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TMI Blog2022 (4) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... was established for the main object to secure accurate circulation figures and data relating to all periodicals and media that sell advertising space and in regard to such publication to obtain information as to area of distribution and fixed standard forms and methods for ascertaining the net sales figures and generally all information that will be of assistance to advertisers and estimating the value of any publication for advertising purposes and to record such information and circulate it to members of this association and generally to establish a bureau of information in regard to all publication and the circulation of them for the benefit of members of the this association. Identical issue on similar facts that the amended provision of Sec. 2(15) of the Act has not application in the case of the assessee had been adjudicated by the coordinate bench of the ITAT [ 2018 (8) TMI 1707 - ITAT MUMBAI] wherein held that the main object of the assessee is that the assessee has to secure accurate circulation figure and data relating to all periodicals and media that sell advertising space and in regard to such publication to obtain information as to area of distribution and fix st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt income or part of the relevant income at the maximum marginal rate. However, in the case of the assessee the assessee by filing of evidences/detail regarding qualification of the Secretary General and his working experience and valuable contribution towards attaining the purpose and object of the trustee, the assessee has satisfactorily proved that salary paid to the Secretary General was not excessive or not in violation of the provisions of Sec. 13(3) of the Act. Therefore, we consider that denial of exemption to the assessee u/s 11 without disproving the contrary evidence furnished by the assessee is not justified. Accordingly, the appeal of the assessee is allowed. Validity of reopening of assessment u/s 147 - HELD THAT:- It is evident from the material placed in the record that reopening u/s 147 in the case of the assessee was based on the tangible material i.e order of CIT(Exemption) dated 19.03.2016 by which the registration granted was cancelled. During the course of appellate proceedings before us the assessee failed to prove contrary that there was no tangible material. Therefore, the judicial pronouncement cited by the assessee are distinguishable from the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act, 1961, and Rules made there under. l(d) (i) On the facts and in the circumstances of the case and in law the action of lower authorities in holding the appellant activity in the nature of trade, commerce or business and thereby in holding that the appellant is not eligible for claim of exemption u/s 11 of the Income Tax Act, 1961, which is contrary to the decision of the Hon'ble ITAT in the appellant's own case in ITA No. 285 286/Bom/95 for A.Y's 1989-90 1990-91. (ii) That the order of the Assessing Officer is legally unsustainable as under section 13(8) read with section 2(15), the Assessing Officer cannot challenge the primary activities of the assessee based on which the charitable status was granted and reaffirmed by the Hon'ble ITAT in the appellant's own case in ITA no. 285 286/Bom/95 for A.Y's 1989-90 1990-91. l(e) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the Ld. Assessing Officer of denial of claim for exemption under section 11 of the Income Tax Act, 1961 to the appellant by invoking the provisions of section 13(l)(c)(ii) 13(2)(g) r.w.s. 13(3)(cc) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... publication to obtain information as to area of distribution and fixed standard forms and methods for ascertaining the net sales figures and generally all information that will be all assistance to advertisers in estimating the value of any publication for advertising purposes and to record such information and circulate it to members of this association and generally to establish the bureau all information in regard to all publication and the circulation of them for the benefit of members of this association. It is also submitted that assessee also collect distribute amongst members of this association information relating to all forms and methods of advertising. The Assessing Officer has reproduced the submission of the assessee relating to the object and activities of the assessee at page 4 to 11 of the assessment order. The assessing officer stated that assessee has received contribution from members to the amount of ₹ 1,45,12,844/- and interest fees of ₹ 1,58,750/- and claimed the same as exempt in its computation. The assessee submitted that it gives a certificate of circulation to its members on the basis of the audit report which indicate the actual number of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the advertisers or advertising agencies that benefit from the circulation figure and this had no utility that benefit the general public as such. The AO has also stated that assessee received a predetermined fees in accordance with the slabs depending upon the circulation figures for carrying out audit under the garb of annual membership subscription and this was nothing but the consideration received for carrying out the audit of the publishers. Therefore, the assessing officer held that assesseee s activity of conducting circulation audit was clearly a business activity for which consideration in the form of membership subscription and one time entrance fees was received. The A.O has further stated that income of the assessee on account of members and entrance fees was exceeded ₹ 25,00,000/-, therefore, case of the assessee was not covered by the 2nd proviso to Sec.2(15) of the Act. The A.O also stated that there was no advancement of any public service but for maximizing the returns on advertisement based on circulation figures. Therefore, assessee s case did not fall under the definition of the advancement of any other object of general public utility. In view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the assessee, therefore, provision of Sec. 13 was not applicable to the case of the assessee. In this regard the ld. Counsel referred page no. 8 of the paper book pertaining to the detail related to salary payment made to Secretary General since 2007-08 to 2012-13 and submitted that the salary was increased over a number of year in gradual stages and it was not the case of the assessee where the salary was paid unreasonably only in the year under consideration. The ld. Counsel also submitted that Secretary General of the assessee has to report to the counsel of management and takes their guidance and orders and clause 43 of Article of Association gives power to the counsel of management to appoint and dismiss a Secretary General, therefore, Secretary General was the employee of the assessee and not the manager. The ld. Counsel has also placed reliance on the decision of ACIT, Circle II, Faridabad Vs. Idicula Trust Society (Rgtd) Bench C (2012) 21 taxman.com 144 (Delhi). On the other hand, the ld. D.R supported the order of the ld. CIT(A) and submitted that Secretary General was the manager of the assessee and he was performing the function of the manager. 6. Heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961, and Rules made there under. 1(b) On the facts and in the circumstances of the case and in law, the lower authorities erred in holding the appellant activity in the nature of trades commerce or business and thereby erred in holding that the appellant is not eligible for claim of exemption u/s 11 of the Income Tax Act, 1961. 4(a) On the facts and in the circumstances of the case and in law, the learned C1T(A) erred in upholding the action of the learned Assessing Officer of treating subscription received from members ₹ 1,22,92,183 and entrance fees of ₹ 7,61,075/- as income chargeable to tax without appreciating that the said receipts are exempt from income tax under the principle of mutuality and the reasons assigned for doing so are wrong and contrary to the facts of the case, provisions of the income tax Act, 1961 and rules made thereunder. 4(b) On the facts and in the circumstances of the case and in law, the learned CIT(A) action of charging to tax the subscription received from members and entrance fees is contrary to the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee is liable to be allowed. It is also argued that after amendment of Section 2(15) of the Act, the claim of the mutuality has also wrongly been declined by revenue which is also liable to be allowed in the interest of justice. In support of the said contention, the Ld. Representative of the assessee has relied upon the cases titled as Bombay Presidency Golf Club Ltd. Vs. DIT (Ex.) (23 taxmann.com 319) (Mum ITAT), Hiralal Bhagwati Vs. CIT (246 ITR 188) (2000) (Bom. High Court), Bar Council of Maharashtra Vs. CIT (126 ITR 27) (1980) (Bom. H.C.), Shri Khot Hindu Steel Mandal Vs. CIT (209 ITR 396 (1993) (Bom High Court), Banglore Club Vs. CIT (29 taxmann.com 29) (2013) (SC) and CIT Vs. Wellington Sports Club (302 ITR 279) (2008) (Bom. High Court). However, on the other hand, the Ld. Representative of the department has strongly relied upon the order passed by the CIT(A) in question. With due regards to the contention raised by the Ld. Representative of the parties and perusing the record, we noticed that the claim of the assessee has been rejected due to the change in definition of Section 2(15) of the I.T. Act, 1961. The assessee company was incorporated on 28.04.1948 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d disseminate such information to all members, b) To collect and distribute amongst members of this Association information relating to all forms and methods of advertising. bb) To secure, collect, circulate and distribute information relating to all or any of the matters specified in the preceding three SubClauses (a), (aa) and (b) amongst any Government in India or abroad or any statutory authority constituted by any such Government interested, directly or indirectly in advertising, and amongst associations, bureau, societies, institutions and federations. whether in India or elsewhere and whether or not members of this Association, having objects similar to those of this Association. bbb) To promote, join as member, associate, or otherwise he interested in, and take hold and dispose of shares in, any other company, association, bureau, society, institution, federation or other organisation, whether in India or elsewhere, having objects similar to those of this Association, or otherwise in any manner concerned with advertising or carrying on any business capable of being conducted so as directly or indirectly to benefit this Association. C) To purchase, take o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, of reasonable and proper remuneration to any officer or servant of the Association, or to any memorandum of the Association in return for any services actually rendered to the Association, nor prevent the payment of interest at a rate not exceeding 6 percent per annum on money lent or reasonable and proper rent for premises demised or let by any member of the Association; but so that no member of the Council of Management or Governing Body of the Association shalt be appointed to any salaried office of the Association paid by fees, and that no remuneration or other benefit in money or money s worth shell be given by the Association to any member of such Council or Governing Body except repayment of out-of-pocket expenses and interest at the rate aforesaid on money lent or reasonable and proper (ant for premises demised or let to the Association provided that the provision last aforesaid shall not apply to any payment to any gas, electric lighting, water or cable company of Which a member of the Council of Management or Governing Body may be a member, or any other company in which such member shall not hold more than one hundredth part of the capital, and such member shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of 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 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: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein in (twenty five lakh rupees) or less in the previous year. 8. No doubt, it is required to be seen whether the object of the assessee falls within the purview of Section 2(15) of the Act or not. There is no change of the object of the assessee. The main object of the assessee is that the assessee has to secure accurate circulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the assessee till date. Merely came into existence of provision of Section 2(25) of the Act nowhere makes the object of the Assessee commercial in nature. Instances of business and profession are also not on record. Taking into account all the facts and circumstances of the case, we are of the view that the CIT(A) has wrongly denied the claim of the assessee u/s 11 of the Act which is liable to be allowed in the interest of justice. Accordingly, we order, The issue no. 1 and 4 are decided in favour of the assessee against the revenue. 6.4 Respectfully following the decision of the ITAT as supra we find decision of ld. CIT(A) is not justified, therefore, grounds Nos. 1(a) to 1(d) and 2(a) 2(b) are allowed. 6.5 All the grounds of appeal of the assessee except ground of No. 1(e) are covered in favour of the assessee by the aforesaid decision of the ITAT bench in the case of the assessee itself as supra. Ground No. 1(e): Invoking the provision of Sec. 13(1)(c) (ii) Sec. 13(2)(g) r.w.s 13(3)(CC) of the I.T. Act. 1961: 7. During the course of assessment the Assessing Officer observed that assessee had given unreasonable salary payment to Secretary Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 20,92,800 5,23,200 33.33 2010-11 23,54,400 2,61,600 12.50 2011-12 25,28,796 4,35,996 18.52 2012-13 30,08,400 4,79,604 18.97 We have also gone through the provision of Sec. 164(2) of the Act which referred to the relevant income which is derived from property held under trust wholly for charitable or religious purposes. Section 164(2) provide for forfeiting of exemption for breach of Sec. 13(1)(d), resulting in levy of maximum marginal rates of tax only to that part of the income which has forfeited exemption. From the plain reading of this proviso it is evident that where the whole or any part of the relevant income is not exempt u/s 11 or 12 because of the provisions of Sec. 13(1)(c) or 13 (1)(d) then tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate. However, in the case of the assessee the assessee by fil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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