ASST CIT 15(2), MUMBAI V. POINSUR GYMKHANA, MUMBAI

ITA 3919/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100556 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 17-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PERMANAND J
• Keywords: Capital asset; Charitable institution; Capital receipt; Cancellation of registration; Capital expenditure
• Section: 12A; 144; 11

Judgement Text

M/S POINSUR GYMKHANA ITA 3919 /M/20 13 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C , MUMBAI . . , , BEFORE SHRI G S PANNU , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIA L MEMBERITA ITA NO. : 3 9 1 9 /MUM/20 13 (ASSESSMENT YEAR: 200 7 - 0 8 ) A CIT - 15 ( 2 ), MATRU MANDIR, ROOM NO. 113, GRANT ROAD (WEST), MUMBAI 400 0 07 VS M/S POINSUR GYMKHANA , NETAJI SUBHASHCHANDRA BOSE,, KRIDANGAN, POINSUR GYMKHANA MARG, MUMBAI - 400 067 .: PAN : AAA TP 6490 K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PERMANAND J RESPONDENT BY : SHRI MILIN DATT ANI /DATE OF HEARING : 18 - 0 6 - 2015 / DAT E OF PRONOUNCEMENT : 07 - 0 8 - 2015 ORDER PER AMIT SHUKLA , J.M. : TH E AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 08 . 0 2 .20 13 PASSED BY CIT(A) - 2 8 , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 144 RELATING TO ASS ESSMENT YEAR 2007 - 08 ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESEES OBJECTS ARE COVERED UNDER RESIDUAL CATEGORY NAMELY ANY OBJECT OF GENERAL PUBL IC UTILITY AS DENIED U/S 2(15) WHEN THE ASSESSEE TRUST IS NOT ENGAGED IN THE PROMOTION OF ANY SPORTS OR GAMES SO AS TO CONSTRUED AS AN ORGANIZATION WORKING FOR CHARITABLE PURPOSEIN TERMS OF THE PROVISIONS OF SECTION 2(15) OF THE ACT 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESEES OBJECT ARE COVERED UNDER RESIDUAL CATEGORY NAMELY ANY OBJECT OF GENERAL PUBLIC UTILITY AS DENIED U/S 2(15) WHEN THE ACTIVITIES OF THE CLUB TO ALLOW EN TRANCE TO ANY PERSON AGAINST A FEE TO USE THE FACILITIES PROVIDED BY THE CLUB WITHOUT M/S POINSUR GYMKHANA ITA 3919 /M/20 13 2 HIS/HER BEING EITHER A TEMPORARY OR PERMANENT MEMBER OF THE SAID CLUB ENTAILS IT BEING AN ORGANIZATION CONDUCTING COMMERCIAL ACTIVITIES UNDER THE GUISE OF A TRUST. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE I S A TRUST WHICH HAS BEEN REGISTERED AS CHARITABLE TRUST U/S 12A OF THE ACT. LOOKING TO ITS MAIN OBJECT S OF PROMOTING OF INDIAN HERITAGE, TO RUN A GYMNASIUM , MAINTENANCE OF JOGGERS PARK, TO RUN SP ORTS ACADEMY , TO HELP POOR PEOPLE AND TO PROMOTE EDUCATION AMONG GIRLS, WOMEN ETC. THE ASSESSEE HAS FILED IT S RETURN OF INCOME DECLARING LOSS OF RS. 2,20,37,040/ - . AS AGAINST THIS, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 13,52,25 7/ - AFTER DISALLOWING 50% OF THE EXPENDITURE OF R S. 77,24,079/ - ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FURNISH RELEVANT DETAILS. FURTHER , THE ASSESSING OFFICER ALSO MADE THE ADDITION ON ACCOUNT OF MEMBERSHIP FEES RECEIVED BY THE ASSESSEE AMOUNTING T O RS. 96,60,513/ - . THE ASSESSMENT WAS COMPLETED U/S 144 , AS NO PROPER COMPLIANCE OR DETAILS WERE GIVEN BY THE ASSESSEE BEFORE THE ASSESSING OFFICER . 3 . BEFORE THE CIT(A), THE ASSESSEE HAS FILED VOLUMINOUS DETAILS AND EVIDENCES IN SUPPORT OF THE EXPENSES A ND ALSO WITH REGARD TO THE MEMBERSHIP FEES RECEIVED FROM ACTUAL MEMBERS. THE LD. CIT(A) HAD DIRECTED THE ASSESSING OFFICER TO MAKING ENQUIRY ON THE FOLLOWING POINTS: I) WHETHER MEMBERSHIP FEES IS FROM ACTUAL MEMBERS AND THERE IS GENUINE TRANSACTIONS. II) WHETHER ESTABLISHMENT EXPENDITURE OF RS.53,1 1,058/ - IS GENUINE EXPENDITURE AND QUALIFIES AS EXPENDITURE BEING CHARITABLE OR RELIGIOUS IN NATURE. III) WHETHER EXPENDITURE OF RS.24,13,021/ - IS ACTUALLY INCURRED FOR THE BASIC OBJECT OF THE TRUST QUALIFIES AS EXPENDITURE FOR CHARITABLE OR RELIGIOUS PURPOSES. IV) WHETHER SURPLUS INCOME OF RS.82,02,305/ - IS NOT SPENT FOR THE CHARITABLE/RELIGIOUS PURPOSE, IF NOT UTILITY OF THE M/S POINSUR GYMKHANA ITA 3919 /M/20 13 3 SURPLUS IS TO BE REPORTED. V) WHETHER INCOME OF RS.2,01,65,128/ - UTILIZED FOR CRE ATION OF CAPITAL ASSETS IS FOR THE OBJECT OF THE TRUST CLARIFIES FOR STATUTORY DEDUCTIONS. VI) WHETHER TRUST IS COVERED U/S.12A OF THE I.T. ACT, 1961 CLAIMED TO BE A TRUST CHARITABLE OR RELIGIOUS IN NATURE AND NOT OF COMMERCIAL AND OTHER THAN CHARITABLE IN NATURE. 4 . IN RESPONSE, THE ASSESSING OFFICER SUBMITTED HIS DETAILED REMAND REPORT AFTER ENQUIRY, THE CONTENTS OF WHICH HAVE BEEN INCORPORATED BY THE CIT(A) FROM PAGES 4 TO 9 OF THE APPELLATE ORDER. AFTER CALLING FOR THE REJOINDER ON THE REMAND REPORT AND CONSIDERING THE ENTIRE MATERIAL ON RECORD, THE LD. CIT(A), HELD THAT THE ASSESSEE TRUST WHICH WAS FORMED ON 04.03.1999 WAS DULY REGISTERED AS A CHARITABLE TRUST U/S 12A AND ALSO WITH THE CHARITY COMMISSIONER. ITS ACTIVITIES ARE FOR THE OBJECT S OF GEN ERAL PUBLIC UTILITY , AS STIPULATED IN SECTION 2(15). HE NOTED THAT IF THE ASSESSEES ACTIVITIES ARE CHARITABLE , THEN INCOME HAS TO BE COMPUTED AS PER SECTION 11 AND 12. IF THE ASSESSING OFFICER HAD ANY DOUBT ABOUT THE ASSESSEES CHARITABLE ACTIVITIES , THE N HE SHOULD HAVE SENT THE PROPOSAL TO THE CIT/DIT FOR CANCELLATION OF REGISTRATION U/S 12AA. ON MERITS, RELYING UPON THE COMMENTS GIVEN BY THE ASSESSING OFFICER, HE DELETED THE ADDITIONS AFTER OBSERVING AND HOLDING AS UNDER : - COMING TO THE MEMBERSHIP FEES , I HAVE CONSIDERED THE REMAND REPORT OF THE AG AND I AGREE WITH HIM THAT EVEN LIFE MEMBERSHIP FEES RECEIVED FROM THE MEMBERS HAS TO BE CONSIDERED TOWARDS TOTAL RECEIPTS. IN TRUST CASES ALL RECEIPTS HAVE TO BE CONSIDERED IN COMPUTING NET SURPLUS UNLESS UNT IL IT IS TOWARDS CORPUS. THE ASSESSEE'S CONTENTION IN THIS REGARD THAT THERE ARE CAPITAL RECEIPTS AND HAVE TO BE EXCLUDED IS THEREFORE REJECTED. IN FACT THE PROVISIONS RELATING TO TRUST CASES AS MENTIONED IN SECTION 10,11,12,12AA AND 13 OF THE I.T. ACT, M/S POINSUR GYMKHANA ITA 3919 /M/20 13 4 ARE SPECIAL PROVISIONS AND EVEN THE COMPUTATION OF NET SURPLUS OR INCOME IS DONE DIFFERENTLY, AS BOTH CAPITAL AND REVENUE RECEIPTS HAVE TO BE INCLUDED AND BOTH REVENUE AND CAPITAL EXPENDITURE HAS TO BE ALLOWED. HOWEVER, EVEN AFTER CONSIDERING THE TOTAL MEM BERSHIP FEES OF RS.96,60,513/ - , THE COMPUTATION WORKS OUT AS UNDER : - TOTAL RECEIPTS AS DISCLOSED BY THE ASSESSEE RS. 1,59,26,384/ - ADD: MEMBERSHIP FEES RS. 96,60,513/ - RS.2,55,86,897/ - LESS: REVENUE EXPENSES AS CLAIMED BY THE ASSESSEE (53,11,058 + 24,13,012) RS. 77,24,079/ - LESS: CAPITAL EXPENDITURE AS CLAIMED BY THE ASSESSEE RS. 2,01,65,128/ - NET SURPLUS RS.( - )23,02,310/ - SINCE THERE IS NO SURPLUS, NOTHING IS REQUIRED TO BE TAXED IN THE HANDS OF THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND IN VIEW OF THE REMAND REPORT OF THE AO THE ADDITION OF RS. 1,35,22,553 / - MADE IS UNSUSTAINABLE AND IS THEREFORE DIRECTED TO BE DELETED. 5 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT IT IS AN UNDISPUTED FACT THAT THE ASSE S SEE HAS BEEN RECOGNIZED AS A CHARITABLE TRUST LOOKING TO ITS OBJECT S OF GENERAL PUBLIC UTILITY AS DEFINED IN SECTION 2(15), AND REGISTRATION HAS ALSO BEEN GRANTED U/S 12A OF THE INCOME - TAX ACT, 1961. ONCE THAT IS SO, THEN IT IS INCUMBENT UPON THE ASSESSING OFFICER TO COMPUTE THE INCOME IN ACCORDANCE WITH SECTION 11 TO SECTION 1 3 . ALL THE CONTENTIONS OF THE ASSESSING OFFICER S RAISED IN THE REMAND REPORT FOR DENYING THE BENEFIT U/S 1 1 HAVE BEEN TAKEN NOTE OF BY THE CIT(A) WHICH HAS NOT BEEN DISPUTED OR REBUT TED BEFORE US. EVEN IF WE LEAVE APART ALL SUCH OBJECTIONS AND CONTENTIONS RAISED BY THE ASSESSING OFFICER, ON MERITS ALSO , THE LD. CIT(A) HAS CATEGORICALLY OBSERVED THAT EVEN IF TOTAL MEMBERSHIP FEES OF RS. 96,50,513/ - IS ADDED AS DONE BY THE ASSESSING OFF ICER, THEN ALSO , SURPLUS IS IN NEGATIVE I.E. ( - ) 23,02,310/ - WHICH CAN BE SEEN FROM THE WORKING GIVEN ABOVE. M/S POINSUR GYMKHANA ITA 3919 /M/20 13 5 SINCE THERE IS NO SURPLUS , HENCE IT HAS BEEN RIGHTLY HELD BY THE CIT(A) THAT NOTHING IS TAXABLE IN THE HANDS OF THE ASSESSEE. THUS, THE ADDITION MA DE BY THE ASSESSING OFFICER HAS RIGHTLY BEEN DELETED BY CIT(A) AND S UCH A FINDING CANNOT BE INTERFERED WITH, BECAUSE IF ASSESSEE IS REGISTERED U/S12A THEN COMPUTATION OF INCOME AS PER SECTION 11 IS MANDATORY . E VEN IF THE ADDITIONS MADE BY THE ASSESSING OFF ICER IS SUSTAINED , THEN ALSO THERE WOULD BE NO TAXABLE INCOME. ACCORDINGLY, THE ORDER OF THE CIT(A) IS AFFIRMED AND GROUND RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST , 2015. ( . . ) ( ) ( G S PANNU ) ( AMIT SH UKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 7 TH AUGUST , 2015 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A) - 2 8 , MUMBAI 4) THE CIT 26 , MUMBAI . 5) , , / THE D.R. C BENCH , MUMBAI. 6) COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS M/S POINSUR GYMKHANA ITA 3919 /M/20 13 6 . SR.N EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT ON HANDWRITTEN MANUSCRIPT 27 .0 7 . 20 1 5 . . SR.PS 2 DRAFT PLACED BEFORE AUTHOR 05 . 0 8 .2015 . . SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SEC OND MEMBER / JM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER / AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS . . SR.PS 6 KEPT FOR PRONOUNCEMENT ON . . SR.PS 7 FILE SENT TO THE BENCH CLERK . . SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER