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TMI Blog2018 (6) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) from assessment order dated 24-02-2014 passed by learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called the Act ) for AY 2011-12. 2. The assessee has raised as many as 14 grounds of appeal in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ). The learned counsel for the assessee at the outset submitted that the assessee is not pressing ground of appeal no. 2 to 13 and only ground of appeal no. 1 and 14 are pressed . The learned counsel for the assessee has also given written letter dated 14th April 2018 to that effect which is placed in file. The learned DR did not raised any objection to the dismissal of ground of appeal no. 2 to 13 raised by the assessee in memo of appeal filed with the tribunal. After hearing both the parties and perusing the material on record, we dismiss ground of appeal no. 2 to 13 raised by the assessee in memo of appeal filed with the tribunal. The ground of appeal no.1 and 14 raised by the assessee in memo of appeal filed with the tribunal read as under:- (1) On the facts and in the circumstances of the case and in law, the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional grounds of appeal has been raised under Rule 11 of the Income-Tax (Appellate Tribunal) Rules, 1963 . The Ld. Counsel for the assessee submitted that these are legal grounds which goes to the root of the matter and does not require any investigation of fresh facts and same may be admitted in view of the decision of the Hon ble Supreme Court in the case of National Thermal Power Company Limited v. CIT(1998) 229 ITR 383(SC). The Ld. DR fairly did not raised any objection more so that similar additional grounds of appeal were admitted in the immediately preceding assessment year 2010-11 by the tribunal in ITA no. 6489/Mum/2016 vide orders dated 24-08-2017. Thus, after hearing both the parties we are of the considered view that these additional grounds of appeal bearing S.No 1 to 4 need to be admitted keeping in view ratio of the judgment of Hon ble Supreme Court in the case of NTPC v. CIT(Supra), as these four additional grounds of appeal are purely legal in nature and hence we direct admission of these four additional grounds of appeal raised by the assessee. We order accordingly. 4. The main controversy in this appeal is with respect to the denial of the exemption to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regn. Fees Membership Security deposit Building Fund Single 30 yrs Rs.5000/ Rs.5000/- Rs.5000/ Rs.60,000/- Family 30 yrs Rs.5000/ Rs.5000/- Rs.5000/ Rs.1,10,000/- 14. The CIT(A) erred in not appreciating the Hon ble Delhi High Court judgment in the case of Institute of Chartered Accountants of India vs. Director General of Income-tax (E) 358 ITR 0091 (Del.) that the expression business , trade or commerce as used in the first proviso to section 2(15) must be interpreted and where dominant object of an organization is charitable, any incidental activity for furtherance of the object would not fall within the expression business , trade or commerce . 2.1 The assessee also filed on 01.03.2017 additional grounds of appeal which are as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls found that the assessee-trust had received interest income of ₹ 24,37,386/- on investments. The AO took into account the fact that the predominant object of the assessee-trust was to provide service to its members. The assessee was providing various facilities such as restaurant, residential rooms, swimming pool, card rooms, sports facilities to its members. To some extent, such facilities were also provided to non-members. Membership to this Gymkhana or Club is extremely difficult and expensive thereby making it exclusive. Therefore, the AO held that the assessee-trust was not an association created/established for charitable purpose within the meaning of the provisions of section 2(15) of the Act. Therefore, he held that the assessee-trust was not entitled to exemption u/s 11 of the Act. The AO held that the income of by way of interest is clearly taxable as the same is not covered under the principals of mutuality. He relied on the decision in the case of Rajpath Club Ltd. 17 ITD 192, Bangalore Club vs. CIT350 ITR 509 and CIT vs. Common Effluent Treatment Plant (Theme-Belapur) Association reported at (2010) 328 ITR 362 (Bom.). In view of the above, the AO brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upheld the addition of interest income of ₹ 24,37,386/- made by the AO. He also upheld the addition of income from non-members of ₹ 1,42,530/-. 5. Before us, the Ld. counsel of the assessee submits in respect of interest income of ₹ 24,37,386/- that (i) the assessee-trust is in existence since 1972, (ii) all the investments made by the assessee-trust are as per the mode specified u/s 11(5), (iii) the assessee-trust has operating deficit of ₹ 4,817,606/- in AY 2010-11 and it attempts to cover its operating deficits out of other receipts such as interest on investments, donation, grants and other ancillary revenues, (iv) all these receipts are meant to assist the assessee-trust to fulfil its charitable objects and not generated with the intention of earning profits, (v) the assessee-trust is not in the business of investment, the surplus amount is invested in Bank FDs, (vi) the interest amount earned on the FDs is used for the activities of the assessee-trust. 5.1 In respect of income from non-members of ₹ 1,42,530/- the Ld. counsel submits that the assessee-trust is serving members of general public for over 40 years and has been actively in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 11 or under section 10(23C) of the Act if they carry on commercial activities. 7.3 We now sum up the issue. A. After an exhaustive survey of most of the landmark rulings, the law in different facet in respect of mutual concerns is now well summed up by the Hon ble Supreme Court in CIT vs Bankipur Club(1997) 226 ITR 97, thus : Where a number of persons combine together and contribute to a common fund for financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to those persons cannot be regarded in any sense as profit. There must be complete identity between the contributors and the participators. If these requirements are fulfilled, it is immaterial what particular form the association takes. Trading between persons associated together in this way does not give rise to profits which are chargeable to tax. Where the trade or activity is mutual, the fact that, as regards certain activities, certain members only of the association take advantage of the facilities which it offers does not affect the mutuality of the enterprise. *But+ if the object of the assessee company claiming to be a mut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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