DEPUTY COMMISSIONER OF INCOME TAX(EXEMPTIONS) 2 MUMBAI, MUMBAI V. OTTERS CLUB, MUMBAI

ITA 3080/MUM/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax (Exemptions)-2(1), Mumbai, as the appellant, and the Otters Club, Mumbai, as the respondent. The appeals pertain to the assessment years 2014-15 and 2015-16, challenging the CIT(A)'s decision which allowed the Otters Club exemption under section 11 of the Income Tax Act. The primary legal issue was whether the Club's activities, which include sports facilities and services, fall under the category of 'trade, commerce, or business' as per the amended section 2(15) of the Act, thereby disqualifying it from exemption under section 11. The Tribunal examined the nature of the Club's activities, the historical context of its operations, and relevant judicial precedents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37545 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Other Referred Cases: New Noble Educational Society vs Chief Commissioner of Income Tax, ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority
• Laws Referred To: Income-tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Retrospective amendment; Tax effect; Charitable institution; Benefit of exemption
• Section: 143(3); 154; 11; 12A; 12

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA Nos. 3078 and 3080/MUM/2024 Assessment Years: 2015-16 and 2014-15 Deputy Commissioner of Income Tax (Exemptions)-2(1), Mumbai Vs. Otters Club, 29C, Otters Club, Carter Road, Bandra (West), Mumbai – 400 050 (PAN : AAATO0013F) (Appellant) (Respondent) Present for: Assessee : Shri Porus Kaka, Sr. Advocate, Shri Nitesh Joshi, Advocate and Ms. Sonakshi Jhunjhunwala, AR Revenue : Shri Krishna Kumar, Sr. DR Date of Hearing : 23.12.2024 Date of Pronouncement : 21.03.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: These two appeals filed by Revenue are against the orders of ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order nos. ITBA/NFAC/S/250/2024-25/1064329846(1), dated 24.04.2024 and ITBA/NFAC/S/250/2024-25/1064259819(1), dated 22.04.2024, passed against the assessment orders by Income Tax Officer (Exemption)-2(2), Mumbai, u/s. 143(3) of the Income-tax Act 2 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 (hereinafter referred to as the “Act”), dated 12.12.2017 for Assessment Year 2015-16 and dated 29.12.2016 for Assessment Year 2014-15. 2. Grounds taken by Revenue are reproduced as under: ITA No. 3078/MUM/2024 1. “Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing the AO to allow the benefit of exemption u/s 11 of the I.T. Act ignoring the fact that the objects of assessee falls under the category of \"advancement of any other object of general public utility\"? 2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing the AO to allow the benefit of exemption u/s 11 of the Act ignoring the fact that once the assessee is hit by the proviso to section 2(15) of the I.T.Act, its objects are no more charitable objects. 3. Whether on the facts and circumstances of the case and in law and in light of the law laid down by Hon'ble Supreme Court in the case of New Noble Educational Society vs Chief Commissioner of Income Tax [2022] 143 taxmann.com 276 (SC) and in Civil Appeal No.21762 of 2017 in various batch of appeals and SLP's [lead case ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 (SC)], the Ld. CIT(A) erred in not appreciating that even if the activities of the assessee are held to be covered under residuary part of section 2(15) as \"advancement of any other object of general public utility\" even then it is not entitled to exemption u/s 11 because it is hit by the proviso to section 2(15) as the income of the assessee consists of membership fees, sale of food, liquor, facility of playing cards, etc. which are in the nature oftrade, commerce or business? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in allowing the claim of the assessee for exemption u/s.11 of the Income Tax Act, 1961 ignoring that the assessee is basically an organization of members and therefore is a mutual organization with commercial objectives and hence no charitable benefits to the society ensure as such?.” ITA Nos.3080/MUM/2024 1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing the AO to allow the benefit of exemption u/s 11 of the I.T. Act ignoring the fact that the objects of assessee falls under the category of “advancement of any other object of general public utility\"? 2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in directing the AO to allow the benefit of exemption u/s 11 of the Act ignoring the fact that once the assessee is hit by the proviso to section 2(15) of the I.T. Act, its objects are no more charitable objects. 3 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 3. Whether on the facts and circumstances of the case and in law and in light of the law laid down by Hon'ble Supreme Court in the case of New Noble Educational Society vs Chief Commissioner of Income Tax [2022] 143 taxmann.com 276 (SC) and in Civil Appeal No.21762 of 2017 in various batch of appeals and SLP's [lead case ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 (SC)], the Ld. CIT(A) erred in not appreciating that even if the activities of the assessee are held to be covered under residuary part of section 2(15) as \"advancement of any other object of general public utility\" even then it is not entitled to exemption u/s 11 because it is hit by the proviso to section 2(15) as the income of the assessee consists of membership fees, sale of food, liquor, facility of playing cards, etc. which are in the nature of trade, commerce or business? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in allowing the claim of the assessee for exemption u/s.11 of the Income Tax Act, 1961 ignoring that the assessee is basically an organization of members and therefore is a mutual organization with commercial objectives and hence no charitable benefits to the society ensure as such?” 3. In both the appeals, the issue involved is common. From the perusal of grounds of appeal, the core issue arising for consideration of the Tribunal is whether the proviso to section 2(15) of the Act, dis- entitles the assessee from availing exemption u/s. 11 and 12 despite it being registered u/s.12A. 4. Before we delve on the issue raised before us, it would be appropriate to take note of the historical back ground of the assessee and its activities. Assessee was formed as a public charitable trust in the year 1970 with the following main objects: i. To construct, establish, operate and maintain swimming pools and other sports facilities for the benefit of persons of all communities and castes in such manner and subject to such terms and conditions as the trustees may decide; ii. To promote aquatic sports and pastimes of all kinds including swimming, diving, water skiing, boating, fishing and all other activities associated with the same. 4 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 4.1. Considering the above objects, Government of Maharashtra vide order dated 04.05.1970 granted a plot of land for the purpose of construction and maintenance of a swimming pool and connected club house facilities for the benefit of persons of all communities and caste subject to such terms and conditions as contained therein. Pursuant thereto, assessee constructed and has been maintaining the sports related facilities concerning swimming and aquatic activities and other sports like squash, billiards, bridge etc. Assessee trust is registered as a charitable trust with the office of the Charity Commissioner under the Bombay Public Trust Act, 1950, since 11.05.1973. It is also registered as a charitable trust under section 12A of the Act, since 16.03.1974. Over more than four decades of its existence, assessee trust has developed world class sports infrastructure with respect to swimming and aquatic activities. Its infrastructure with respect to other sports like squash, billiards and bridge would also meet the international standards. It has been regularly providing coaching to sportsmen, where, few of the coaches and trainers engaged by it are internationally recognised. As a part of the said sports facilities, Assessee also has a permit room and a restaurant for those using its sports facilities. 4.2. Assessee has a litigation history right from Assessment Year 1975- 76 with exception for few of the intermittent years. Assessee has elaborately submitted the relevant details pertaining to its litigation history, on the relevant issues which arose before the Tribunal, Hon'ble High Court and Hon'ble Supreme Court along with conclusions raised by each of the authority on those issues. The same forms part of the written submission placed on record. It is important to note that from very inception, assessee is carrying on the same activity in furtherance of the objects mentioned above. In the return of income filed for the 5 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 assessment year 1975-76, assessee claimed exemption under section 11 of the Act which was denied by the Assessing Officer. When the issue again came back to the Assessing Officer after being set aside by the Tribunal, exemption was granted to the assessee under section 11 of the Act which continued continuously for ten years. In this context, reference is made to the order dated 29.09.1982, passed in ITA no.1918/Bom/1981. Assessee’s claim of exemption under section 11 of the Act was again rejected by the Assessing Officer in the Assessment Year 1985-86 and 1991-92. While deciding assessee’s appeal in ITA no.5576/Bom/1993 and ITA no.6413/Bom/1994, dated 23.08.2001, the Coordinate Bench relying upon the decision of Hon'ble Special Bench decision in Breach Candy Swimming Bath Club held that assessee’s income from Swimming Pool, other sports activities, Bar and Restaurants, etc. are from the activities carried out towards the object of the assessee, except, income from facilities provided for playing Cards for stakes. Thus, the Coordinate Bench ultimately concluded that the assessee is entitled for exemption under section 11 of the Act in respect of all of its income except the income from providing facilities of play cards. Similar view was expressed by the Coordinate Bench in the subsequent assessment years. Decision of the Coordinate Bench in Assessment Years 2004-05, 2006-07 and 2007-08, have also been upheld by the Hon'ble Jurisdictional High Court of Bombay, wherein appeals filed by the Revenue were dismissed. Even the SLP filed by the Revenue against the decision of the Hon'ble Jurisdictional High Court in Assessment Year 2004-05, 2006-07 and 2007-08 were dismissed, though, due to low tax effect. 4.3. With the above stated litigation history, till Assessment Year 2008-09, assessee has been recognised as a charitable institution with 6 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 charitable objects and its claim of exemption u/s.11 was allowed consistently. 4.4. Section 2(15) defines charitable purpose, by the Finance Act, 2010, with retrospective effect from 01.04.2009, a proviso was inserted below section 2(15) of the Act clarifying that, advancement of any other object of general public utility shall not be a charitable purpose if, it inter alia, involves the carrying on of any activity in the nature of any trade, commence or business for a cess or fee or any other consideration, if the aggregate value of the receipts from the activities referred to therein is Rs.12 lakh or more in the year. In the assessment orders passed in the assessee's own case for the Assessment Years 2009-10 to 2013-14, ld. Assessing Officer had based this amendment to hold that assessee cannot be regarded as a charitable trust. In its consolidated appellate order dated 07.08.2019, Coordinate Bench has considered the details of the activities being pursued by the assessee and concluded that its case will not fall within the said proviso. In the course of present hearing, a statement reproducing the relevant findings of the Coordinate Bench from the said order was furnished. The same are reproduced as under: i. The Assessee trust was created with the charitable object to construct, establish, operate and maintain swimming pools and other sports facilities for the benefit of all communities and castes ii. The charitable nature of the Assessee can be appreciated from the fact that not only it is registered with Charity Commissioner, Mumbai, but was also granted registration in the year 1974 as a Charitable Institution under section 12A of the Act immediately after its creation. iii. Department allowed assessee's claim of exemption continuously for succeeding 10 years. iv. While deciding assessee's appeal for assessment years 1985-86 and 1991- 92, the Tribunal, after following the Special Bench decision of the Tribunal in Breach Candy Swimming Bath Trust v/s ITO. concluded that except the income derived from the activity of providing facilities for playing Cards at 7 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 stake, all other income from Swimming Pool and other sport activities, Bar and Restaurants, etc., will be from the activities of carrying out the object of general public utility, hence, entitled exemption under section 11 of the Act. v. It is also relevant to observe, the decision of the Tribunal allowing assessee's claim of exemption under section 11 of the Act in the assessment years 2004- 05, 2006-07 and 2007-08, have also been upheld by the Hon'ble Jurisdictional High Court. vi. In fact, while deciding Revenue's appeal for the assessment year 2007-08 in Income Tax Appeal no. 200 of 2013, dated 19th January 2015, the Hon'ble Jurisdictional High Court expressed its displeasure with the approach of the Department in repeatedly filing appeals when the issue has been decided in favour of the assessee not only by the Tribunal, but by the Hon'ble Jurisdictional High Court in the preceding assessment years. years. vii. There is no dispute between the parties that the objects on the basis of which the assessee trust was created remained unchanged even in the impugned assessment year. Even, the activities carried on by the assessee are in similar lines and there is no major change in the activities of the assessee. viii. From the materials placed before us, we find that the assessee provides its swimming pools/sporting facilities for training and learning of students of different Schools, Colleges and Institutions and for that purpose not only it holds camps regularly, but holds various competitions even involving various Schools. ix. It also provides swimming coaching to kids including mentally challenged kids for preparing them for participating in Special Olympics and events. x. For this purpose, the assessee has created international standard infrastructure which has resulted in creating champion swimmers who have participated in State and National level as well as international events and won medals and awards. xi. The fact that the assessee is providing its infrastructure and training facilities to train and groom swimmers for competing at State, national and international level is evident from the fact that champion swimmers like Anita Sood, Bijoy Jain, Reza Shirazi, Gaurav Kapoor, Pallavi Shetty, Kavita Sood, Milind Soman, amongst others have excelled at different levels of swimming competitions. xii. Similarly, a number of world class players in Billiards and Squash have come up using the infrastructure and training facilities of the assessee. xiii. In these circumstances, it cannot be said that the services and facilities of the assessee are not accessible to the general public. xiv. On the contrary, the facts on record prove that the assessee had been carrying on its activities fully in conformity with the objects for which it was created. xv. On a perusal of the facts and material on record, there cannot be any doubt that predominant object of the assessee is the object of general public utility and the activities carried on by the assessee are also for achieving that object. 8 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 The income generated by the assessee from sale of liquor, food stuff and room rent are only incidental to the predominant object of general public utility. xvi. It is established that the assessee provides its infrastructure and facilities to a large section of public and many of them have benefited by utilizing the faculties and training provided by the assessee. xvii. In various decisions cited before us, the Tribunal has also held that income derived from sale of liquor, food stuff, etc., cannot be considered to be commercial activity without considering the predominant object of the assessee. It is not the case of the Department that the assessee is carrying on any business or commercial activity in organized manner. Rather the sale of liquor, food stuff, letting of rooms, etc., is incidental to its main activity of constructing, maintaining and providing facilities of swimming pool and other sports to general public at large. 4.5. It is important to note the findings of the Coordinate Bench in the Order for AY 2009-10 to 2013-14, wherein it is noted that \"It is not the case of the Department that the assessee is carrying on any business or commercial activity in organized manner. Rather the sale of liquor, food stuff, letting of rooms, etc., is incidental to its main activity of constructing, maintaining and providing facilities of swimming pool and other sports to general public at large.