KHAR GYMKHANA, MUMBAI V. ITO (E) II(1), MUMBAI

ITA 3290/MUM/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71782 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Assessee Lawyers: A H DALAL
• Keywords: Business income; Charitable institution
• Section: 80G; 12A; 12AA; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL H HH H BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . . . !' !' !' !' , # # # # $% $% $% $% BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA, AM , AM , AM , AM ./ I.T.A I.T.A I.T.A I.T.A. NO. . NO. . NO. . NO.3290/MUM/2013 3290/MUM/2013 3290/MUM/2013 3290/MUM/2013 ( & & & & ' ' ' ' / ASSESSMENT YEAR :2009-10) KHAR GYMKHANA, 13 TH ROAD, KHAR (WEST) MUMBAI-400052 / VS. INCOME TAX OFFICER, (E)-II(1) PIRAMAL CHAMBERS, 4 TH FLOOR, LALBAUG, M. K. ROAD, MUMBAI-400012 %( # ./ ) ./ PAN/GIR NO. :AAATK5163C ( (* / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( +,(* / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) & && & -. -. -. -. 0 1 0 1 0 1 0 1 /ASSESSEE BY : SHRI A. H. DALAL % % % % 0 1 0 1 0 1 0 1 / REVENUE BY : SHRI PITAMBER DAS 0 00 0 .# .# .# .# / DATE OF HEARING : 13 TH NOVEMBER 2013 23' 23' 23' 23' 0 00 0. . . .# ## # /DATE OF PRONOUNCEMENT: 27 TH NOVEMBER 2013 $4 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 01.02.2013 OF COMMISSIONER OF INCOME TAX(APPEALS) F OR THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. I) THE LEARNED CHIEF COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFIC ER IN TAXING THE INCOME OF THE APPELLANT @ ` 68,45,200/- ON THE BASI S THAT IT WAS NOT ENTITLED TO EXEMPTION U/S 11. II) THE CIT(A) FAILED TO APPRECIATE THAT- (A) THE APPELLANT WAS EXCLUSIVELY OPERATING THE GYMKHANA FOR SPORTS ACTIVITIES LIKE SWIMMING, SQUAS H, BADMINTON, CRICKET AND TABLE TENNIS ETC. AS PER DET AILED FACTS GIVEN IN THE STATEMENT OF FACTS. ITA NO.3290/M/2013 KHAR GYMKHANA 2 (B) THE SPORTS AND RECREATION ALSO FALL WITHIN THE MEANING OF MODERN CONCEPT OF EDUCATION. (C) THE APPELLANT WAS THEREFORE FOR THE OBJECT OF EDUCATION AS PER THE FIRST THREE OBJECTS DEFINED IN CHARITABLE PURPOSE AND THEREFORE THE PROVISO TO SEC TION 2(15) APPLYING ONLY TO 4 TH OBJECT OF GENERAL PUBLIC UTILITY DID NOT APPLY. (D) THE A.O THEREFORE WRONGLY ASSESSED THE APPELLANT UNDER PROVISO TO SECTION 2(15). II. I) THE A.O WRONGLY ASSESSED THE NON MUTUAL INCO ME DETERMINED @ ` 67,39,299/- AND BUSINESS INCOME @ ` 1,05,901/-. II) THE CIT(A) IGNORED THE CONTENTION OF THE APPEL LANT THAT PROVISO TO SECTION 2(15) WAS NOT APPLICABLE AND MER ELY DISMISSED THE APPEAL ON THE GROUND THAT REGISTRATION U/S 12A IS WITHDRAWN BY THE DIT(E) RETROSPECTIVELY WITH EFFECT FROM ASSE SSMENT YEAR 2009-10, IN WHICH EVEN THE CIT(A) SHOULD HAVE AWAIT ED THE OUTCOME OF THE APPEAL FILED WITH THE TRIBUNAL AGAIN ST THE CANCELLATION ORDER BY DIT(E) U/S 12A. 3. THE ASSESSEE TRUST IS REGISTERED AS A CHARITABLE U/S 12A AS WELL AS U/S 80G OF THE INCOME TAX ACT. THE REGISTRATION U/S 12AA WAS CANCELLED/WITHDRAWN BY THE DIT(E) VIDE ORDER DATED 8.12.2011 WITH EFFECT FROM ASSESSMENT YEAR 2009-10. SUBSEQUENTLY, THE ASS ESSING OFFICER HAS HELD THAT THE ACTIVITIES OF THE ASSESSEE FROM WHICH IT DERIVED INCOME FROM SALE OF LIQUOR, CANTEEN COMPENSATION, DAILY CARD GA MES AND GUEST FEES ARE IN THE NATURE OF TRADE, COMMERCE AND BUSINESS. ACCO RDINGLY, THE ASSESSING OFFICER HELD THAT THE ACTIVITY OF THE ASSESSEE ARE HIT BY THE PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT COUPLED WITH TH E WITHDRAWAL OF THE REGISTRATION/EXEMPTION U/S 12A BY THE DIT(E). THE A .O BROUGHT TO TAX THE ENTIRE INCOME OF THE ASSESSEE. ON APPEAL, THE CIT(A ) HAS CONFIRMED THE ACTION OF THE A.O BY TAKING NOTE OF THE FACT THAT T HE EXEMPTION U/S 11 IS CONTINGENT UPON THE GRANT OF REGISTRATION U/S 12A A ND ONCE THE ITA NO.3290/M/2013 KHAR GYMKHANA 3 REGISTRATION IS WITHDRAWN THE ASSESSEE NO LONGER WO ULD BE ELIGIBLE FOR THE EXEMPTION. 4. BEFORE US THE LD. A.R OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE TRUST HAS BEEN CREATED WITH THE OBJECT TO PROVIDE ITS MEMBER THE FACILITY FOR GAMES, SPORTS, INDOOR AND OUTDOOR AND TO PROVIDE AMENITIES ASSOCIATED THEREWITH. APART FROM THIS THE OBJECT OF THE TRUST ALSO INCLUDE TO PROVIDE ITS MEMBER ALL ADVANTAGES, CONVENIENCE AND AMENITIES OF SOCIAL NATURE TO PROMOTE MANAGE/ASSIST IN THE PROMOTION AN D MANAGEMENT OF ALL FORMATIONS OF SPORTS AND GAME, GENERAL ADVANCEMENT AND PHYSICAL CULTURE AND SOCIAL ACTIVITIES. HE HAS FURTHER SUBMITTED THA T THE PROMOTION OF GAME AND SPORT IS CONSIDERED TO BE A CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME TAX ACT. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE CBDT CIRCULAR NO. 395 DATED 25.9.19 84 AS WELL AS THE DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF CI T VS OOTACAMUND GYMKHANA CLUB 110 ITR 392. THE LD. A.R HAS ALSO REL IED UPON THE DECISION OF HONBLE M. P. HIGH COURT IN CASE OF LITTLE ANGEL S SHIKSHA SAMITI VS UNION OF INDIA 199 TAXMAN 237 AND SUBMITTED THAT TH E HONBLE HIGH COURT HAS HELD THAT THE EDUCATION IS NOT ONLY TO IMPART E DUCATION THROUGH BOOK READING BUT IT ALSO INCLUDES SPORTS ACTIVITIES AND OTHER RECREATIONAL ACTIVITIES, DANCE, THEATRE AND EVEN HAVING EDUCATIO NAL TOUR SO THAT THE CHILDREN CAN DEVELOP THEIR OVERALL TALENT. THE LD. A.R HAS POINTED OUT THAT THE REGISTRATION U/S 12A BY THE DIT(E) HAS BEEN RES TORED BY THIS TRIBUNAL VIDE ORDER DATED 10.7.2013 IN ITA NO. 373/M/2012. T HUS, THE LD. A.R HAS SUBMITTED THAT THE ASSESSEES STATUS OF CHARITABLE TRUST HAS BEEN RESTORED ITA NO.3290/M/2013 KHAR GYMKHANA 4 BY THE TRIBUNAL AND THEREFORE THE EXEMPTION U/S 11 CANNOT BE DENIED TO THE ASSESSEE WHEN THE ASSESSEE IS USING THE ENTIRE INCOME FOR THE PURPOSE OF ADVANCEMENT OF THE OBJECTS OF THE TRUST. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF SPECI AL BENCH OF THIS TRIBUNAL IN CASE OF BREACH CANDY SWIMMING BATH TRUS T VS ITO AND SUBMITTED THAT THE SPECIAL BENCH HAS HELD THAT RUNN ING A BAR AND RESTAURANT IS A PROPERTY HELD UNDER THE TRUST FOR A CHARITABLE OBJECT WITHIN THE MEANING OF SECTION 11(4) AND NOT AFFECTED BY SE CTION 11(4A) OF INCOME TAX ACT. THEREFORE, IT WAS HELD THAT THE ASS ESSEE TRUST IS ENTITLED TO THE EXEMPTION U/S 11. THE LD. A.R HAS FURTHER CO NTENDED THAT THE PROVISO TO SECTION 2(15) IS NOT APPLICABLE IN THE C ASE OF THE ASSESSEE AS THE ASSESSEE IS CARRYING OUT THE CHARITABLE ACTIVIT Y WHICH FALLS UNDER THE TERM EDUCATION. HE HAS FURTHER CONTENDED THAT THE O BJECT OF THE ASSESSEE TRUST ITSELF IS NOT BUSINESS ACTIVITY AND THE ACTIV ITIES OF BAR AND RESTAURANT ARE ONLY IN ADVANCEMENT OF THE OBJECT OF THE TRUST, THEREFORE, THESE ACTIVITIES ARE INCIDENTAL TO THE MAIN OBJECT. ALTER NATIVELY, THE LD. A.R HAS SUBMITTED THAT THE INCOME FROM THE ACTIVITIES WHICH ARE TREATED AS BUSINESS ARE INCIDENTAL TO ACHIEVE OBJECTS OF THE T RUST FALLS U/S 11(4A) OF THE INCOME TAX ACT. 5. ON THE OTHER HAND, THE LD. D.R HAS SUBMITTED THA T POST AMENDMENT TO SECTION 2(15) THE ACTIVITY OF SELL OF LIQUOR DOE S NOT FALL UNDER THE TERM CHARITABLE. HE HAS FURTHER SUBMITTED THAT THE ASSES SEE IS HIT BY THE PROVISO TO SECTION 2(15) OF THE INCOME TAX ACT. HE HAS FURTHER SUBMITTED THAT THE DECISION RELIED UPON BY THE ASSESSEE ARE P RIOR TO THE AMENDMENT ITA NO.3290/M/2013 KHAR GYMKHANA 5 OF SECTION 2(15) OF THE INCOME TAX ACT THEREFORE, T HE SAME ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE A.O DENIED THE EXEMPTION BY CONSIDERING THE FACT THAT THE REGISTRATION U/S 12A WAS CANCELLED/WITHDRA WN BY THE DIT(E) AND FURTHER THE ACTIVITIES OF SALE OF LIQUOR, CANTEEN, DAILY CARD GAMES, GUEST FEES ARE IN THE NATURE OF TRADE, BUSINESS AND COMME RCE AND THEREFORE HIT BY THE PROVISO OF SECTION 2(15) OF THE INCOME TAX A CT. ON APPEAL, THE CIT(A) HAS DECIDED THE ISSUE IN PARA 4.4 OF THE IMP UGNED ORDER AS UNDER: 4.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND FACTS OF THE CASE. THE EXEMPTI ON U/S 11 IS CONTINGENT UPON THE GRANT OF REGISTRATION U/S 12A. ONCE THE REGISTRATION IS WITHDRAWN THE ASSESSEE NO LONGER WO ULD BE ELIGIBLE FOR THE EXEMPTION. SINCE, THE EXEMPTION IT SELF WAS WITHDRAWN RETROSPECTIVELY W.E.F. A.Y. 2009-10 THE Q UESTION OF GRANTING EXEMPTION DOES NOT ARISE. IN VIEW OF THIS, THE A.OS ACTION CANNOT BE FAULTED. AS REGARDS THE ISSUE OF D ITS POWER TO WITHDRAW RETROSPECTIVELY IT IS SEEN THAT THE HONBL E BOMBAY HIGH COURT IN THE CASE OF SINHAGAD TECHNICAL EDUCATION S OCIETY VS CIT (CENTRAL), 343 ITR 23 HELD THAT THE DIT HAD SUCH PO WER. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 7. AS IT IS CLEAR FROM THE FINDING OF THE CIT(A) TH AT THE ISSUE WAS DECIDED SOLELY ON THE BASIS OF WITHDRAWAL/CANCELLAT ION OF REGISTRATION U/S 12A WITHOUT GOING INTO THE ISSUE OF APPLICABILITY O F PROVISO TO SECTION 2(15) OF THE ACT. SINCE, THE REGISTRATION U/S 12A HAS BEE N RESTORED BY THE TRIBUNAL VIDE ORDER DATED 10.7.2013 THEREFORE, WE S ET ASIDE THE IMPUGNED ORDER OF THE CIT(A) AND REMIT THE MATTER TO THE REC ORD OF THE CIT(A) TO DECIDE THE ISSUE ON MERITS AND PARTICULARLY ON THE QUESTION OF APPLICABILITY OF PROVISO TO SECTION 2(15) OF THE ACT. ITA NO.3290/M/2013 KHAR GYMKHANA 6 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF NOVEMBER 2013 SD/- SD/- ( . . !' ) # $% (N. K. BILLAIYA) ACCOUNTANT MEMBER ( ) & $% (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 27 TH NOVEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI