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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 ..... . l(b) (i) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) (hereinafter referred as "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 proviso to section 2(15) of the Income Tax Act, 1961 and the reasons assigned for doing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961, and Rules made there under. (ii) On the facts and in the circumstances of the case and in law, the lower authorities failed to appreciate that, the amended provisions of section 2(15) do not change the character or exempt status of the Assessee. l(c) On the facts and in the circumstances of the case and in law, the lower authorities erred in holding that the membership subscription and entrance fees are tainted with commerciality and beyond the scope of mutuality and thereby erred in denying the appellant's claim for exemption u/s 11 of the Income Tax Act, 1961, and the reasons assigned for doing so is wrong and contrary to the facts and circumstances of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f hearing." 2. All the grounds of appeal filed by the assessee as supra are interconnected therefore these grounds of appeal are adjudicatd together as follows. Fact in brief is that return of income declaring total income of Rs.nil was filed on 26.09.2012. The case was subject to scrutiny assessment and notice u/s 132 and 142(1) along with questionnaire were issued. The assessee company was incorporated as per the provision of Sec. 25 of the Company Act, for the purpose of securing accurate circulation figures and data relating to all periodical and media that sell advertising space. During the course of assessment the assessing officer asked the assessee to explain as to why provision of amended Sec. 2(15) should not be applied in its case for denial of exemption claimed u/s 11 of the Act. The assessee explained that it is a company registered u/s 25 of the Company Act, 1956 without share capital and also registered as charitable organization u/s 12(A) vide registration dated 11.11.1982. It is also submitted that the main object of the assessee to secure actual circulation figures and data relating to all periodicals and media that sell advertising space and in regard to such pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of activities of the assessee is required to be addressed: (i) the assessee activity are in the nature of trade, commerce or business. (ii) The assessee is rendering any service in relation to any trade commerce or business. (iii) The assessee received any consideration in the nature of fees or cess for its business activities & (iv) Assessee's income of such activity is more than Rs. 25,00,000/-. Therefore, the Assessing Officer asked the assessee as to why provision of amended Sec. 2(15) should not be applied in its case. The assessee has made detailed submission vide letter dated 26.02.2015 which has been summarized as under: (i) The assessee's main revenue is contributions from from members and investment on deposit. (ii) Revenue earned is applied only towards general public utility; (iii) Activities are carried out for mutual benefit of members; (iv) Activities do not constitute business, trade or commerce since there is no profit motive; (v) Reliance was placed on CBDT Circular No. 11/2008, dated 15.09.2008. The A.O was not satisfied with the submission of the assessee and he was of the view that it was the advertisers or advertising agencies that ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he services rendered by the Secretary General, therefore, considered that assessee has violated the provision of Sec. 13 of the Act and assessee was not eligible to claim exemption u/s 11 of the Act. 4. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 5. During the course of appellate proceedings before us the ld. Counsel has filed paper book comprising copies of document and details of submission made before the A.O and ld. CIT(A) during the course of assessment and appellate proceedings. The assessee has also filed paper book comprising copies of judicial pronouncements relied upon by the ld. Counsel. The ld. Counsel contended that on the issue of denial of claim of exemption u/s 11 of the Act the coordinate bench of the ITAT, in the case of assessee vide ITA No. 5681/Mum/2015 & 6393/Mum/2016 A.Y. 2011-12 & 2012-13 has adjudicated the identical issue and similar facts in favour of the assessee. On the issue of payment of unreasonable salary to the Secretary General the ld. Counsel submitted that Secretary General was not the manager of the assessee, therefore, provision of Sec. 13 was not applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 6.3 At the outset the ld. Counsel has submitted that the 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 vide order ITA No.5681/Mum/2015 & 6393/Mum/2016 A.Y. 2011-12 & 2012-13. With the assistance of the ld. Representative we have perused the decision of coordinate bench as supra. The coordinate bench had adjudicated the following grounds of appeal :- 1(a) to 1(b) and 4(a) 4(b): "1(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) (hereinafter referred as CIT(A)') erred in confirming the action of the Ld. Assessing Officer of denial of claim for exemption under section II of the Income Tax Act, 1961 to the appellant by invoking the proviso to section 2(15) of the Income Tax Act, 1961 and the reasons assigned for doing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was continuously claiming the exemption u/s 11 of the I.T. Act and the exemption was allowed by Income Tax Authority but after the amendment of Section 2(15) of the Act, the claim of the assessee was declined whereas there was no change in the objects of the assessee, therefore, the finding of the CIT(A) is wrong against law and facts and is liable to be set aside. It is also argued that the claim by the assessee u/s 11 of the I.T. Act, 1961 was declined in the A.Y. 1989-90 &1990- 91 which was allowed by the Hon'ble ITAT in the assessee's own case in ITA. No.285/Bom/1995 dated 28.04.1995 and the nature of the work of the assessee did not change till date but the claim of the assessee has wrongly been declined, therefore, the finding of the CIT(A) is not liable to be sustainable in the eyes of law. It is argued that the clause 3,4 & 8 of the Memorandum of Association speaks about object of the assessee which