BOMBAY ANDHRA MAHARASHTRA & GYMKHANA, MUMBAI V. DIT (E), MUMBAI

ITA 2014/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88556 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURINDER JIT SINGH
• Keywords: Business income; Charitable institution; Cancellation of registration
• Section: 12A; 12AA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI , BEFORE SHRI D. MANMOHAN, VICE PRESIDENT (M.Z.) AN D SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.2014/MUM/2012 (A.Y.2009-10) THE BOMBAY ANDHRA MAHASABHA & GYMKHANA PLOT NO.10-C, LAKHAMSI NAPPO ROAD HINDU COLONY, DADAR MUMBAI-400 014. GIR NO./PAN : AAATT 3448 B (APPELLANT ) VS. THE DIRECTOR OF INCOME TAX (EXEMPTIONS) 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL MUMBAI. (RESPONDENT) APPELLANT BY : SHRI K. GOPAL RESPONDENT BY : SHRI SURINDERJIT SINGH DATE OF HEARING : 04 /0 3 /2015 DATE OF PRON OUNCEMENT : 04 /0 3 /2015 ORDER PER CHANDRA POOJARI, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF DIT(EXEMPTION) DATED 03/02/2012 FOR THE ASSESSMENT YEAR 2009-10. IN THIS CASE THE GRIEVANCE OF THE ASSESSEE IS WITH REG ARD TO CANCELLATION OF REGISTRATION GRANTED TO THE ASSESSEE U/S.12AA OF TH E INCOME TAX ACT, 1961 (THE ACT). 2. FACTS OF THE CASE ARE THAT THE ASSESSEE HAS BEEN GRANTED REGISTRATION U/S. 12AA OF THE ACT. ACCORDING TO THE DIT(EXEMPTIO N), THE ASSESSEE HAS 2 ITA NO.2014/M /12 THE BOMBAY ANDHRA MAHASABHA & GYMKHANA BEEN CARRYING OUT THE ACTIVITIES IN THE NATURE OF T RADE, COMMERCE, BUSINESS ETC. DURING THE ASSESSMENT YEAR 2009-10 AND GROSS R ECEIPTS THEREFROM ARE IN EXCESS OF RS.10.00 LACS. IN THE OPINION OF DIT(E XEMPTION) THE ASSESSEES CASE IS HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT, WITH EFFECT FROM ASSESSMENT YEAR 2009-10. ACCORDINGLY, AFTER CALLING FOR EXPLANATION FROM THE ASSESSEE THE DIT(EXEMPTION) WITHDREW THE REGIST RATION GRANTED TO THE ASSESSEE U/S. 12A OF THE ACT. AGGRIEVED BY THIS, TH E ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. AR FOR ASSESSEE SUBMITTED THAT THE OBJEC TS OF THE ASSESSEE TRUST ARE AS UNDER - A) TO PRESERVE AND PROMOTE THE LANGUAGE, CULTURE AND H ISTORY OF ANDHRAS RESIDING IN GREATER MUMBAI AND SUBURBS AND THE REALISATION OF TRADITIONAL RELATIONSHIP AND BROTHERHOOD WITH AL L ANDHRAS ALL OVER INDIA; B) TO ENCOURAGE AND PROMOTE LITERARY, SCIENTIFIC, CULT URAL, MORAL PHYSICAL AND ARTISTIC ACTIVITIES FOR SOCIAL ADVANCEMENT WITH OUT DISCRIMINATING OF ANY LANGUAGE, RELIGION, CASTE, OR CREED AND STRIVE FOR CULTURAL INTEGRATION OF INDIA; C) TO ADVANCE CULTURE, KNOWLEDGE, AND EDUCATION BY THE MAINTENANCE OF READING ROOMS, AND LIBRARIES, PERIODICALS, MAGAZINE S, AMONG THE MEMBERS AND THEIR FAMILIES; HOLDING OF GATHERINGS, SEMINARS, LECTURES, EXHIBITIONS, ENACTING OF DRAMAS, AND OTHE R MEDIA ENTERTAINMENT AND EDUCATION; PROMOTION OF MUSIC, OT HER FINE ARTS, LITERATURE, AND CULTURE IN GENERAL. TO ENCOURAGE IN DOOR AND OUTDOOR GAMES AND TO ORGANIZE SPORTS TOURNAMENTS; D TO ENCOURAGE INDOOR AND OUTDOOR GAMES AND TO ORGA NIZE SPORTS TOURNAMENTS.; E) TO UNDERTAKE ANY KIND OF RELIEF WORK AND GIVE CHAR ITABLE HELD TO ALL 3 ITA NO.2014/M /12 THE BOMBAY ANDHRA MAHASABHA & GYMKHANA WORTHY CAUSES OF ANDHRAS AND OTHERS; F) TO TAKE PART OR ENGAGE IN ANY OTHER LAWFUL ACTIV ITY OR ANY SUCH OTHER ACTIVITY WHICH ARE CONDUCIVE TO THE PROMOTION OF AL L OR ANY OF THE ABOVE OBJECTS IN THE INTEREST OF COMMUNITY AND NATI ON. 3.1 IT WAS FURTHER SUBMITTED BY THE LD. AR THAT THE INCOME FROM HALL CHARGES IS PROPERTY INCOME AND NOT BUSINESS INCOME. IT WAS BE POINTED OUT THAT THE INCOME FROM THE HALL CHARGES WAS RS.38.52 LAKHS WHEREAS THE EXPENSES WERE RS.47.46 LAKHS THUS LEADING TO A LOSS OF RS.8.94 LAKHS. THEREFORE, EVEN THE INCOME GENERATED IS NOT SUFFICI ENT FOR THE MAINTENANCE OF THE PROPERTY. THUS THERE IS NO CLEAR PROFIT MOTI VE FROM THE ACTIVITY. 3.2 THE LD. AR FOR THE ASSESSEE ALSO SUBMITTED THAT THE TRUST COULD NOT BE GROUPED UNDER THE EXCLUSIVE RESIDUARY CATEGORY TO D ENY EXEMPTION, MERELY BECAUSE IT DERIVED INCOME FROM A FUNCTION HALL. BY MERE LETTING OUT OF ITS HALL, THE ASSESSEE TRUST HAD NOT LOST ITS CLAIM TO EXEMPTION. THE LETTING OUT OF THE FUNCTION HALL WAS TO EARN INCOME TO FULFIL A ND APPLY THE SAME TO THE MAIN OBJECTS OF THE ASSESSEE TRUST. THE LD. AR HAS ALSO PLACED RELIANCE IN THE CASE OF MAHARASHTRA HOUSING & AREA DEVELOPMENT AUTHORITY VS . ADIT(EXEMPTION) ITA NO.435/MUM/2012 ORDER DATED 22/ 02/2013 FOR THE ASSESSMENT YEAR 2009-10 . THE LD. DR RELIED ON THE ORDERS OF DIT(EXEMPTION). 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD. SIMILAR ISSUE CAME UP FOR CONSIDERATION BEF ORE THE CO-ORDINATE BENCH IN THE CASE OF M/S. VANITA SAMAJ IN ITA NO.1034/MUM/2012 ORDER 4 ITA NO.2014/M /12 THE BOMBAY ANDHRA MAHASABHA & GYMKHANA DATED 26/2/2014 FOR THE ASSESSMENT YEAR 2009-10. T HE TRIBUNAL HELD AS FOLLOWS :- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORD. IT IS NOT IN DISPUTE THAT THE TRUST HAD COM E INTO EXISTENCE IN 1953 AND IT WAS GRANTED REGISTRATION UNDER SECTION 12A O F THE ACT AND THERE IS NO CHANGE IN THE NATURE OF ACTIVITIES OF THE TRUST SIN CE THEN. IT IS NOT THE CASE OF THE DIT (EXEMPTION) THAT THE ACTIVITIES OF THE TRUST ARE NOT GENUINE; IN FACT THE DIT (EXEMPTION) ASSUMED THAT BY VIRTUE OF THE FI RST PROVISO TO SECTION 2(15) OF THE ACT THE ACTIVITY OF THE TRUST SHOULD B E TREATED AS NOT GENUINE OVERLOOKING THE FACT THAT THERE IS NO CHANGE IN THE ACTIVITY SO AS TO INVOKE PROVISIONS OF SUB-SECTION (3) OF SECTION 12AA OF TH E ACT. IN OUR CONSIDERED OPINION, ON A CONJOINT READING OF THE FIRST PROVISO WITH SECOND PROVISO TO SECTION 2(15) OF THE ACT, A TRUST CAN BE DENIED EXE MPTION IN THE YEAR WHERE THE GROSS RECEIPTS EXCEED THE LIMIT PRESCRIBED IN T HE SECOND PROVISO