TMI Blog1995 (4) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes, inter alia, the following : (a) To secure accurate circulation figures and data relating to all periodicals and media that sell advertising space and in regard to such publications to obtain information as to area of distribution and fix standard forms and methods for ascertaining the net sales figures and generally all information that will be of assistance to advertisers in estimating the value of any publication for advertising purposes and to record such information and circulate it to members of this Association and generally to establish a bureau of information in regard to all publications and the circulation of them for the benefit of members of this Association such service to be known as the A.B.C. service or by such other name or description as the Council of this Association may determine from time to time. (b) To collect and distribute amongst members of this Association information relating to all forms and methods of advertising. (bb) To secure, collect, circulate and distribute information relating to all or any of the matters specified in the preceding two sub clauses (a) and (b) amongst any Government in India or abroad or any statutory author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a registration certificate as required under section 12A of the Income-tax Act, 1961 (hereinafter called the Act ). For and up to the assessment year 1980-81, the assessee was assessed as a trade association by the 12th ITO, Companies Circle (6). For the assessment year 1981-82 and onwards, the assessee claimed exemption under section 11. It obtained registration under section 12A. The assessments for the assessment years 1981-82 to 1983-84 were completed by the 8th ITO, Trust Circle, and the exemption as contemplated under section 11 was granted to the assessee. For these assessment years, the amount of subscription received from Members was claimed as exempted. This claim was not allowed. No appeal was preferred against such disallowance. It was stated that for these assessment years (1981-82 to 1983-84) even after such disallowance, the total income was determined at ' Nil '. 4. The receipts from subscription and entrance fees from members were treated as exempt on the basis of mutuality for and up to the assessment year 1980-81 by the Assessing Officer. For the assessment years 1984-85 and 1985-86 such receipts were not treated as exempt on the ground of mutuali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed its reply vide letter dated 10-11-1993 and 21-9-1994. In its reply, the assessee stated : (i) the primary or dominant purpose for which the company was established is contained in sub-clauses (a), (b) and (bb) of clause 3 of Memorandum of Association; (ii) the CIT(A) at the time of registration under section 12A of the Act considered the object of the Company; (iii) the benefit under section 11 of the Act was granted to the assessee company in the preceding assessment years. In its letter dated 21-9-1994, assessee stated that the Bureau was established for the purpose of collecting information and data which render assistance to advertisers, Government and other bodies, members and non-members. This is certainly an object of general public utility. Merely because such activity will benefit the members also, is not a material, aliunde, to which it can be said that the object is not of general public utility. 9. Smt. Arti Vissanji and Shri N.S. Porwal, learned counsel for the assessee, appeared before us. Relevant documents and papers were filed. it was contended that the assessee is not carrying on any activity for profit. The purpose of the assessee-organisation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of the Legislature that the said procedure was prescribed not to mechanically grant the registration but grant it only after making an enquiry into the charitable and religious nature of the trust. The grant of a certificate under section 12A is a power conferred upon the CIT and it is implied that every power-granted under the statute carries a duty to do all such things, which would effectuate that power. Moreover, the grant of a certificate has some pertinent significance and legal sanction behind it for the purposes of grant of exemption under section 11 and it could not be by-passed as mere ideal formality. It was therefore, wrong to think that section 12A merely prescribed a formality to be complied within a routine way without investigation, and the grant of certificate did not mean that the trust was not otherwise entitled to exemption under section 11 and it would still confer upon the ITO a power to enquire into the character of the institution and deny exemption under section 11. 11. It was submitted that the income of the assessee from subscription and application fees and also entrance fees is not exigible to tax in view of the decision of the jurisdictional H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the ambit of section 11 (4A) of the Act. 14. Coming to section 12A, the registration aspect, it was contended that this is only a condition, for availing section 11 benefit just because certificate under section 12A is granted, it cannot be concluded that assessee satisfied all the conditions precedent for availing the benefit of section 11. Once it is concluded that assessee is engaged in the business, the amount received on account of subscription and application fees and also the entrance fees is exigible to tax. 15. Apropos the modus of computation, it was submitted that general expenses and depreciation are not allowable. Expenses were considered while working out the surplus. It was stated that the ' cost of asset ' was reflected as ' application of income ' towards the object of charity. Asscssee claimed total deduction in respect of the same. Again it cannot be permitted to claim depreciation. In regard to the set-off and carry-forward of deficit, Shri Singh submitted that there is no such provision in the law. Regarding the concept of mutuality, it was contended that assessee admitted the position that information are available to the outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charity because the boys who received its benefit paid for their education a moderate sum proportionate to their means. Public utility could best be adjudged by examining the character of the utility and intention for rendering the same utility to the public. 18. The assessee-company was treated in the preceding assessment years as a charitable organisation. The benefit contemplated under section 11 of the Act was conferred on the assessee. The activity remains the same. The objects are the same. There was no contravention of any rule and procedure. Without assigning any cogent reason, such benefit cannot be withdrawn. 19. The assessee was granted registration under section 12A. The Tribunal in the case of Dwarkaprasad has held that section 12A does not prescribe a mere formality which is to be applied in a routine way. The grant of certificate manifest legal sanction for the purpose of grant of exemption under section 11. The requirement of section 12A certificate is a sine qua non, for availing the benefit under section 11. It is a precondition and such certificate is available only to charitable organisations. 20. The ratio rendered in the case of Surat Art Silk Mfg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying the earlier decisions of the Supreme Court and of this High Court, the question was answered in the negative and in favour of the assessee. In view of the above decisions which are of the binding nature, we hold that income of the assessee from subscription, application fees and entrance fee is not exigible to tax. 22. Apropos the modus for the computation of income we have noted the arguments. In our opinion the Assessing officer has applied the correct modus. While ascertaining the surplus the expenses debited to the account were taken care of. The cost of assets on which the depreciation was claimed was reflected in the accounts as ' application of income ' towards the object of charity, resultantly, the assessee claimed total deduction in respect of the cost of assets. In our opinion, again he cannot be permitted to claim the depreciation on the same. 23. The next ground in regard to the levy of interest under section 234B was stated to be consequential. We direct the Assessing Officer to grant consequential relief in respect of the same. 24. In view of our decision concerning the exemption under section 11, the ground apropos the ' mutuality ' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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