nowhere leads the nature of the work of assessee as commercial in nature, therefore, the finding of the CIT(A) is not sustainable and the claim of 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 mutualit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circulation of them for the benefit of members of this Association such service to be known as the A.B.C. service or by such other name or description as the Council fl91ttftn may determine from time to time. aa)To set up a new division .of the Bureau to be known as 'National Readership Studies Council' in the field of Readership Studies for carrying out Readership Surveys covering all major publications published In India, whether or not such publications are audited by the Bureau or are publications of Bureau's members, arid to record, collect and distribute such readership surveys and all information relating thereto to all users thereof, who may require the same for estimating, the value of such publications published in India. irrespective of whether or not such users are members of the Bureau. aaa) The company may undertake circulation audits, digital audits of publications printed and published within India or outside India as well as measurements of websites carrying advertisements through any electronic device and disseminate such information to all members, b) To collect and distribute amongst members of this Association information relating to all fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of them. j) To pay all the expenses connected with the formation and incorporation of the Association k) Except as otherwise expressly stated to do all or any of the foregoing things anywhere. PROVIDED that the Association shall not support with it funds any-object or endeavour to impose on or procure to be observed by its members or others, any regulation, restriction or condition which if an object of the Association would make it a Trade Union." 6. However, clause 4, 5a and 8 is also necessary to be reproduced on record for ready reference:- "4. The income and property of the Association, whensoever derived, shall be applied solely towards the promotion of the objects of the Association as set forth in this Memorandum of Association and no portion thereof shall be paid or transferred directly or indirectly, by way of dividend, bonus or otherwise howsoever by way of profit to the members of the Association. PROVIDED that nothing herein shall prevent the payment, in good faith, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and liabilities any property whatsoever, the same shall not be paid to or distributed among the members of the Association, but shall be given or transferred to some other institution or institutions having objects similar to the objects of the Association, and which shall prohibit the distribution of its or their income and property among its or their members to an extent at least as great as is imposed on the Association under or by virtue of Clause 4 hereof, such institution or institutions to be deter-mined by the memorandum of the Association at or before the time of dissolution, or in default thereof by the High Court of Bombay and if and so far as effect cannot be given to such provision then to some charitable object." 7. The objects of the assessee nowhere changed however after the amendment the provision us/ 2(15) of the Act the claim of the assessee u/s 11 of the Act was declined. The amended provision u/s 2(15) is hereby reproduced below:- "Charitable purpose" 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 inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances when there is not a single instance of any business on record. The dominant purpose if any is charitable and incidental activities are not required to be treated as business in nature. In this regard, we also find in support of law settled in Bombay Presidency Golf Club Ltd. Vs. DIT (Ex.) (23 taxmann.com 319) (Mum ITAT), Indian Chamber of Commerce Vs. ITO (ITA No. 1491 & 1284/Kol/2012 (Kol. ITAT), Bar Council of Maharashtra Vs. CIT (126 ITR 27) (1980) (Bom.HC) and Hiralal Bhagwati Vs. CIT (246 ITR 188) (2000). So far as the claim in connection with member's contribution and entrance fees are concerned, the same is not liable to be chargeable to tax in view of the law settled in CIT Vs. Wellington Sports Club etc. Further, we noticed that the claim of the assessee u/s 11 of the I.T. Act, 1961 was declined in the year of 1989- 90 & 1990-91 by revenue which was allowed by the ITAT in the assessee's own case. Since then there was no change in the objects 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the counsel of management and takes their guidance and orders. It is noticed that counsel of management of the assessee comprises of 8 elected representatives of publisher members, 4 elected representatives of advertising agency members and 4 elected representatives of advertisers members. These facts demonstrate that the power to manage activities and affaires of the assessee was with the counsel of management. We have also perused the detail related to the salary paid to the Secretary General and observed that increased in the salary was made in gradual stages as under: Relevant Assessment Year Salary Payment Increase insalary % Increase 2007-08 12,08,592 - - 2008-09 15,69,600 3,61,008 29.87 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption) 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 of the case of the assessee. Accordingly, this ground of appeal of the assessee is dismissed. 10. The Ground No. 1 of the assessee vide ITA No. 2041/Mum/2019 is identical and similar to the ground No. 1 of ITA No.2040/Mum/2019 as adjudicated supra therefore applying the findings of ITA No.2040/Mum/2019 as mutatis mutandis, the same stand dismissed. 11. The remaining Grounds of the appeal of the assessee vide ITA Nos.2040 & 2043/Mum/2019 are based on identical facts and similar issue as adjudicated supra in ITA No.6393/Mum/2016 therefore, applying the finding of ITA No. 6393/Mum/2016 as mutatis mutandis these grounds of appeal are covered in favour of the assessee. 12. In the result, the appeal of the assessee vide ITA No. 6393/Mum/2016 is allowed. The appeals vide ITA Nos. 2040 to 2041/Mum/2019 are partly allowed, the appeals vide ITA Nos. 2042 to 2043/Mum/2019 are allowed. Order pronou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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