ITO (E), New Delhi V. M/s. The Indian Golf Union, New Delhi

ITA 2653/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6773 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 2653/DEL/2015 AY: 20 10-11 INCOME TAX OFFICER (E), VS THE INDIAN GO LF UNION, WARD 2(3), 24 TH , 1ST FLOOR, ADCHINI, NEW DELHI. NEW DELHI-110017 (PAN: AAATT3232B) (APPELLANT) (RESPONDENT) APPELLANT BY : MS ASHIMA NEB, SR. DR RESPONDENT BY : NONE DATE OF HEARING: 02.07.2018 DATE OF PRONOUNCEMENT: 04.07.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL IS PREFERRED BY THE DEPARTMENT AGAINST THE ORDER DATED 24.02.2015 PASSED BY THE LD. CIT (APPEALS)-40 , NEW DELHI FOR ASSESSMENT YEAR 2010-11. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SOCIETY IS REGISTERED UNDER THE SOCIETYS REGISTRATION ACT, 18 60 AND IS ALSO REGISTERED U/S 12A OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS 'THE ACT') VIDE ORDER DATED 31.08.19 99. ADMITTEDLY, THE OBJECTS OF THE SOCIETY INCLUDE PROMOTION OF GOL F IN INDIA, FOSTERING AND MAINTAINING A HIGH STANDARD OF AMATEU R GOLF IN ITA NO. 2653/DEL/2015 ASSESSMENT YEAR 2010-11 2 INDIA, CONDUCTING THE AMATEUR GOLF CHAMPIONSHIP OF INDIA AND OTHER GOLF CHAMPIONSHIPS AND PROMOTING AND ARRANGIN G GOLF MATCHES AND COMPETITIONS IN INDIA AND ABROAD. 2.1 THE RETURN OF INCOME WAS FILED AT NIL AND THE C ASE WAS SELECTED FOR SCRUTINY SUBSEQUENTLY. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAD RECEIVED SPONSORSHIP FEES OF RS. 1,70, 69,931/- DURING THE YEAR AND, ACCORDINGLY, HE WAS OF THE OPI NION THAT THE ASSESSEE WAS GENERATING INCOME BY WAY OF RECEIVING SPONSORSHIPS. THE ASSESSING OFFICER REQUIRED THE A SSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSEE WAS CARRYING OUT BUSINESS ACTIVITIES ALTHOUGH IT WAS A CHARITABLE SOCIETY. I T WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE ASSESSING OFF ICER THAT IT WAS NOT ENGAGED IN ANY BUSINESS AND THAT THE SPONSO RSHIPS WERE RECEIVED IN FURTHERANCE OF ITS ACTIVITIES FOR ORGAN IZING GOLF TOURNAMENTS AND FOR PROMOTION OF THE SPORT OF GOLF IN INDIA. HOWEVER, THE ASSESSING OFFICER WAS OF THE OPINION T HAT THE ASSESSEE SOCIETY WAS CARRYING OUT AN OBJECT OF GENE RAL PUBLIC UTILITY AND, WAS, THEREFORE, REQUIRED TO AVOID ANY ACTIVITY WHICH WAS IN THE NATURE OF BUSINESS, TRADE OR COMMERCE. THE ASSESSING OFFICER WAS ALSO OF THE VIEW THAT THIS ATTRACTED TH E APPLICATION OF ITA NO. 2653/DEL/2015 ASSESSMENT YEAR 2010-11 3 FIRST PROVISO TO SECTION 2(15) OF THE INCOME TAX AC T, 1961 AND, THEREFORE, COMMERCIAL RECEIPTS WOULD NOT BE ENTITLE D TO GET THE BENEFIT OF EXEMPTION IN RESPECT OF SUCH INCOME. TH E ASSESSING OFFICER PROCEEDED TO TAX THE SURPLUS GENERATED FOR THE YEAR AMOUNTING TO RS. 39,08,961/- AT THE MAXIMUM MARGINA L RATE AFTER DENYING THE BENEFIT OF EXEMPTION U/S 11/12 OF THE ACT. 2.2 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. FIRS T APPELLATE AUTHORITY WHO ALLOWED THE ASSESSEES APPEAL AND DIR ECTED THE ASSESSING OFFICER TO ALLOW EXEMPTION U/S 11(1) OF T HE ACT TO THE ASSESSEE. NOW, THE DEPARTMENT HAS APPROACHED THE I TAT AND HAS CHALLENGED THIS ACTION OF THE LD. CIT (A). 3. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE WHEN THE APPEAL WAS CALLED OUT FOR HEARING NOR WAS ANY ADJOURNMENT APPLICATION RECEIVED ON BEHALF OF THE ASSESSEE/RESPONDENT. HOW EVER, LOOKING INTO THE FACTS OF THE CASE, WE ARE PROCEEDING TO DE CIDE THE APPEAL ON MERITS EX PARTE QUA THE ASSESSEE/RESPONDENT. 4. THE LD. SR. DR READ OUT EXTENSIVELY FROM THE ASS ESSMENT ORDER AND ARGUED THAT AS PER THE NEW DEFINITION OF CHARITY IN SECTION 2(15) OF THE ACT, CHARITABLE SOCIETIES WITH THE OBJECT OF GENERAL PUBLIC UTILITY CANNOT CARRY OUT ANY ACTIVIT Y WHICH IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR IS RENDERI NG ANY SERVICE ITA NO. 2653/DEL/2015 ASSESSMENT YEAR 2010-11 4 IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS. TH E LD. SR. DR SUBMITTED THAT THE ACTIVITY OF THE ASSESSEE IN TAKI NG SPONSORSHIP HAS THE CHARACTERISTIC OF BUSINESS AND SINCE THE AS SESSEES CASE FALLS UNDER THE LAST LIMB OF SECTION 2(15) I.E. THE ADVANCEMENT OF OBJECT OF ANY OTHER GENERAL PUBLIC UTILITY, IT IS H IT BY PROVISO TO SECTION 2(15) OF THE ACT. LD. SR. DR ALSO SUBMITTE D THAT THE LD. CIT (A) HAD ERRED IN DIRECTING THAT THE ASSESSEE SH OULD BE GRANTED THE BENEFIT U/S 11(1) OF THE ACT. 5. WE HAVE HEARD THE LD. SR. DR AND HAVE ALSO PERUS ED THE ORDER OF THE LD. CIT (A). LD. CIT(A) WHILE ALLOWIN G RELIEF TO THE ASSESSEE HAS FOLLOWED THE RATIO OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOT ION ORGANIZATION VS. DGIT(E) REPORTED IN 53 TAXMANN.COM 404 (DEL) WHEREIN VIDE JUDGMENT DATED 22.01.2015, THE HONBLE DELHI HIGH COURT WHILE UPHOLDING THE CONSTITUTIONAL VALIDITY O F PROVISO TO SECTION 2(15) HAS LAID DOWN THE STRICT AND LITERAL INTERPRETATION OF THE PROVISO TO SECTION 2(15) AND HAS HELD THAT MERE RECEIPT OF FEE OR CHARGE WILL NOT MEAN THAT THE ASSESSEE IS INVOL VED IN ANY TRADE, COMMERCE OR BUSINESS. IN THE CASE OF INDIA T RADE PROMOTION ORGANISATION, THE LD. DGIT (E) HAD PASSED AN ORDER STATING THAT THOUGH THE ASSESSEE WAS ENGAGED IN TH E ITA NO. 2653/DEL/2015 ASSESSMENT YEAR 2010-11 5 ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY, AS PER S. 2(15) OF THE ACT, ITS OBJECT COULD NOT BE REGARD ED AS CHARITABLE PURPOSES DUE TO THE NEW PROVISO TO S. 2(15) AND FU RTHER THAT IT WAS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(IV). IT WAS HELD BY THE LD. DGIT (E) THAT AS THE ASSESSEE HAD HUGE SURPLUSE S IN BANKS, IT HAD GIVEN ITS SPACE FOR RENT DURING TRADE FAIRS AND EXHIBITIONS, IT HAD RECEIVED INCOME BY WAY OF SALE OF TICKETS AND I NCOME FROM FOOD AND BEVERAGE OUTLETS IN PRAGATI MAIDAN , ETC, THE ASSESSEE WAS RENDERING SERVICE TO A LARGE NUMBER OF TRADERS AND INDUSTRIALISTS IN RELATION TO TRADE, COMMERCE AND B USINESS AND WAS, THEREFORE, HIT BY THE EXPANDED LIST OF ACTIVIT IES CONTAINED IN THE PROVISO TO SECTION 2(15). IT WAS FURTHER OBSERV ED BY THE LD. DGIT (E) THAT THE SERVICE OF