9911796707
TMI Blog2019 (9) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... e cancelled merely because of proviso to section 2(15) of the Act. Assessee is entitled to exemption under section 11 of the Act in respect of income generated from all other activities except the income from playing Cards for stakes. As regards the income generated from playing Cards, it is the contention of the learned Sr. Counsel for the assessee before us that the assessee does not provide facilities for playing Card for stakes but it holds Bridge Tournaments. The aforesaid claim of the assessee has to be verified by the AO and the nature of income derived from playing Cards and its entitlement to exemption under section 11 can be decided after factually examining assessee s claim. Needless to say, the Assessing Officer shall provide adequate opportunity of being heard to the assessee before deciding the issue. - ITA no.648/Mum./2013, 1551/Mum./2015, 1552/Mum./2015, 6913/Mum./2016, 6914/Mum./2016 - - - Dated:- 7-8-2019 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER Revenue by: Shri Abirama Kartikeyan Assessee by: Shri Porus Kaka a/w Shri Nitesh Joshi ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 11 of the Act was allowed by the Tribunal. Further, the assessee relied upon the Special Bench decision of the Tribunal in Breach Candy Swimming Bath Trust. However, the Assessing Officer was not impressed with the submissions of the assessee. He observed,against the decision of the Tribunal in assessee s own case for the assessment year 2004 05, the Revenue has filed special leave petition(SLP) before the Hon'ble Supreme Court which is pending. Further, he observed, the assessee is a club and entry to club is not open to general public. In this context, he referred to local enquiries made by him revealing that entry to the club is restricted to members, their family members and guests accompanying them. He observed, non members are admitted by charging coaching fee for the games in which they are interested. On perusing the details of coaching fees charged from the members and non members, the Assessing Officer observed that for admitting members the club charges huge fees. Thus, he observed, the assessee is not carrying on any activity which is of charitable nature. Referring to different categories of members and membership fees charged, the Assessing Officer obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of the object and the purpose for which the trust was created, not only it was granted registration by the Charity Commissioner, Mumbai, but the Commissioner of Income Tax also granted registration under section 12A of the Act. In this context, he drew our attention to the copy of the registration certificate granted under section 12A of the Act on 16th March 1974. The learned Sr. Counsel submitted, in a span of 46 years, the assessee has produced Swimmers and Squash Champions who have achieved highest National sports awards such as Arjuna, Shiv Chatrapati Award, Asian Record Holder of the English Channel, Asian Age Group Gold, Silver, Bronzemedalists, Senior National Champions, Age Group National Champions and scores of winners at state level aquatic meets, Junior and Senior School, College and University. Contesting the observations of the Departmental Authorities that the Club is a mutual concern providing services to its members only, the learned Sr. Counsel submitted, the Club hosts learn to swim camps for non members round the year. He submitted,the camps are open to the members of public regardless of caste and creed. The life time and life saving scheme of swimming i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 trust, except, income from facilities provided for playing Cards for stakes. Thus, the Tribunal ultimately concluded that the assessee is entitled for exemption under section 11 of the Act in respect of all its income except the income from providing facilities of play cards. He submitted, similar view was expressed by the Tribunal in the subsequent assessment years as well. In this context, he drew our attention to the orders of the Tribunal in other assessment years till the assessment year 2008 09. The learned Sr. Counsel submitted, the decision of the Tribunal in assessment years 2004 05, 2006 07 and 2007 08, have also been upheld by the Hon'ble Jurisdictional High Court. In this context, he drew our attention to the orders of the Hon'ble Jurisdictional High Court while dismissing the appeals filed by the Revenue. The learned Sr. Counsel for the assessee submitted, even the SLP filed by the Revenue against the decision of the Hon'ble Jurisdictional High Court in assessment year 2004 05 has been dismissed, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proviso to section 2(15) of the Act has to be applied on the basis of predominant object. He submitted, if the predominant object of the assessee is charitable in nature, any income or profit generated through other activities would be incidental and ancillary to the predominant object, hence, would not vitiate the charitable character of the trust. In support of such contention, he relied upon the following decisions: i) DIT(E) v/s Shree Nashik PanchavatiPanjrapole, [2017] 81 taxmann.com 375 (Bom.); ii) Institute of Chartered Accountants of India v/s DGIT(E), [2013] 35 taxmann.com 140 (Del.); iii) GS1 India v/s DGIT(E), [2013] 38 taxmann.com 364 (Del.); iv) The Indian Merchants Chambers v/s DDIT(E), ITA no.4076/Mum./2013, dated 29.06.2016; v) ADIT(E) v/s Jeevan Vidya Mission, [2015] 64 taxmann.com 62 (Mum.) (Trib.); and vi) ITO v/s Kalinga Cultural Trust, ITA no.332/Hyd./ 2017, dated 10.11.2017. 7. He submitted, even after introduction of proviso to section 2(15) of the Act, exemption u/s 11 of the Act has been allowed by the Tribunal in case of various other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt near to such facilities. Therefore, facilities Bar and restaurant near Swimming Pools, makes it clear that the assessee was carrying on business of selling liquor and food which is a commercial activity. That being the case, assessee cannot be treated as a charitable trust. The learned Departmental Representative, though, agreed that the assessee provides swimming pool and sports facilities and by using them various international standard swimmers and players have been produced, however, the predominant object of the assessee has to be seen. He submitted, the Departmental Authorities have clearly demonstrated that the facilities of the assessee are exclusively for the use of members and not open to general public. Therefore, it has to be treated as a mutual concern. Thus, he submitted, assessee s claim of exemption under section 11 of the Act was rightly rejected by the Assessing Officer and learned Commissioner (Appeals). 11. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Factual matrix of the case reveals that the assessee trust was created with the charitable object to constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of general public utility, hence, entitled to exemption under section 11 of the Act. It is relevant to observe, while dealing with the identical issue relating to assessee s claim of exemption in the subsequent assessment years till the assessment year 2008 09, the Tribunal allowed assessee s claim of exemption under section 11 of the Act. The latest order of the Tribunal for the assessment year 2008 09, was vide ITA no.2250/Mum./ 2012, dated 13th September 2013. 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. 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. It has also been brought to our notice by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y coming within the expression charitable purpose viz. advancement of any other object of general public utility. The proviso says, the object of general public utility cannot be considered to be a charitable purpose if it involves the carrying on of all/any activity in the nature of trade, commerce or business or any activity of rendering any services in relation to any trade, commerce or business for a cess or fee or any consideration. Before we examine the implication of proviso to section 2(15) of the Act qua assessee s claim of exemption, it is necessary to deal with the allegation of the Departmental Authorities that the facilities of the assessee are not easily accessible to general public. In our view, the aforesaid observation of the Departmental Authorities is contrary to the facts brought on record. From the materials placed before us, we find that the assessee provides its swimming pools/sporting facilities for training and learning of students of different Schools, Colleges and Institutions and for that purpose not only it holds camps regularly, but holds various competitions even involving various Schools. It also provides swimming coaching to kids including mentall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial activities not only as per the aforesaid provision, but also under section 11(4A) of the Act. The proviso to section 2(15) of the Act which was brought to the statute by Finance Act, 2010, with retrospective effect from 1st April 2009, came up for judicial scrutiny time and again. The Courts while interpreting the said provision have held while applying the proviso to section 2(15), the predominant object of the assessee has to be seen. If the predominant object of the assessee is of general public utility and while carrying out such object incidentally activity in the nature of trade, commerce or business is carried out generating some income, the same would not make the activity of the assessee in the nature of trade, commerce or business. This view has been expressed by the Hon'ble Jurisdictional High Court in Shree Nashik Panchavati Panjrapole (supra). The Hon ble Delhi High Court in Institute of Chartered Accountants of India (supra) while interpreting the proviso to section 2(15) of the Act held that the purport of the proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose, but are conducting some activities for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the claim of exemption under section 11 of the Act is allowable. The facts of assessee s case is more or less identical to the facts of the other Clubs in respect of whom the Tribunal has rendered decisions allowing claim of exemption under section 11 of the Act. In various decisions cited before us, the Tribunal has also held that income derived from sale of liquor, food stuff, etc., cannot be considered to be a commercial activity without considering the predominant object of the assessee. 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. In fact, in case of Chembur Gymkhana (supra), the Hon'ble Jurisdictional High Court has approved the decision of the Tribunal that the assessee fulfills the condition of section 2(15) of the Act in spite of the fact that it provided for sale of alcohol in its restaurants which, according to the Tribunal, is an activity incidental to other main a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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