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2018 (7) TMI 2043 - AT - Income TaxBenefit of exemption u/s.11 denied - charitable activity u/s 2(15) - assessee is a charitable trust engaged in the activity of promotion of swimming - HELD THAT - As decided in own case 2018 (4) TMI 1267 - ITAT MUMBAI providing sports facilities to general public without restriction to any caste, creed, religion or profession is eligible for exemption u/s 11 of Income-tax Act, 1961. An activity would be considered business if it is undertaken with a profit motive. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. The expressions business , trade or commerce as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organization is charitable any incidental activity for furtherance of the object would not fall within the expressions business , trade or commerce . If the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institutions. It is not necessary that it should provide something for nothing or for less than it costs or for less than the ordinary price. It is not necessary that the Trust should provide something for nothing or for less than it cause or for less than the ordinary Trust. Accordingly the orders of the authorities below are set aside. Accordingly, hold that the assessee trust should not be visited with denial of exemption. Hence, the orders of the authorities below is set aside and issue decided in favour of the assessee.
Issues Involved:
1. Applicability of the proviso to Section 2(15) of the Income-tax Act. 2. Eligibility for exemption under Section 11 of the Income-tax Act. Issue-wise Detailed Analysis: 1. Applicability of the proviso to Section 2(15) of the Income-tax Act: The primary grievance of the assessee was the confirmation by the CIT(A) of the AO's decision that the proviso to Section 2(15) of the Income-tax Act was applicable, thereby declining the benefit of exemption under Section 11. The Tribunal noted that in the assessee’s own case for A.Y. 2009-10, under similar facts and circumstances, the issue was decided in favor of the assessee. The Tribunal observed that providing sports facilities to the general public without restriction to any caste, creed, religion, or profession squarely falls within the definition of "charitable purpose" as defined under Section 2(15) of the Income-tax Act, 1961. Consequently, the assessee was deemed eligible for exemption under Section 11. The Tribunal further noted that the assessee had deficits from its core activity of promoting swimming for all the years and that the collections from its members were less than the amount spent for its objectives. The income from investments was the only source covering these deficits. Therefore, the Tribunal concluded that there was no merit in the AO's finding that the assessee was carrying out its activities on commercial lines with an intention to earn profit. 2. Eligibility for exemption under Section 11 of the Income-tax Act: The Tribunal examined the case laws relied upon by the assessee, such as the ITAT, Mumbai Bench's decision in the case of Chembur Gymkhana. It was held that for invoking the First Proviso to section 2(15), it is necessary for the AO to provide a factual finding that the assessee derived income by engaging in trade, business, or commercial activity. The Tribunal emphasized that the assessee was registered as a charitable trust under section 12A and that the objects of the trust were for charitable purposes. The AO had not pointed out any change in the object of the assessee trust. The Tribunal also referred to the decision in the case of Dahisar Sports Foundation vs ITO, where it was held that the main object of the trust was the promotion of sports and games. The collection of certain charges from coaching camps meant for the promotion of sports and games did not alter its character of being charitable. The Tribunal reiterated that the object or purpose of the trust was charitable and that collecting charges did not change this character. Additionally, the Tribunal cited the Hon'ble Bombay High Court's decision in the case of DIT vs Goregaon Sports Club, which held that providing sports facilities to the general public without restriction to any caste, creed, religion, or profession is eligible for exemption under Section 11 of the Income-tax Act, 1961. Conclusion: The Tribunal concluded that the facts and circumstances during the year under consideration were the same as in the earlier years. Respectfully following the order of the Tribunal in the assessee’s own case, it was held that there was no merit in the decline of exemption under Section 11. Accordingly, the order of the lower authorities was set aside, and the assessee was allowed exemption under Section 11. The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 30/07/2018.
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