ALLOTTING SPACE AND OT HER AMENITIES LIKE WATER, ELECTRICITY AND SECURITY, ETC. TO THE T RADERS TO CONDUCT THEIR EXHIBITIONS FELL WITHIN THE AMBIT OF ANY ACTI VITY OF RENDERING ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSIN ESS. THE ASSESSEE FILED A WRIT PETITION BEFORE THE HONBLE D ELHI HIGH COURT CLAIMING THAT THE FIRST PROVISO TO SECTION 2(15), A S AMENDED BY THE FINANCE ACT, 2008, WAS ARBITRARY AND UNREASONAB LE AND VIOLATIVE OF ARTICLE 14 OF THE CONSTITUTION OF INDI A. THE HONBLE ITA NO. 2653/DEL/2015 ASSESSMENT YEAR 2010-11 6 DELHI HIGH COURT HELD IN THE FAVOUR OF THE ASSESSEE . THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT ARE AS UNDER : (I) IT IS APPARENT THAT MERELY BECAUSE A FEE OR SOM E OTHER CONSIDERATION IS COLLECTED OR RECEIVED BY AN INSTIT UTION, IT WOULD NOT LOSE ITS CHARACTER OF HAVING BEEN ESTABLI SHED FOR A CHARITABLE PURPOSE. IT IS ALSO IMPORTANT TO NOTE AS TO WHAT IS THE DOMINANT ACTIVITY OF THE INSTITUTION IN QUESTIO N. IF THE DOMINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINE SS, TRADE OR COMMERCE, THEN ANY SUCH INCIDENTAL OR ANCILLARY ACT IVITY WOULD ALSO NOT FALL WITHIN THE CATEGORIES OF TRADE, COMMERCE OR BUSINESS. IT IS CLEAR FROM THE FACTS OF THE PRES ENT CASE THAT THE DRIVING FORCE IS NOT THE DESIRE TO EARN PROFITS BUT, THE OBJECT OF PROMOTING TRADE AND COMMERCE NOT FOR ITSE LF, BUT FOR THE NATION BOTH WITHIN INDIA AND OUTSIDE INDIA. C LEARLY, THIS IS A CHARITABLE PURPOSE, WHICH HAS AS ITS MOTIVE TH E ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY TO WHICH THE EXCEPTION CARVED OUT IN THE FIRST PROVISO TO SECTIO N 2(15) OF THE SAID ACT WOULD NOT APPLY; (II) IF A LITERAL INTERPRETATION WERE TO BE GIVEN T O THE SAID PROVISO, THEN IT WOULD RISK BEING HIT BY ARTICLE 14 (THE EQUALITY CLAUSE ENSHRINED IN ARTICLE 14 OF THE CONSTITUTION) . IT IS WELL- SETTLED THAT THE COURTS SHOULD ALWAYS ENDEAVOUR TO UPHOLD THE CONSTITUTIONAL VALIDITY OF A PROVISION, AND IN DOING SO, THE PROVISION IN QUESTION MAY HAVE TO BE READ DOWN; ITA NO. 2653/DEL/2015 ASSESSMENT YEAR 2010-11 7 (III) SECTION 2(15) IS ONLY A DEFINITION CLAUSE. TH E EXPRESSION CHARITABLE PURPOSE APPEARING IN SECTION 2 (15) OF THE SAID ACT HAS TO BE SEEN IN THE CONTEXT OF SECTION 10(23C )(IV). WHEN THE EXPRESSION CHARITABLE PURPOSE, AS DEFINED IN SECTION 2(15) OF THE ACT, IS READ IN THE CONTEXT OF SECTION 10(23C)(IV) OF THE SAID ACT, WE WOULD HAVE TO GIVE UP THE STRICT A ND LITERAL INTERPRETATION SOUGHT TO BE GIVEN TO THE EXPRESSION CHARITABLE PURPOSE BY THE REVENUE. IN CONCLUSION, WE MAY SAY THAT THE EXPRESSION 'CHAR ITABLE PURPOSE', AS DEFINED IN SECTION 2(15) CANNOT BE CON STRUED LITERALLY AND IN ABSOLUTE TERMS. IT HAS TO TAKE COLOUR AND BE CONSIDERED IN THE CONT EXT OF SECTION 10(23C)(IV) OF THE SAID ACT. IT IS ALSO CLEAR THAT IF THE LITERAL INTERPRETATION IS GIVEN TO THE PROVISO TO SECTION 2(15) OF THE SAID ACT, THEN THE PROVISO WOULD BE AT RISK OF RUNNING FOWL OF THE PRINCIPLE OF EQUALITY ENSHRINED IN ARTICLE 