TO SECTION 2(15) AND IN ALL OTHER YEARS INCOME FROM SU CH ACTIVITIES SHOULD BE CONSIDERED FOR THE BENEFITS UNDER SECTION 2(15) IF IT IS WITHIN THE LIMIT PROVIDED THEREIN. IF IT WAS TO BE INTERPRETED THAT ONCE THE INCOME OF THE TRUST IN ONE YEAR CROSSES THE LIMIT PROVIDED IN THE SECON D PROVISO, THE REGISTRATION ORIGINALLY GRANTED HAS TO BE CANCELLED, IT MAKES TH E SECOND PROVISO REDUNDANT FOR THE YEARS WHERE THE RECEIPTS ARE LESS THAN THE SPECIFIED LIMIT; THIS COULD NOT BE THE INTENTION OF THE LEGISLATURE. IN FACT, T HE ACT DOES NOT PROVIDE FOR CLAIMING OF EXEMPTION ON YEAR TO YEAR BASIS. 8. ON A CONSPECTUS OF THE MATTER WE, THEREFORE, HOL D THAT DENIAL/ CANCELLATION OF REGISTRATION IN THE INSTANT CASE IS NOT IN ACCOR DANCE WITH LAW. TO CLARIFY FURTHER THE GROSS RECEIPTS HAVING EXCEEDED THE STIP ULATED MONITORY LIMIT PROVIDED IN THE SECOND PROVISO TO SECTION 2(1 5) OF THE ACT, THE ASSESSEE IS NOT ENTITLED TO CLAIM EXEMPTION IN THIS YEAR BUT TH AT FACT ALONE CANNOT MAKE THE TRUST NON-GENUINE FOR THE PURPOSE OF INVOKING S ECTION 12AA(3) OF THE ACT. WE, THEREFORE, SET ASIDE THE ORDER PASSED BY THE D IT (EXEMPTION) AND ALLOW THE APPEAL FILED BY THE ASSESSEE. NEEDLES S TO OBSE RVE THAT THE AO IS DUTY BOUND TO INDEPENDENTLY VERIFY AS TO WHETHER THE ASS ESSEE FULFILLED THE OTHER CONDITIONS SUCH AS APPLICATION OF INCOME, ETC . SO AS TO CLAIM EXEMPTION UNDER SECTION 12(15). 4.1 FURTHER, THE TRIBUNAL IN THE CASE OF MADRAS MOTOR SPORTS CLUB VS. DIT(EXEMPTION) 141 ITD 1 (CHENNAI) HELD THAT WHERE OBJECTS AND ACTIVITIES OF THE ASSESSEES CHARITABLE TRUST WERE COVERED UN DER THE CATEGORY OF ADVANCEMENT OF GENERAL PUBLIC UTILITY, IF THE REC EIPT EXCEEDED RS.10.00 5 ITA NO.2014/M /12 THE BOMBAY ANDHRA MAHASABHA & GYMKHANA LACS, SAME COULD NOT BE SUFFICIENT REASON FOR CANCE LLING THE REGISTRATION GRANTED TO THE ASSESSEE U/S.12AA OF THE ACT. IN VIE W OF THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO HOLD THAT DIT(EXEM PTION) IS NOT JUSTIFIED IN CANCELLING THE REGISTRATION GRANTED U/S. 12AA OF TH E INCOME TAX ACT AND ACCORDINGLY WE ANNUL THE ORDER OF THE DIT(EXEMPTION ) ON THIS ISSUE AND RESTORE THE REGISTRATION GRANTED TO THE ASSESSEE U/ S. 12AA OF THE ACT. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 2014/MUM/12 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/2015 ! ' # $%& 04/03/2015 ' SD/- SD/- ( / D. MANMOHAN ) ( / CHANDRA POOJARI ) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; $% DATED 04/03/2015 . % . ./JV, SR. PS 6 ITA NO.2014/M /12 THE BOMBAY ANDHRA MAHASABHA & GYMKHANA ()* ()* ()* ()* +*!) +*!) +*!) +*!) / COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. (.,- / THE RESPONDENT. 3. / ( ) / THE CIT(A)- 4. / / CIT 5. *0' ()% , , / DR, ITAT, MUMBAI 6. '12 3 / GUARD FILE. % % % % / BY ORDER, .*) () //TRUE COPY// 4 44 4 / 5 5 5 5 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI