ADIT (E), New Delhi V. Delhi Golf Club Limited., New Delhi

ITA 3857/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2383 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-12-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 11-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Keywords: Business income; Charitable institution
• Section: 143(3); 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI I.P.BANSAL, JM AND SHRI R.C.SHARMA, AM ITA NO.3857/DEL/2009 ASSESSMENT YEAR : 2006-07 ASSTT.DIRECTOR OF INCOME TAX (E), TRUST CIRCLE II, NEW DELHI. VS. M/S DELHI GOLF CLUB LIMITED, DR.ZAKIR HUSSAIN ROAD, NEW DELHI 110 003. PAN NO.AAACD3321Q. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANISH GUPTA, DR. RESPONDENT BY : SHRI RANJAN CHOPRA, CA. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 12.6.2009 FOR AY 2006-07, IN THE MATTER OF ORDER PA SSED U/S 143(3) OF THE IT ACT. 2. THE GRIEVANCE OF THE REVENUE IS THAT CIT(A) HAS NOT TREATED THE CASUAL MEMBERSHIP FEES AS BUSINESS INCOME. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT ASSESSEE COMPANY IS REGISTERED U/S 12A OF THE ACT WITH THE MAIN ACTIVITY TO PROMOTE THE GAME OF GOLF IN INDIA. IN THE RETURN F ILED FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DECLARED CASUAL MEM BERSHIP FEES. THE ASSESSEE WAS ASKED TO FURNISH LIST OF CASUAL MEMBERS AND THE FEES CHARGED FROM THEM AND DETAILS OF SERVICES ENJOYED BY THEM. VIDE LETTER D ATED 19.11.2008, THE ASSESSEE HAS FURNISHED FULL DETAILS OF CASUAL MEMBERS, FEES CHAR GED FROM THEM ALONGWITH SERVICES ENJOYED BY THEM AND RECEIPTS FROM THE SAME . THE ASSESSEE ALSO FILED FEE STRUCTURE OF THE CASUAL MEMBERS. THE AO OBSERVED T HAT FEES CHARGED FROM THE CASUAL MEMBERS WAS MUCH HIGHER THAN THE PERMANENT M EMBERS AND THE CASUAL MEMBERS ARE NOT ELIGIBLE FOR OTHER FACILITIES. THE AO OBSERVED THAT CASUAL ITA-3857/D/2009 2 MEMBERS DID NOT ENJOY ANY PRIVILEGES EXCEPT USE OF GOLF COURSE FOR CERTAIN FEE, THUS THEY ARE NOT MEMBERS BUT PUBLIC WHO ARE USING THE FACILITY FOR A PRICE. ACCORDINGLY, HE HELD THAT FEES RECEIVED FROM CASUAL MEMBERS IS INCOME FROM BUSINESS AND PROFESSION AND NOT LIABLE FOR EXEMPTIO N U/S 11 OF IT ACT. 4. BY THE IMPUGNED ORDER, CIT(A) ALLOWED THE ASSESS EES CLAIM BY OBSERVING THAT AS PER THE ARTICLE OF ASSOCIATION OF THE ASSES SEE CLUB, THE CASUAL MEMBERS ARE TREATED AS ASSOCIATE MEMBERS AND THEY HAVE TO MAKE PAYMENT FOR THEIR DAY TO DAY PLAYING. THUS, BY ALLOWING CASUAL MEMBERS TO PLAY IN THE CLUB, IT WAS ALLOWING PUBLIC AT LARGE TO LEARN THE GAME OF GOLF FOR WHICH ASSESSEE CLUB HAS BEEN ESTABLISHED, ACCORDINGLY REQUIREMENTS OF SECTION 2( 15) OF THE ACT ARE SATISFIED, THEREFORE BENEFIT U/S 12A CANNOT BE DENIED. AGAINS T THIS ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND ALSO PERUSED THE MEMOR ANDUM AND ARTICLE OF ASSOCIATION OF THE ASSESSEE CLUB. AS PER CLAUSE-9 OF THE ARTICLES OF ASSOCIATION, THE CLUB WAS ENTITLED TO ADMIT VARIOUS CLASSES OF PERSO NS WHICH ALSO INCLUDED CASUAL MEMBERS, IN ADDITION TO PERMANENT AND TENURE MEMBER S. THE CASUAL MEMBERS WERE ALSO USING THE GOLF COURSE IN THE SAME MANNER AS PERMANENT AND TENURE MEMBERS WERE USING. THE AO HAS DECLINED FEES RECEI VED FROM THE CASUAL MEMBERS AS INCOME U/S 12A, MERELY BECAUSE ASSESSEE CLUB WAS NOT MAINTAINING SEPARATE BOOKS OF ACCOUNT REGARDING THIS BUSINESS A CTIVITY. AS PER AO, IT WAS A BUSINESS INCOME AND NOT INCOME OF THE MUTUAL INTERE ST THAT WAS NOT LIABLE FOR EXEMPTION U/S 11. THERE IS NO MERIT IN THE AOS AC TION FOR TREATING THE FEES RECEIVED FROM THE CASUAL MEMBERS AS BUSINESS INCOME . THE ASSESSEE CLUB WAS MAINTAINING REQUIRED RECORDS WITH REGARD TO INCOME AND EXPENDITURE. THERE IS NO REQUIREMENT OF MAINTAINING SEPARATE ACCOUNTS WITH R ESPECT TO THE FEES RECEIVED FROM DIFFERENT KINDS OF MEMBERS AS PROVIDED IN THE ARTICLE OF ASSOCIATION. THE ASSESSEE, DELHI GOLF CLUB LIMITED, IS A WELL-KNOWN CLUB HAVING BEEN IN DELHI FOR ITA-3857/D/2009 3 OVER FIVE DECADES. ITS MAIN OBJECT IS TO PROMOTE T HE GAME OF GOLF IN INDIA. IT HAS MEMBERS FROM VARIOUS WALKS OF LIFE. EVEN THE DEPAR TMENT ALL ALONG AFTER DUE EXAMINATION HAD ACCEPTED THAT ACTIVITY OF THE ASSES SEE AS NOT FOR PROFIT MOTIVE. INSPITE OF THIS CONSISTENT FINDING OF THE DEPARTMEN T ITSELF IN THE PAST, WITHOUT ANY COGENT REASON, THE AO HAS HELD THAT BECAUSE THE ASS ESSEE WAS NOT MAINTAINING SEPARATE BOOKS OF SUCH CASUAL MEMBERS, IT WAS A BUS INESS INCOME OF THE ASSESSEE NOT LIABLE FOR EXEMPTION. AS PER THE ARTICLES OF C LUB, THE CASUAL MEMBERS WERE ALLOWED THE USAGE OF GREEN TO PLAY THE GAME OF GOLF . THE CASUAL MEMBERS ARE ALLOWED TO PLAY GOLF AT THE CLUB, WHEN THEY ARE IN DELHI. THERE IS NO FINDING BY THE AO TO THE EFFECT THAT ACTIVITIES OF THE CLUB DURING THE YEAR WERE NOT COVERED BY THE DEFINITION PROVIDED U/S 2(15) I.E. CHARITABLE PURPO SE WHICH INCLUDES RELIEF OF POOR, EDUCATIONAL AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IN ORDER TO SATISFY THE REQUIREMENT OF BEING AN OBJECT OF G ENERAL PUBLIC UTILITY WITHIN THE MEANING OF SECTION 2(15) OF THE ACT, IT IS NOT NECE SSARY THAT THE BENEFIT SHOULD REACH EACH AND EVERY PERSON OF THE COUNTRY OR THE S TATE. IT IS SUFFICIENT IF IT REACHES A SIZEABLE NUMBER OF MEMBERS OF THE PUBLIC. IT IS THEREFORE CLEAR THAT FOR AN ASSOCIATION TO BE RECOGNIZED AND GIVEN BENEFIT OF S ECTION 12(A) OF THE IT ACT, ITS OBJECTIVES LISTED SHOULD COVER ANY ONE OR ALL THE F OLLOWING LAID DOWN PRINCIPLES:- (1) OBJECT OF GENERAL PUBLIC UTILITY WITH THE MEANI NG OF SECTION 2(15) MEANS THAT THE BENEFIT NEED NOT REACH EACH AND EVERY PERS ON. IT IS SUFFICIENT IF IT REACHES A SIZEABLE NUMBER OF MEMBERS OF THE PUBL IC. (2) TO SERVE A CHARITABLE PURPOSE OBJECT SHOULD BE TO BENEFIT THE MANKIND AND NOT THE WHOLE OF MANKIND IN A PARTICULAR COUNTR Y OR PROVINCE. (3) THE SECTION OF PUBLIC WHICH IS EXPECTED TO BENE FIT SHOULD BE WELL DEFINED EVEN THOUGH IT DOES REPRESENT ONLY A PORTIO N OF THE MANKIND. (4) THE INTENTION OF PROVIDING THE BENEFIT TO PORTI ON OF THE PUBLIC AS INDIVIDUAL SHOULD BE CLEARLY SPELLED OUT. ITA-3857/D/2009 4 6. THE QUESTION WHETHER PROMOTION OF SPORTS AND GAM ES CAN BE CONSIDERED AS BEING A CHARITABLE PURPOSE HAS BEEN EXAMINED. THE BOARD ARE ADVISED THAT THE ADVANCEMENT OF ANY OBJECT BENEFICIAL TO THE PUBLIC OR A SECTION OF THE PUBLIC AS DISTINGUISHED FROM AN INDIVIDUAL OR GROUP OF INDIVI DUALS WOULD BE AN OBJECT OF GENERAL PUBLIC UTILITY. IN VIEW THEREOF, PROMOTION OF SPORTS AND GAMES IS CONSIDERED TO BE A CHARITABLE PURPOSE WITHIN THE ME ANING OF SECTION 2(15) OF THE IT ACT, 1961. THEREFORE, AN ASSOCIATION OR INSTITUTIO N ENGAGED IN THE PROMOTION OF SPORTS AND GAMES CAN CLAIM EXEMPTION UNDER SECTION 11 OF THE IT ACT, 1961, EVEN IF IT IS NOT APPROVED UNDER SECTION 10(23) OF THE A CT RELATING TO EXEMPTION FROM TAX OF SPORTS ASSOCIATIONS AND INSTITUTIONS HAVING THEIR OBJECT AS THE PROMOTION CONTROL, REGULATION AND ENCOURAGEMENT OF SPECIFIED SPORTS AND GAMES. 7. IN VIEW OF THE ABOVE, WE ARE INCLINED TO AGREE W ITH THE LEARNED AR THAT ORDER PASSED BY THE AO IS DEVOID OF ANY MERITS AND NO INTERFERENCE IS REQUIRED IN THE ORDER OF CIT(A), THE FINDING OF WHICH HAS NOT B EEN CONTROVERTED BY THE LEARNED DR DURING THE COURSE OF HEARING BEFORE US. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER, 2009. SD/- SD/- (I.P.BANSAL) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21.12.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-3857/D/2009 5