\" Even in the current year the Assessing Officer has not disputed that the activities are not commercial and in fact held that they satisfy the test of mutuality. Therefore, on no account these activities could be said to be in the nature of trade, commerce or business. 5. Since the facts and issues arising in both the appeals are same, reference is made to the facts for Assessment Year 2014-15. Assessee filed its return of income on 29.09.2014, reporting total income at Nil and claiming deficit to be carried forward of Rs.5,43,81,463/-. In the said return, assessee claimed exemption u/s.11 of the Act. Assessment was completed by passing order u/s.143(3) determining total assessed income at Rs.19,14,33,874/- for which the reasons for addition have already been narrated above. In the impugned assessment order, ld. 9 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 Assessing Officer has denied the claim for exemption u/s.11 primarily on two grounds:- a. that the Assessee is an association formed for the benefit of its members and, hence, is in the nature of a mutual association which cannot be regarded as charitable in nature; and b. proviso below section 2(15) of the Act has been invoked to treat the amounts received by it for sports activities being swimming, table tennis, billiards, squash and playing cards etc., as well as other activities being permit room and restaurant where in the latter refreshment and soft drinks are served, as activities in the nature of the trade, commerce or business. 5.1. However, ld. CIT(A) allowed the appeal filed by the assessee by following the decision of Hon'ble Jurisdictional High Court of Bombay in assessee’s own case for Assessment Years 2004-05, 2006-07 and 2007-08, against which Revenue is in appeal before the Tribunal. The moot point raised by the Revenue before the Tribunal is that assessee is an organisation of members and is therefore a mutual organisation with commercial objectives and hence no charitable benefits accrue to it as such for claiming exemption u/s.11 of the Act. Revenue also contests that decision of Hon'ble Supreme Court in the case of ACIT vs. Ahmedabad Urban Development Authority [2022] 449 ITR 1 (SC), holds in favour of the Revenue, since proviso to section 2(15) is not satisfied. 5.2. Thus, considering the litigation history as narrated above, with the latest decision of the Coordinate Bench in assessee’s own case up to Assessment Year 2013-14, the question to be addressed is that if an institution is already registered u/s. 12A with the charitable object 10 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 falling in the category of “Object of General Public Utility (GPU)” holding it to be charitable in nature then, is it still to be seen whether the object and activity for which it has been granted registration, has any element of trade, commerce or business. 5.3. Before deciding this issue, it is incumbent to understand whether the activities of the assessee for which it has been granted registration u/s.12A per se falls in the category of carrying out any activity in the nature of trade, commerce or business as contained in proviso to section 2(15), since only when assessee carries any other activity which falls in such nature of trade, commerce or business then, it would trigger proviso to section 2(15). 6. From the submission by the assessee in its written note, details of activities pursued by the assessee for year under consideration, including financial statistics are as under: i. The benefit of its sports facilities is also available to non-members as the assessee hosts camps with multiple batches in summer and autumn vacations. It also hosts competitions in various formats including the Inter-Club Swim meet. The schools in its locality use the swimming pool to provide training to their students. It also trains mentally challenged kids for Special Olympics. In a similar manner, it is activities (detailed write up in respect of this encouraging other sports activities is reproduced by the ld. CIT(A) as a part of assessee's submissions in paragraph 7.7 at pages 6 to 17 of the appellate order). ii. A note on its performance including their achievements for AY 2014-15 are at pages 38 to 57 of the Factual Paper Book and for the AY 2015-16 are at pages 84 to 99 of the Factual Paper Book. A bare perusal thereof shows that, it is an institution genuinely supporting the sports activities and its swimmers or players of other sports have won medals at the district level, state level, national level and in international competitions. iii. At pages 24 to 37 of the Factual Paper Book, it has placed its audited Financial Statements for the year ended 31.03.2014 and at pages 60 to 83 for the year ended 31.03.2015. The relevant highlights therefrom are as under: a) For the year ended 31.03.2014 its Income and Expenditure account is at page 32 reflecting that as against total receipt of Rs. 10,07,98,867/-, interest income comprised of Rs. 8,83,44,345/-. This interest income has 11 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 been earned on investment made by it in accordance with section 11(5) of the Act. The source of such funds which have been invested are the Corpus and Earmarked Funds, statutory accumulation which upto the AY 2002-03 was permitted to the extent of 25% of the receipt and from the AY 2003-04 it is 15% thereof. Such investment has also been made out of accumulations as per section 11(2) thereof. Since, the assessee is in existence for more than four decades in the past, its investments stood at Rs. 91,90,99,000/-. b) Without Interest Income, the Assessee has suffered a loss of Rs.5,21,41,944/- c) Further, its activities as per the object of the Trust have been bifurcated into sports activities, social activities and other club activities. In respect of each of these activities the Assessee has separately reflected the receipts as well as the direct expenditure thereon. A bare comparison of such receipts and direct expenditure would show that they have resulted into a huge deficit. In this regard, it would also be relevant that the expenditure as referred to therein does not include establishment expenses of Rs. 2,19,29,503/- which has not been allocated to the said activities in the working. If the said expenditure is also allocated, then, the deficit would only further increase. A schedule providing the working of expenditure incurred for the aforesaid activities is at pages 34 and 35 of the Factual Paper book and Schedule relating to establishment expenses is at page 36 thereof all of which are also extracted below: 12 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 13 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 6.1. Fees/charges collected by the assessee, among other things, in respect of its sports activities as furnished in its written submission is as under: SWIMMING POOL Rate Period Member Nil Cap 10 per session Playing Member 200 per month Towel 10 each Soap 5 each GYMNASIUM Rate Period Members - 60 to 70 years 50% Members - Above 70 years Free Member - Gents & Ladies 40 per entry Maximum 400 per month SQUASH Rate Period Member 40 per l/2 hrs Maximum 400 per month Marker fees 25 per l/2 hrs Playing Member 200 per month BRIDGE ROOM Rate Period Member 15 per session Maximum 225 per month Couple maximum charges 450 per month Playing Member Bridge 300 per month 14 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 BILLIARDS ROOM Rate Period Member 15 per session Maximum 225 per month Marker Fees 10 per '/2 hrs Playing Member Billiards 200 per month 6.2. Swimming pool Maintenance for Corporate & Temporary Members Rs. 40/-per month. Game Charges for Corporate & Temporary Members Rs. 100/- per month. 6.3. To recoup some of the recurring cost of maintaining infrastructure and facilities, assessee charges fees for various activities based on the details as tabulated above which is substantially below the cost incurred by it. A summary of details of receipts and expenses of this account as contained in the order of ld. CIT(A), at page 23 is extracted below: Nature of Activity Gross Receipts (Rs.) Amount Spent (Rs.) Sports activities 15,14,776/- 2,22,41,084/- Social activities 1,67,765/- 56,27,085/- Other club activities 20,20,245/- 1,46,81,166/- Total 37,02,786/- 4,25,49,335/- Amount of short recovery of the cost 3,88,46,549/- 6.4. From the above tabulated gross receipts and amount spent on various activities carried out by the assessee, it was pointed out that 15 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 amount of consideration received is much below the cost and therefore these activities cannot be held to be in the nature of trade, commerce or business or providing service in relation thereto. 6.5. Assessee had furnished details of three years on expenses incurred and revenue generated by it from its activities which forms part of its audited statement of accounts. The total expenditure does not include proportionate share in the unallocated administrative and establishment cost. Year on year, without allocating proportional administrative and establishment expenses, assessee has incurred loss. These details are tabulated below. Year Ended Total expenses incurred (RS.) Total contribution received (Rs.) Net Deficit (surplus) (Rs.) 31st March, 2013 91,29,702 68,35,900 22,93,802 31st March, 2014 84,46,637 22,41,921 62,06,716 31st March, 2015 1,46,81,166 20,20,245 1,26,60,921 6.6. With respect to the permit room and the restaurant, it is submitted that the said facilities form part of the sports activities. To have refreshment and drinks after playing a sport is a common phenomenon. Further, its infrastructure, coaches and trainers as well as quite a few of its sportsmen are of an international repute. Hence, it is essential for it to provide the said facilities within the club. In fact, this position also stands accepted by the appellate authorities including the Tribunal in the earlier years, already noted in earlier paragraphs. 16 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 6.7. With respect to the facility for playing cards, it is submitted that the Tribunal by its consolidated appellate order dated 07.08.2019 for the Assessment Years 2009-10 to 2013-14 had remanded this issue to the ld. Assessing Officer to re-consider the assessee's claim for exemption under section 11 of the Act with respect to this activity. By order dated 19.07.2024 giving effect to the said appellate order of the Tribunal, ld. Assessing Officer has accepted the assessee's claim for exemption in respect of the fees collected for this facility. Observations of ld. Assessing Officer in the said order while accepting the claim are extracted below: “On perusal of the submissions made by the assessee and alter factually verifying the assessee's claim, it is found that the assessee is eligible to claim exemption s 11 of the IT Act with respect to the income derived from Bridge tournaments. Accordingly, The income of the assessee is revised as under:- Particulars Amount (Rs.) Total taxable income as per order u/s 154 rws 143(3) dt 13.02.2017 4,55.52,080/- Less:- Relief allowed by Hon'ble ITAT's order no. ΙΓΑ Nо. 1551/Mum./2015 dt. 07/08/2019 Benefit of exemption u's 11 and 12 of the IT Act to be granted to the assessee (4,10,44,361) Total taxable income 45,07,719 7. It is an undisputed fact on record that the main objects of the assessee based on which registration was granted u/s. 12A of the Act and, which objects have been accepted to be of charitable nature have not undergone any change till date. Therefore, it is to be accepted that assessee is a charitable organization existing for charitable purpose having the object of general public utility in terms of Section 2(15) of the Act. 8. At this stage, it is relevant to observe, Section 2(15) of the Act as was existing in the statute in its original form which underwent change 17 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 through amendment by Finance Act, 2008, with effect from 01.04.2009 with introduction of the following proviso:- \"15) \"charitable purpose\" includes relief of the poor, education, medical relief, 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;\" 8.1. A careful reading of the proviso clearly indicates that it applies only to 'advancement of any other objects of general public utility’. Pertinently, proviso introduced to Section 2(15) has undergone further changes, subsequently. However, for the purpose of deciding the present appeal, the proviso as originally introduced by Finance Act, 2008, effective from 01.04.2009 would be relevant. As could be seen from the reading of the proviso noted above, it carves out an exception in the sense that advancement of any other object of general public utility shall not be regarded as charitable purpose in the following situations: i. if it involves any activity in the nature of trade, commerce or business. ii. or it involves any activity of rendering of any service in relation to any trade, commerce or business, iii. the activities in item (i) and (ii) are for a fee or cess or any other consideration. 8.2. Meaning of the words 'trade', 'commerce' and \"business' have to be understood in their ordinary sense and as known in common parlance. The word 'trade' would mean exchange of goods for goods or for money. The word 'business', though, has been defined under section 2(13) of the Act, however, is generic. 'Business' in its ordinary sense 18 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 would mean an occupation, or profession which occupies time, attention or labour of a person and is generally undertaken with a profit motive. The word 'commerce' again is of same connotation as 'trade' or 'business'. 8.3. As could be seen from the main objects of the assessee, it is not in any manner involved in any activity of trade, commerce or business. In the year under consideration, ld. Assessing Officer has not disputed that the activities are not commercial but has held that they satisfy the test of mutuality for which the Revenue has raised ground no.4 in the present appeal. Therefore, on no account these activities could be said to be in the nature of trade, commerce or business. Further, it is necessary to see whether the second condition of any activity of rendering any service in relation to any trade, commerce or business is applicable. Since the assessee itself is not carrying on any trade, commerce or business, it cannot be said that it is involved in any activity of rendering service in relation to any trade, commerce or business. 9. Coordinate Bench has already dealt with the proviso to section 2(15) invoked by the ld. Assessing Officer in assessee’s own case for Assessment Year 2009-10 to 2013-14 as discussed above. To further elaborate on this issue, we refer to the memorandum explaining the provision of Finance Bill, 2008 spells out the legislative intent for insertion of the proviso to section 2(15) of the Act. The relevant part of the memorandum reads as under: \"Streamlining the definition of \"charitable purpose\" Section 2(15) of the Act defines \"charitable purpose\" to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility. It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under section 10(23) or section 11 of 19 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 the Act on the ground that they are charitable institutions. This is based on the argument that they are engaged in the \"advancement of an object of general public utility\" as is included in the fourth limb of the current definition of \"charitable purpose\". Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase \"advancement of any other object of general public utility\", it is proposed to amend section 2(15) so as to provide that \"the advancement of any other object of general public utility shall not be a 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 of any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity. This amendment will take effect from the 1st day of April, 2009 and will accordingly apply in relation to the assessment year 2009-10 and subsequent assessment years.\" 9.1. From the reading of above explanatory notes, it transpires that it was brought to the statute keeping in view the fact that in the garb of advancement of object of general public utility, many institutions/organizations are actually engaged in income generating commercial activities. Therefore, to prevent misuse of the exemption provision in the statute intended for genuine charitable institutions/organizations, the proviso was introduced. 10. It is further observed that as per the proviso to section 2(15), activity of trade, commerce or business or services related thereto, must be for a cess or fee or any other consideration. In the facts of the present case, admittedly, assessee recovers only the cost incurred for providing its facilities. In this respect, the factual details have been elaborately narrated in the above paragraphs which includes financial statistics as well as fees/charges recovered by the assessee for providing various sports and other facilities. The income and expenditure statement of the 20 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 assessee is in deficit if the interest earnings are excluded from the total receipts of the assessee, details of which are already extracted above. 11. This issue of proviso to section 2(15) in the case of Institutions carrying out object of General Public Utility has been dealt by Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra). In this respect, certain paragraphs from the said judgement are reproduced for the sake of ready reference. \"170. Classically, the idea of charity was tied up with eleemosynary. However, \"charitable purpose\" - and charity as defined in the Act have a wider meaning where it is the object of the institution which is in focus. Thus, the idea of providing services or goods at no consideration, cost or nominal consideration is not confined to the provision of services or goods without charging anything or charging a token or nominal amount. This is spelt out in ballon Chamber of Commerce (supra) where this Court held that certain GPUs can render services to the public with the condition that they would not charge \"more than is actually needed for the rendering of the services, may be it may not be an exact equivalent, such mathematical precision being impossible in the case of variables, may be a little surplus is left over at the end of the year the broad inhibition against making profit is a good guarantee that the carrying on of the activity is not for profit\". 171. Therefore, pure charity in the sense that the performance of an activity without any consideration is not envisioned under the Act. If one keeps this in mind, what section 2(15) emphasizes is that so long as a GPU's charity's object involves activities which also generates profits (incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20%) under second proviso to section 2(15) for receipts from such profits, is adhered to. 172. Yet another manner of looking at the definition together with sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profit, the prohibition against carrying on business or service relating to business is not attracted - if the quantum of such profits do not exceed 20% of its overall receipts. 173. It may be useful to conclude this section on interpretation with some illustrations. The example of Gandhi Peace Foundation disseminating Mahatma Gandhi's philosophy (in Surat Art Silk) through museums and exhibitions and publishing his works, for nominal cost, ipso facto is not business. Likewise, providing access to low-cost hostels to weaker segments of society, where the fee or charges recovered cover the costs (including administrative expenditure) plus nominal mark up; or renting marriage halls for low amounts, again with a fee meant to cover costs; or blood bank services, again with fee to cover costs, are not activities in the nature of business. Yet, when the entity concerned charges substantial amounts over and above the cost it incuts for doing the same work, or work which is part of its object (de, publishing an expensive coffee table book 21 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 on Gandhi, or in the case of the marriage hall, charging significant amounts from those who can afford to pay, by providing extra services, far above the cost-plus nominal markup) such activities are in the nature of trade, commerce, business or service in relation to them. In such case, the receipts from such latter kind of activities where higher amounts are charged, should not exceed the limit indicated by proviso (ii) to section 2(15)\" ………. \"253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the interpretation of the changed definition of \"charitable purpose\" (w.e.f. 1-4-2009), as well as the later amendments, and other related provisions of the IT Act ………….. A. General test under section 2(15) A.3. Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be \"trade, commerce, or business\" or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of \"cess, or fee, or any other consideration\" towards \"trade, commerce or business\". In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis. would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. H. Application of interpretation H. At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the Assessee's (whether statutory, or non-statutory) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinize the record to discern whether the nature of the Assessee's activities amount to \"trade, commerce or business\" based on its receipts and income (de, whether the amounts charged are on cost-basis, or significantly higher). If it is found that they are in the nature of \"trade, commerce or business\", then it must be examined whether the quantified limit (as amended from time to time) in proviso to section 2(15), has been breached, thus disentitling them to exemption.\" 11.1. From the above, it is noted that intention to earn profit is an essential ingredient for an activity to be considered in the nature of trade, commerce or business. If a charitable trust or institution charges a nominal profit above cost in respect of its activities, it would not fall within the vice of proviso to section 2(15). As elaborately dealt in the above paragraphs in the present case, assessee has not even covered its 22 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 expenses in respect of activities offered by it, there being deficit in its income and expenditure statement. Furthermore, ld. Assessing Officer has also not disputed this fact, who has held these to be mutual activities. 11.2. We also take note of the decision of Coordinate Bench of ITAT, Mumbai in the case of Media Research Users Council vs. ADIT [2024] 205 ITD 170 (Mum) wherein the judgement of Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) was analysed and is relevant in the present case. The analysis made by the Coordinate Bench in para-19 of its order is extracted below for ease of ready reference: “19. The Hon'ble Supreme Court after analyzing the law Wien was prevalent and applicable prior to insertion of proviso w.e.f. 01/04/2009 and amendments made thereafter, have clarified the amended position of law in the following manner:- ➤ if at all any activity in the nature of trade, commerce or business, or a service in the nature of the same, for any form of consideration is permissible, then activity should be intrinsically linked to, or is part of the GPU category charity's object. ➤ the test of the charity being driven by a predominant object is no longer good law. Likewise, the ambiguity with respect to the kind of activities generating profit which could feed the main object and incidental profit-making also is not good law. ➤ What instead, the definition under section 2(15) through its proviso directs and thereby marks a departure from the previous law, that if a GPU charity is to engage in any activity in the nature of trade, commerce or business, for consideration it should only be a part of this actual function to attain the GPU objective; and equally important consideration is the imposition of a quantitative standard i.e., income (fees, cess or other consideration) derived from activity in the nature of trade, business or commerce or service in relation to these three activities, should not exceed the quantitative limit. The Hon'ble Apex Court has further held that the idea of providing services or goods at no consideration or at cost may not be relevant factor as it has to be given a wider meaning. But now there is an inhibition against making profit though there may be a little surplus left over the end of the year. Thus, concept of pure charity i.e. the performance of an activity without consideration is not envisioned under the Act, however, as long as GPUs object involves activities which also generates profits, it can be granted exemption provided the 23 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 quantitative limit under second proviso to section 2(15) for receipts from such profits, is adhered to. ➤ In para 171, it has been stated that if the charity involves itself in activities that entail charging amounts only at cost or marginal markup over cost and also derives from profit, the prohibition against carrying on business or service relating to business is not attracted (if the quantum of such profits did not exceed 20% of its overall receipts) has been adhered to.” 12. Considering the factual matrix of the case, extensive documents placed on record, elaborate discussion made on the applicable provisions of the Act and the decisions in the assessee’s own case as well as those by Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) and by Coordinate Bench of ITAT, Mumbai in the case of Media Research Users Council (supra), we summarise our conclusions on the core issue as stated above. We find that assessee has been held to be a charitable institution carrying on the object of General Public Utility which is primarily engaged in promotion of sports including swimming, squash, gymnasium, other sports activities like yoga, aqua aerobics, table tennis, bridge, billiards and snooker. Activities carried out by the assessee has led to nurturing of talent in all these sports fields, details of which are elaborately discussed by ld. CIT(A) in his order in paragraph 7.7. Assessee has also placed on record details of performance and achievements of various sports persons in the above stated sports at national as well as international levels. Keeping the litigation history and the entire discussion made above in perspective, it is held that assessee is a charitable trust and principles of mutuality has been erroneously applied by the ld. Assessing Officer for denying the claim of exemption u/s.11 of the Act. 12.1. Further, we note that almost for four decades, assessee has been found to be pursuing these activities for charitable purpose, which is 24 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 available for the benefit of persons of all communities and castes. It is undisputed that promotion of sports falls within the charitable cause of advancement of any other object of General Public Utility. Merely because proviso has been inserted in Section 2(15), it does not render activities which has been consistently found to be charitable to become commercial in nature. We find that in absence of intention to generate profit from the activities undertaken by the assessee, in view of continuous deficit, the same cannot be regarded as commercial in nature. Furthermore, we find that ld. Assessing Officer considered the activities on the principles of mutuality. In our considered view as discussed in detail in the above paragraphs, once the activities are held to be mutual, the same cannot be simultaneously held in the nature of trade, commerce or business, because a person cannot trade with oneself. Application of principles of mutuality has already been negated by us, also the activities of the assessee are held not to be in the nature of trade, commerce or business. It is adequately demonstrated by the assessee that fees/charges recovered by it for its activities are to meet its cost which in fact is not sufficient since assessee incurs deficit year on year basis which is met out from the interest earnings. Thus, in view of these findings and observations, we hold that assessee is not hit by the proviso to Section 2(15) of the Act and thus, claim of exemption u/s.11 is allowed. Accordingly, grounds raised by the Revenue are dismissed. 13. In the result, appeal of the Revenue is dismissed. 14. Since, identical fact pattern is involved in the appeal for Assessment Year 2015-16, with same grounds raised by the Revenue, our observations and findings for appeal in Assessment Year 2014-15 25 ITA Nos. 3078 and 3080/Mum/2024 O\u0017ers Club, AYs 2015-16 and 2014-15 applies mutatis mutandis. Accordingly, appeal for Assessment Year 2015-16 is also dismissed. 15. In the result, both the appeals of the Revenue are dismissed. Order is pronounced in the open court on 21 March, 2025 Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 21 March, 2025 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "