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TMI Blog2020 (1) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out by the assessee are in violation of its objects. Be that as it may, as observed earlier, the only reasoning on the basis of which learned Commissioner (Appeals) has upheld the disallowance of assessee s claim of exemption under section 11 of the Act is due to withdrawal/cancellation of assessee s registration under section 12A of the Act. However, after restoration of the registration granted under section 12A of the Act by virtue of the order passed by the Tribunal, as referred to above, the reasoning of learned Commissioner (Appeals) in rejecting assessee s claim of exemption under section 11 of the Act cannot be upheld. It is relevant to observe, in case of another assessee, viz. Cotton Textile Promotion Council, learned Commissioner (Appeals) had upheld rejection of claim of exemption under section 11 of the Act on identical reasoning for the very same assessment year. However, while deciding the appeal of the assessee in [ 2015 (1) TMI 1437 - ITAT MUMBAI] the Tribunal having taken note of the fact that the registration granted under section 12A of the Act has been restored by the Tribunal, allowed assessee s claim of exemption under section 11 of the Act by setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding instructional course, lecture and demonstration, training, schooling and care, maintenance of horses horsemanship and offered kind of equestrian sports and knowledge of horse and to give all facilities for practice thereof. It is stated that the assessee is a member of the Equestrian Federation of India (EFI) and Indian Polo Association (IPA). Looking at the objects of the assessee, it was granted registration as a Charitable Institution under section 12A of the Act. For the assessment year under dispute, the assessee filed its return of income on 30th September 2009, declaring nil income. In the course of assessment proceedings, the Assessing Officer called upon the assessee to furnish the trust deed for verifying the objects of the assessee. After verifying the objects of the assessee and the details of income shown in the income and expenditure account, he found that the assessee has earned income from hire charges of horses for marriage ceremony, rental income from Olive Bar and Kitchen Pvt. Ltd. and riding fees and escort charges, recovery from members, proceeds from other activities, income from investment, other income, etc. After verifying the objects of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer held, even if they are not business activities, per se, but such activity carried on by the assessee in a regular and organized manner is in the nature of business by way of exploiting its assets commercially. Thus, he held that such income has to be treated as income from business. Accordingly, assessee s claim of exemption under section 11 of the Act was disallowed and the Assessing Officer proceeded to compute the income of the assessee by on commercial principles after allowing expenditure. As a result, the taxable income was determined at ₹ 28,95,050. Against the assessment order so passed, the assessee preferred appeal before the first appellate authority. 4. After considering the submissions of the assessee in the context of facts and material on record, the learned Commissioner (Appeals) upheld the denial of exemption claimed under section 11 of the Act, though, on a different reasoning. She held that since assessee s registration granted under section 12A of the Act has been withdrawn, it will not be eligible to claim exemption under section 11 of the Act. However, as regards the rental income of ₹ 91,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and the Revenue s appeal against such order of the Tribunal was dismissed by the Hon'ble Jurisdictional High Court in ITA no.1250/2015, vide order dated 29th November 2017. Thus, he submitted, assessee s claim of exemption under section 11 has to be allowed. Without prejudice, he submitted, the proviso to section 2(15) of the Act is applicable only to the activity of carrying out objects of general public utility. Whereas, the assessee, in essence, is providing education to riders regarding not only how to ride horses but in relation to horses. Thus, since the assessee is engaged in the activity of providing education, any income earned which is ancillary and incidental to its main object, it cannot be treated as business or trading activity. Thus, assessee s claim of exemption under section 11 of the Act has to be allowed as it fulfills the conditions of charitable purpose as per section 2(15) of the Act. In support of such contention, leaned Sr. Counsel for the assessee relied upon a number of decisions. 6. The learned Departmental Representative strongly relying upon the observations of the Assessing Officer and the learned Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t vital conditions for availing of exemption under section 11 and 12. The Apex Court in the case of UP Forest Corporation and another v/s DCIT, 297 ITR 1 (SC) has held that for the purpose of claiming benefit under section 11 and 12, it is imperative that registration under section 12A is a condition precedent. Once the DIT exemption has withdrawn the registration under section 12A by a detailed order it was incumbent upon the A.O. to follow the same, till resolved further. I, therefore, uphold the order of the A.O. since the cancellation of certificate under section 12A would make the appellant ineligible for exemption section 11 and 12. Ground numbers 1 and 2 are dismissed. 8. On a careful reading of the relevant extract from learned Commissioner (Appeals) s order, it is very much clear that the only reasoning on the basis of which she has upheld the rejection of assessee s claim of exemption under section 11 of the Act is due to withdrawal/cancellation of registration granted under section 12A of the Act, vide order dated 8th December 2011. Notably, against the aforesaid order of learned DIT (Exemp.) cancelling the registration granted under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exemption under section 11 of the Act is due to cancellation of assessee s registration under section 12A of the Act. Once the cancellation of registration has been set aside and registration granted under section 12A of the Act has been restored by the Tribunal, learned Commissioner (Appeals) s decision for disallowance of exemption under section 11 of the Act becomes redundant, hence, has to be set aside. Accordingly, we set aside the impugned order of learned Commissioner (Appeals) and allow assessee s claim of exemption under section 11 of the Act. In view of our decision above, we do not intend to deliberate further on various other arguments advanced by leaned Sr. Counsel for the assessee justifying the claim of exemption under section 11 of the Act. 9. In the result, appeal stands allowed in the terms indicated above. ITA no.195/Mum./2013 Revenue s Appeal for A.Y. 2009 10 10. The grounds raised by the Revenue are on the issue of proper head under which the rental income received from Olive Bar and Kitchen Pvt. Ltd. has to be assessed. While it is the claim of the assessee that the rental income has to be assessed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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