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TMI Blog2020 (4) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... d for tax by the assessee itself after the amendment in section 2(15) for AY. 2009-10 onwards. It is only the membership fees from its own members which has been claimed as exempt by the assessee on the principle of mutuality. The assessee is a trade association of software industries and its main objective is to promote and protect the interest of its members. So the membership fees received by the assessee from its own members comes within the meaning of principle of mutuality and as such the net income of the assessee from its own member is exempt from tax. The case laws cited by the assessee as above also support the case of the assessee on the principle of mutuality, After considering all the facts and circumstances of the case and keeping in view the order of my predecessor for AY. 2009-10, benefit on principle of mutuality be granted to the assessee on membership fees from members only. Issue to be decided in favour of assessee as relying on own case [ 2019 (11) TMI 339 - ITAT DELHI] and [ 2019 (10) TMI 123 - ITAT DELHI] - ITA No:- 3237/Del/2016 - - - Dated:- 9-1-2020 - SHRI SUDHANSHU SRIVASTAVA AND SHRI ANADEE NATH MISSHRA, JJ. Appellant by : Shri H.N. Mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the chamber of commerce of the IT-BPO industries in India. NASSCOM was set up in 1988, is not for profit organization registered under the Indian Societies Act, 1860. It aims to drive the overall growth of the technology and service market and maintain India's leadership position, by taking up the role of a strategic advisor to the Industry. Examination of the I/E account shows that it has the following sources of Income- Membership Subscription - 16,31,96,400 Seminars - 17,81,87,804 Publication - 88,00,434 Advertisement Income - 36,37,425 Industry Development Initiative - 68,30,200 Other Income - 14,76,846 Interest - 4,66,79,626 All this Income includes both the Income from members and non-members as well. 5. Whereas on the Expenditure side it includes only Personnel expenses, Cost of publicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Circular further states that institutions or trade associations which are registered under section 12A as existing for advancement Of any other object Of general public utility would cease to be existing for charitable purpose if it involves the carrying on of; a) Any activity in the nature of trade, commerce or business or; b) Any activity of rendering any service in relation to trade, commerce or business. The Circular, further stated that Where the institution or trade association claims to be both charitable and mutual organization and its activities are restricted to contribution from and participation of only its members, such organizations/ institutions would not be hit by the proviso to section 2(15) owing to the principle of mutuality. However, if such organizations have dealing with non- members. this claim to charitable organization would be governed by the stipulation contained in the proviso to section 2(15) of the Act. In view the above, we are of the opinion that we do not qualify for entitlement of exemption benefits a/s 2(15) of the act; consequent to the amendment having been carried out in section 2(15) of the Income tax act, through the finance ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te identity between the contributors to the fund and the beneficiaries from the fund, with no profits being derived from such contributions, Our membership subscription stream of income meets the above criteria/conditions in totality and accordingly qualifies for the benefits of exemption on the principle of mutuality. While availing the benefit of exemption on the principle of mutuality, all direct costs pertaining to this steam of income are netted off from the said income stream. In addition to the netting direct costs, all the indirect costs worked out on the basis of apportionment, based on revenue of each stream of our income are also netted off from the same as per details provided in our income tax return of the A Y 2010-11. Point no.3: Show cause as to why the exemption on mutuality principle should not be disallowed. We have already provided our detail reply under point no-I and point no. 2. Point no.4: Details of expenditure incurred outside India: We would like to mention that we are not availing the benefit of exemption as is admissible to us under section 11 of the income tax act, being an entry registered under section 11 of the Income Tax act, being an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 20,000/- 1 ₹ 40,000/- 2 ₹ 75,000/- 3 ₹ 1,87,500/- 4 ₹ 3,75,000/- 5 ₹ 6,25,000/- 6 This again is the violation of the principle of Mutuality Wherein differential treatment is given to various members based on their turnover. Thus on this ground the assessee society cannot claim the benefit of mutuality. 8.2 Secondly it again should be noted that circular no. 11 of 2008 dated 19th December, 2008 issued by the CBDT exempting mutual societies from preview of sec 2(15) clearly stated that if such mutual organisations have dealing with non-members, their claim, to charitable organizations would be governed by the stipulation contained in the proviso to sec 2(15) of the Act and not by the principle of mutuality. The para 3.1 of the circular states- Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected and accounted in our financial statement. Publications and Profiler: This stream of income comprises of income from sale of publications developed by NASSCOM and online retrieval of information pertaining to member data base being maintained by the Society. Th said income and expenditure thereon is reflected and accounted in our financial statement Advertisement: This stream of income comprises of income from Advertisements placed on various newsletters and on the webpage. This stream of income emanates from both members and non members. The said inconi@ and expenditure thereon is reflected and accounted in our financial statement. Industry development initiative: This stream of income comprises Of income from contributions received from members and non members for carrying out research relating to various subjects of industry interest and receipts from State Governments and private bodies for initiating and conducting NAC [NASSCOM assessment of competence) tests, where the State Governments reimburse the program fees for conducting the NAC program. NAC program, is the NASSCOM assessment of competence and is an industry initiative from NASSCOM that aims to mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for a cuss or fee or any other consideration, irrespective of the nature of sue or application, or retention, Of the income from such activity. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year.] 10. An analysis of the Income Expenditure account filed by NASSCOM not only proves but also establish the facts that NASSCOM falls under limb of general public utility and is rendering service in relation to trade, commerce or business in lieu of some fee, Consideration etc. This is the only activity carried out by NASSCOM. This was also accepted by the assessee in his reply dated 26.02.2013 in which the assessee stated - 'We would like to submit, that we are a charitable society having object of the general public utility. However, despite our being a charitable society having object of the general public utility, we do not qualify for exemption benefits as are admissible and allowed to charitable societies, consequent to the amendments brought about in the Income Tax Act through the finance act 2008. The disallowance of exemption, being on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es within the meaning of principle of mutuality and as such the net income of the assessee from its own member is exempt from tax. The relevant portion of the order of Ld. CIT(A) is reproduced as under: 3. The appellant mainly raised the ground that the ITO has erred on facts and in law in denying exemption claimed by the appellant, for an amount of ₹ 8,32,29,451/- in respect of receipts from members on account of membership subscription, on the principle of mutuality and in holding that the principle of mutuality shall not be applicable to membership subscription, since (a) the appellant was charging varying membership fees from different members which carried differential voting rights; (b) the appellant had dealings with both members and non-members. 4. The facts of the case are that the assessee filed return of income on 15.10,2010 declaring a total income as NIL. The assessee society is registered u/s. 12A of the Income Act, 1961 vide order dated 29.06.1998, NASSCOM is the premier trade body and the chamber of commerce of the IT-BPO industries in India. NASSCOM was set up in 1988 and is a not for profit organization registered under the India Societies Act, 1860. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be seen that the society is offering various services to non-members as we in lieu of sponsorship fees, delegate fees, publication fees, advertisement fees, Industry development initiative etc. Thus, on this ground, the principle of mutuality was rejected and the assessee was brought within the preview of proviso to section 2(15) Aggrieved the assessee is in appeal. 6. During the appellate proceedings, it was reiterated that as a consequence of the amendment, the appellant ceased to be charitable society in terms of section 2(15) and consequently did not claim exemption under section 11 of the Act from the AY 2009-10 and onwards. Accordingly, the appellant offered Lo lax income earned from various activities as business income. Being so, the question of denial of exemption, under section 11/12 of the Act, as raised by the assessing officer does not come in to the picture. The differential membership subscription is only fixed to recover higher subscription from those having larger turnover, while seeking to support fledglings/ new entrants. The membership based on the turnover, carry differential voting rights. However, uniform service is provided by the appellant to all ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship fees from members only. [C.1] The present appeal has been filed by Revenue against the impugned appellate order dated 14.03.2016 of the Ld. CIT(A). At the time of hearing before us, the Ld. AR of the Assessee submitted at the outset that the issue in dispute in the present appeal is squarely covered in favour of the assessee, by the orders of the Co-ordinate Bench of ITAT, Delhi in assessee s own case; vide order dated 20.09.2019 in ITA No. 6521/Del/2013 for Assessment Year 2009-10 and order dated 05.11.2019 in ITA No. 5738/Del/2016 for Assessment Year 2012-13. The Leaned Departmental Representative ( Ld. DR , for short) agreed that the issue in dispute in the present appeal is squarely covered in favour of the assessee, vide the aforesaid orders dated 20.09.2019 and 05.11.2019 of co-ordinate Bench of ITAT, Delhi. Neither side has brought any distinguishing facts and circumstances to our attention to persuade us to take a view different from view already taken by the Co-ordinate Bench of ITAT, Delhi by aforesaid order dated 20.09.2019 and 05.11.2019; and both sides were in agreement at the time of hearing before us, that facts and circumstances for this year (A.Y. 2010-11) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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