officer relied on the decision of the Calcutta High Court in the case of Cricket Association of Bengal v. CIT [1959] 37 ITR 277 and Madras High Court in the case of CIT v. Ootacamund Gymkhana Club [1977] 110 ITR 392. The Assessing Officer observed that the assessee is a club limited to the members which constitute body of individuals existing on the subscription of fees of members and benefits arising therefrom are also limited to its members. On these facts the Assessing Officer treated the assessee club as a mutual concern and held that guest fee as well as interest income, which is not governed by the principle of mutuality, would be liable to tax. The Assessing Officer accordingly denied exemption under section 11 holding that the assessee trust is not a charitable organisation. In Support of his view, the Assessing Officer heavily relied on the decision of the Gujarat High Court in the case of CIT v. Shree Jari Merchants Association [1977] 106 ITR 542 and Sports Club of Gujaral Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st are charitable in nature. These decisions are as under : (a) CIT v. Breach Candy Swimming Bath Trust [1955] 27 ITR 279 (Bom.) (b) CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) (c) CIT v. Ootacamund Gymkhana Club Case (d) Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC) (e) Bar Council of Uttar Pradesh v. CIT [1983] 143 ITR 584 (All.) (f) Andhra Pradesh Riding Club's case (g) Cochin Chamber of Commerce Industry v. CIT [1994] 205 ITR 536 (Ker.) 20. The ld. counsel next argued that once registration has been allowed by the CIT under section 12A, the Assessing Officer is not entitled to deny the exemption under section 11 on the ground that the objects of the trust are not charitable. Reliance is placed on the following decisions: (1) ITO v. Mrs. Dwarika Prasad Trust [1989] 30 ITD 843 (Delhi) (TM) (2) Audit Bureau of Circulations v. Asstt. Director of Income-tax [1995] 55 ITD 408 (Bom.) 21. The ld. counsel further argued that the assessee trust has been allowed exemption under section 11 right since assessment years 1984-85 to 1988-89 under scrutiny assessments and there is no justification for making a departure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Apex Court cited by the learned representatives of both sides before us. At the outset, we note that the tax authorities have treated the assessees trust as a mutual society bringing to tax interest income as well as club fees and excluding the subscription and contribution of the members from the purview of taxation. The assessee trust formed for the purpose of promotion of sports and games which has been conducting tournaments and coaching camps for the participants and which has been sanctioned substantial grants-in-aid by the Govt. of India for construction of sports stadium cannot be treated as a mutual concern. It is to be noted that the Memorandum of Association of the assessee trust provides that the surplus funds on dissolution of the society would not be distributed amongst the members but the same would be utilised for the charitable objects as enumerated in the trust deed. On these facts the conclusions of the tax authorities that the assessee trust is a mutual concern is factually and legally unsustainable. 24. The objects of the assessee trust, as reproduced hereinbefore, are unquestionably the promotion and encouragement of sports. The circular No. 395, dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer to find out whether the income of the institution has been applied for the objects of the institution and the statutory conditions as contained under sections 11 to 13 are fulfilled by the assessee. In our opinion it is beyond the province of the Assessing Officer to reject the claim of exemption under section 11 by looking into the objects of the association and holding the same as non-charitable in nature. In support of the view being taken by us here, reliance is placed on the judgment of Calcutta High Court in Ananda Marga Pracharaka Sangh v. CIT [1996] 218 ITR 254. At page 270 of the report their Lordships observed as follows: "It may be mentioned here that the registration of the charitable society as a charitable society under section 12A is not an idle or empty formality. This is apparent from the tenor of the provisions of section 12A. It requires that no only an application should be filed in the prescribed form setting out the details of the origin of the trust but also the names and addresses of the trustees and/or managers. The form further requires a certified copy of the instrument of its creation as well as two copies of the latest accounts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cognition has been given for the period 2-5-1992 to 31-3-1993. Thus the CIT has accorded recognition to the assessee trust as a charitable organisation for the purposes of allowing deduction to the donees under section 80G. This clearly indicates that the CIT is satisfied that the assessee is charitable Organisation fulfilling the conditions laid down under section 80G(5) for the period indicated in the two certificates issued by the CIT. After the CIT has allowed the benefit to the assessee institution under section 80G and also registered the assessee institution as a charitable organisation under section 12A, we see no reason for the Assessing Officer to come to a conclusion that the assessee trust is not a charitable organisation entitled to exemption under section 11. 28. It is further to be noted that the assessee trust has been allowed exemption by the Assessing Officer under section 11 for assessment years 1984-85 to 1987-88. Further more, the assessee institution has been registered under section 12A by the CIT and conferred the benefit of recognition under section 80G. Obviously the instrument under which the assessee trust has been constituted as well as its rules and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision is therefore not applicable. The next decision relied upon by the Revenue is Ootacamund Gymkhana Club's case. This decision does not in any manner militate against the case of the assessee. 30. In our opinion the objects of the assessee trust being encouragement of sports and games are clearly charitable in nature in terms of the definition contained in section 2(15) of the Act. Merely because the assessee charges fees from its members would not in any manner intrinsically alter the nature and character of the services rendered by the assessee trust. The dominant purpose and objective of the assessee trust is promotion of sports and games and any fees charged from the members is not motivated by commercial considerations. The fees is charged admittedly for the purposes of provision and management of sports facilities for the General Public. The fact that without becoming a member of the assessee trust, the facilities provided by the assessee trust cannot be availed off, would not by itself indicate that the activities of the club are non-charitable. The word "public" used in the expression "object of General Public Utility' in section 2(15) does not necessarily refer to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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