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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 ..... of general public utility as per the definition of Sec. 2(15) of I.T. Act 1961 and not entitled to carry on any business or commercial activity. 2. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in law in allowing the appeal of the assessee ignoring the fact that assessee charges subscription fee on the basis of turnover from the members and voting right is as per subscription of fees. So, the voting right to members is actually based on the turnover, which is violating of the principle of mutuality. 3. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing." [B] Assessment Order dated 18.03.2013 was passed by the Assessing Officer ("AO", for short) under Section 143(3) of the Income Tax Act, 1961 ("I.T. Act", for short) wherein the total income was assessed at Rs. 12,14,81,569/- against returned income at Nil. The addition of returned income of assessee was made by the AO based on his conclusion that exemption under Section 11 & 12 of I.T. Act was to be denied to the assessee and that the assessee society was to be assessed as normal AOP (Association of Person). The relevant portion of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il the benefits of exemption, considering the new proviso inserted in section 2(15) of the act, through the finance act 2008: The said new proviso added in section 2(15) of the act, denying the exemption benefit to us is detailed hereunder for your perusal and ready reference: "provided that the advancement of any other Of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature Of trade, commerce or business, or any activity Of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application or retention, of the income from such activity." In this regard, we would also like to draw your attention to Circular No.11 of 2008 issued by the CDDT which explains the scope and purpose of the amendment made in section 2(15) of the Act. It is stated in the aforesaid circular that the proviso inserted Vide finance Act, 2008 qualifies only the last limb of charitable purpose as defined in section 2(15) of the Act, and does not affect the first three limbs of the aforesaid section. The Circular further states that institutions or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-11 filed in the capacity of Association of person (AOP) Point no. 2: Show cause as to why NASSCOM should not be governed by the proviso to sec 2(15) as it contradicts the principle of mutuality, with receipts coming from non-members as well. We would wish to submit that we have not sought any benefit of exemption on the basis of the proviso to sec 2(15) of the Income Tax Act, 1961 during the Assessment Year2009-10. This, particularly, keeping in view the amendment and insertion of the new proviso in section 2115) of the Income tax act through the finance act 2008, denying exemption benefits w. e.f. 01.0.4.2009. However, we would like to submit that we have availed the benefit of exemption on only one stream of our income pertaining to membership subscription on the principle of mutuality; This with such income being a restricted receipt only from our members where benefit of this activities there under are restricted to members only. Our contention, seeking the benefit of exemption on the principle of mutuality is supported by considerations and conditions are as detailed hereunder: There must be complete identity between the contributors to the fund and the beneficiaries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Athena Info Consulting Pvt. Ltd 10,000 5 Aurigo Software Technologies Pvt Ltd 22,000 6 Cisco S stems India Pvt. Ltd 7,50,000 8.1 Further the members are given differential voting rights on the basis of valiant. subscription charges paid by the members as per clause 12.3 of the Memorandum of Association and Rules and Regulations of NASSCOM. Clause 12.3 related to the voting* rights states that: "The voting rights of members shall be calculated according to the share of annual 'subscription of the members on the following .basis (fractions of a rupee being ignored): Annual Subscription Votes Rs. 20,000/- 1 Rs. 40,000/- 2 Rs. 75,000/- 3 Rs. 1,87,500/- 4 Rs. 3,75,000/- 5 Rs. 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which entitlement is in terms of clause 12.2 and 123 of the Memorandum of Association and Rules and Regulations of NASSCOM. Events: This stream of income comprises of income from sponsorship, delegate fees and charges for exhibition/stalls provided at the events, and the said income emanates both from members and non members. The said income and expenditure thereon is reflected 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. Thé 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the advancement of any other object o/general public utility". Provided that the advancement of any Other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity rendering any service in relation to any trade, commerce or business, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed as normal ADP. [C] Aggrieved, the assessee filed appeal before the Ld. CIT(A). Vide impugned appellate order dated 14.03.2016, the Ld. CIT(A), following the order of the Ld. CIT(A) for the assessment Year (A.Y. 2009-10) allowed the assessee's appeal holding that: "... 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 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 Rs. 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 decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber. Members are given differential voting rights on the basis of variant of subscription charges paid by them as per the Memorandum of Association and Rules and Regulations of NASSCOM. This again is the violation of the principle of Mutuality Wherein differential treatment is given to various members base on their turnover. It 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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, I am of the view that the benefit on principle of mutuality be granted to the assessee on membership 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 circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X
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