14 OF THE CONSTITUTION INDIA. IN ORDER TO SAVE THE CONSTITUTIONAL VALIDITY OF THE PROVISO, THE SAME WO ULD HAVE TO BE READ DOWN AND INTERPRETED IN THE CONTEXT OF SECT ION 10(23C)(IV) BECAUSE, IN OUR VIEW, THE CONTEXT REQUI RES SUCH AN INTERPRETATION. THE CORRECT INTERPRETATION OF TH E PROVISO TO SECTION 2(15) OF THE SAID ACT WOULD BE THAT IT C ARVES OUT AN EXCEPTION FROM THE CHARITABLE PURPOSE OF ADVANCE MENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THAT EXCEPTION IS LIMITED TO ACTIVITIES IN THE NATURE OF TRADE, COMME RCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE I N RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE O R ANY ITA NO. 2653/DEL/2015 ASSESSMENT YEAR 2010-11 8 OTHER CONSIDERATION. IN BOTH THE ACTIVITIES, IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE ACTIVITY OF REND ERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS, THE DOMINANT AND THE PRIME OBJECTIVE HAS TO BE SEEN. IF THE DOMINANT AND PRIME OBJECTIVE OF THE INSTITUTION, WH ICH CLAIMS TO HAVE BEEN ESTABLISHED FOR CHARITABLE PURPOSES, I S PROFIT MAKING, WHETHER ITS ACTIVITIES ARE DIRECTLY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR INDIRECTLY IN THE RE NDERING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR B USINESS, THEN IT WOULD NOT BE ENTITLED TO CLAIM ITS OBJECT T O BE A 'CHARITABLE PURPOSE'. ON THE FLIP SIDE, WHERE AN IN STITUTION IS NOT DRIVEN PRIMARILY BY A DESIRE OR MOTIVE TO EARN PROFITS, BUT TO DO CHARITY THROUGH THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, IT CANNOT BUT BE REGARDED AS AN INS TITUTION ESTABLISHED FOR CHARITABLE PURPOSES. THUS, WHILE WE UPHOLD THE CONSTITUTIONAL VALIDITY O F THE PROVISO TO SECTION 2(15) OF THE SAID ACT, IT HAS TO BE READ DOWN IN THE MANNER INDICATED BY US. 5.1 WE FIND THAT THE LD. CIT (A) HAS DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE BY RELYING ON THE RATIO LAID DOWN B Y THE HONBLE JURISDICTIONAL HIGH COURT. WE FURTHER NOTE THAT EVE N DURING THE COURSE OF PROCEEDINGS BEFORE US AND EVEN ON BEING S PECIFICALLY ASKED BY THE BENCH, THE LD. SR. DR COULD NOT POINT OUT ANY OTHER JUDGMENT TO THE CONTRARY IN THIS REGARD. IT IS UNDI SPUTED THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY HAVE NOT BEEN DO UBTED BY THE ITA NO. 2653/DEL/2015 ASSESSMENT YEAR 2010-11 9 TAX AUTHORITIES AND THEY CONTINUE TO BE REGARDED AS CHARITABLE IN NATURE. ACCORDINGLY, FOLLOWING THE RATIO OF THE JUD GMENT OF THE HONBLE DELHI HIGH COURT AS AFORESAID WHICH HAS ALS O BEEN APPLIED BY THE LD. CIT (A), WE FIND NO REASON TO IN TERFERE WITH THE FINDINGS OF THE LD. CIT (A) IN THIS REGARD AND WE D ISMISS THE GROUNDS RAISED BY THE DEPARTMENT. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH JULY, 2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 4 TH JULY, 2018 GS COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 4. DR, ITAT BY ORDER ASSTT. REGISTRAR ITA NO. 2653/DEL/2015 ASSESSMENT YEAR 2010-11 10 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER 1