Hamsadhwani, CHENNAI V. DIT, CHENNAI

ITA 494/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57886 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-01-2012
• Assessment Year: misc
• Appeal Filed On: 15-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: V JAGDISAN
• Keywords: Business income; Charitable institution; Retrospective amendment
• Section: 80G; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 494/MDS/2011 M/S HAMSADHWANI, 2, 8 TH LANE, INDIRA NAGAR, CHENNAI 600 020. PAN : AAATH0154Q (APPELLANT) V. THE DIRECTOR OF INCOME TAX (EXEMPTIONS), CHENNAI 600 034. (RESPONDENT) APPELLANT BY : SHRI V. JAGDISAN, CA RESPONDENT BY : SHRI K.E.B. RENGARAJAN, JUNIOR STANDING COUNSEL DATE OF HEARING : 16.01.2012 DATE OF PRONOUNCEMENT : 16.01.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVAN CE IS THAT LD. DIT(EXEMPTIONS), CHENNAI, DENIED IT RENEWAL OF APPR OVAL UNDER SECTION 80G OF INCOME-TAX ACT, 1961(IN SHORT THE ACT) THOUGH IT WAS HAVING SUCH AN APPROVAL FOR THE PERIOD 1.4.2006 TO 31.3.2009. I.T.A. NO. 494/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, A SOCIETY FORMED FOR ADVANCEMENT OF MUSIC, OTHER FINE ARTS AND TRADITION AL ARTS, HAD APPLIED FOR RENEWAL OF ITS APPROVAL UNDER SECTION 8 0G OF THE ACT VIDE APPLICATION DATED 10.3.2010 IN FORM 10G PRESCRIBED UNDER INCOME- TAX RULES, 1962. ASSESSEE WAS ALREADY REGISTERED U NDER SECTION 12AA OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') V IDE C.NO.DIT(E) 2(110)91-92 DATED 9.8.1991. LD. DIT(E) NOTED THAT RECEIPTS OF THE ASSESSEE FROM SPONSORSHIP FEES, SALE OF TICKETS AND MUSIC COACHING FOR FINANCIAL YEARS 2007-08 TO 2009-10 WAS IN EXCES S OF ` 10 LAKHS AND ASSESSEE WAS PUT ON NOTICE WHY ITS APPLICATION FOR RENEWAL OF APPROVAL UNDER SECTION 80G OF THE ACT SHOULD NOT BE REJECTED IN VIEW OF THE AMENDMENT MADE TO SECTION 2(15) OF THE ACT B Y FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1.4.2009 ADDING A SECOND PROVISO THERETO. REPLY OF THE ASSESSEE WAS THAT THE SPONSO RSHIP FEES RECEIVED FROM ITS MEMBERS WERE FOR PAYING OFF THE A RTISTS AND THESE WERE NEITHER A BUSINESS RECEIPT NOR FROM ANY ADVENT URE IN THE NATURE OF TRADE. AS PER THE ASSESSEE, INSOFAR AS SALE OF TICKETS WAS CONCERNED, THESE WERE ISSUED TO VISITORS WHO CAME T O SEE A PARTICULAR PROGRAMME, WHO WERE MADE TEMPORARY MEMBERS OF THE S OCIETY FOR I.T.A. NO. 494/MDS/11 3 THAT PURPOSE. INSOFAR AS MUSIC COACHING WAS CONCE RNED, ARGUMENT OF THE ASSESSEE WAS THAT IMPARTING MUSIC COACHING W AS NOTHING BUT EDUCATION, AND PER SE WAS CHARITABLE IN NATURE. AP ART FROM THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT V. SRI THYAGA BRAHMA GANA SABHA (188 ITR 160), ASSESSEE AL SO RELIED ON FOLLOWING DECISIONS OF CO-ORDINATE BENCH OF THIS TR IBUNAL IN SUPPORT OF ITS RENEWAL APPLICATION:- 1. MARAA V. ITO (EXEMPTIONS) 130 TTJ 489 (CHENNAI) 2. CANE DEVELOPMENT COUNCIL, MAWANA V. CIT 128 TTJ 316 (DELHI) 3. HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTI ON CONTROL BOARD V. CIT 125 TTJ 98 (CHANDIGARH) HOWEVER, THE DIT(E) WAS OF THE OPINION THAT THE C ASE LAWS RELIED ON BY THE ASSESSEE WERE DISTINGUISHABLE AND ASSESSEE W AS HAVING RECEIPTS EXCEEDING ` 10 LAKHS IN EACH YEAR. SUCH RECEIPTS WERE IN THE NATURE OF COMMERCIAL/TRADE RECEIPTS ACCORDING T O HIM AND THEREFORE, THE ACTIVITIES OF THE ASSESSEE-SOCIETY W ERE HIT BY THE FIRST PROVISO TO SECTION 2(15) OF THE ACT DEFINING CHARI TABLE PURPOSE. ACCORDING TO HIM, ASSESSEES RELIANCE ON THE DECISI ON OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SRI THYAGA BRAHMA GANA I.T.A. NO. 494/MDS/11 4 SABHA (SUPRA) WOULD ALSO NOT HELP IT SINCE ADVANCEM ENT OF MUSIC WAS ONLY AN OBJECT OF GENERAL PUBLIC UTILITY AND TH EREFORE, ASSESSEE HAD TO SATISFY THE CONDITION SPELT OUT IN FIRST PRO VISO TO SECTION 2(15) OF THE ACT WHICH IT HAD NOT DONE. HE, THEREFORE, REJE CTED THE APPLICATION FOR RENEWAL FILED BY THE ASSESSEE. 3. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDER OF DIT(E), SUBMITTED THAT ASSESSEE WAS A SOCIETY ENGAG ED IN ENCOURAGING CLASSICAL DANCE AND MUSIC AND CONDUCTIN G DANCE AND MUSIC PROGRAMMES OF REPUTED PERFORMERS AND MUSICIAN S FOR ADVANCEMENT OF MUSIC. AS PER LEARNED A.R., ASSESS EES OBJECT WAS DEVELOPMENT OF MUSIC AND OTHER FINE ARTS BASED ON I NDIAN CULTURE AND ASSESSEE WAS NOT CARRYING ON ANY TRADE, COMMERCE OR BUSINESS, WHEN IT WAS COLLECTING FEES FROM PERSONS WHO WERE A TTENDING THE PROGRAMMES. AS PER LEARNED A.R., THE SPONSORSHIP F EES RECEIVED WERE USED FOR PAYING THE ARTISTS AND THERE WAS NO C OMMERCIAL INTENTION OR ANY FLAVOUR OF TRADING INVOLVED OF THE ACTIVITIES OF THE ASSESSEE. ACCORDING TO HIM, LD. DIT(E) WENT WRONG IN CONCLUDING THAT SPONSORSHIP FEE AND FEE FOR MUSIC COACHING WER E ALL EMANATING FROM ANY BUSINESS, TRADING OR COMMERCIAL ACTIVITIES WHEN THE PURPOSE I.T.A. NO. 494/MDS/11 5 OF THE ASSESSEE WAS NOT COMMERCIAL AT ALL. HE ALSO SUBMITTED THAT THE ASSESSEE WAS HAVING REGISTRATION UNDER SECTION 12AA OF THE ACT VIDE ORDER DATED 9.8.1991 AND THIS WAS STILL CONTIN UING. ACCORDING TO HIM, DENIAL OF RENEWAL OF APPLICATION UNDER SECTION 80G OF THE ACT, WHEN ITS REGISTRATION UNDER SECTION 12AA OF THE ACT WAS INTACT, WAS UNJUSTIFIED. RELIANCE WAS ALSO PLACED ON THE DECIS ION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF MYLAPORE FINE ARTS CLUB V. DDIT(E) IN I.T.A. NO.1706/MDS/2010 DATED 12 TH SEPTEMBER, 2011. 4. PER CONTRA, LEARNED D.R. STRONGLY SUPPORTING THE ORDER OF LD. DIT(E), SUBMITTED THAT FEES FOR MUSIC COACHING, SAL E OF TICKETS AND SPONSORSHIP FEE RECEIVED BY THE ASSESSEE EXCEEDED ` 10 LAKHS AND BY APPLICATION OF SECOND PROVISO TO SECTION 2(15) OF THE ACT, ASSESSEE WENT OUT OF THE DEFINITION OF CHARITY AN D HENCE WAS NOT ELIGIBLE FOR RENEWAL OF APPROVAL UNDER SECTION 80G OF THE ACT. LEARNED D.R. POINTED OUT THAT THE SECOND PROVISO TO SECTION 2(15) OF THE ACT WAS INTRODUCED BY FINANCE ACT, 2010 WITH RE TROSPECTIVE EFFECT FROM 1.4.2009 AND THEREFORE, LD. DIT(E) HAD RIGHTL Y REFUSED TO GRANT A RENEWAL BASED ON SUCH AMENDED LAW. ACCORDING TO HI M, THE I.T.A. NO. 494/MDS/11 6 ARGUMENT OF THE ASSESSEE THAT THERE WAS NO CHANGE I N THE FACTUAL SITUATION FOR TAKING A DIFFERENT VIEW IN THE MATTER WHEN THE ASSESSEE WAS ENJOYING THIS APPROVAL FOR THE PERIOD FROM 1.4. 2006 TO 31.3.2009 WAS ILL CONCEIVED IN VIEW OF THE AMENDED LAW. 5. WE HAVE PERUSED THE ORDER OF LD. DIT(E) AND HE ARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT ASSESSEE WAS ENGAGED IN THE ADVANCEMENT OF MUSIC AND FINE ARTS, WHICH WAS CULTU RALLY IMPORTANT IN THE STATE OF TAMIL NADU. THE OBJECTS OF THE ASSESS EE AS MENTIONED IN ITS MEMORANDUM OF ASSOCIATION PLACED AT PAPER-BO OK PAGE NO.2, READ AS FOLLOWS:- 1. TO PROMOTE THE ADVANCEMENT OF MUSIC AND OTHER F INE ARTS AND TRADITIONAL ARTS. 2. IN PURSUANCE OF THE ABOVE OBJECTS, TO HOLD MUSICAL ENTERTAINMENTS, DISCOURSES, DANCE RECITALS, GROUP SINGING, DRAMAS, EXHIBITIONS, LECTURES, SEMINARS, COMPETITIONS, ETC. 3. TO ARRANGE FOR THE EXPOSITION OF MUSIC AND OTHE R ARTS BY COMPETENT ARTISTS AND TO ENCOURAGE DESERVIN G TALENT. 4. TO CONDUCT SCHOOLS FOR IMPARTING INSTRUCTIONS IN TH E ABOVE ARTS ON CORRECT LINES AND THUS AFFORD FACILIT IES FOR THE PROPAGATION AND DEVELOPMENT OF SUCH ARTS. 5. TO DO SUCH OTHER THINGS O R UNDERTAKE ACTIVITIES AS ARE INCIDENTAL AND ARE CONDUCIVE TO THE ATTAINMENT OF THE ABOVE OBJECTS. I.T.A. NO. 494/MDS/11 7 AS HELD BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL I N THE CASE OF MYLAPORE FINE ARTS CLUB (SUPRA), THERE CANNOT BE TW O OPINIONS THAT IN THE STATE OF TAMIL NADU, WHICH IS A LAND OF MUSIC, DANCE AND CLASSICAL ACTIVITIES PROMOTING THE ADVANCEMENT OF S UCH ARTS, CAN ONLY BE CONSTRUED AS A CHARITABLE PURPOSE COMING UNDER SECTION 2(15) OF THE ACT. HOWEVER, AS PER LD. DIT(E) , RECEIPTS OF THE ASSESSEE EXCEEDED ` 10 LAKHS FOR THE YEARS 2007-08 TO 2009-10. SUCH RECEIPTS AS CULLED OUT FROM PARA 6 OF DIT(E) S ORD ER IS REPRODUCED HEREUNDER:- 2009 - 10 ` 2008 - 09 ` 2007 - 08 ` SPONSORSHIP FEES 8,55,305 7,43,250 9,88,069 SALE OF TICKETS 52,300 91,800 76,750 FEES F OR MUSIC COACHING 4,25,900 4,16,350 3,90,850 TOTAL 13,33,505 12,51,400 14,55,669 IF WE HAVE A LOOK AT SECTION 2(15) OF THE ACT WHICH DEFINES CHARITABLE PURPOSE, IT RUNS AS UNDER:- 2 ( 15 ) 55 CHARITABLE PURPOSE 56 INCLUDES RELIEF OF THE POOR, EDUCATION 56 , MEDICAL RELIEF, 57 [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLAC ES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHE R 56 OBJECT OF GENERAL PUBLIC UTILITY: I.T.A. NO. 494/MDS/11 8 PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES T HE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY A CTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS 56 , FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:] 58 [ PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGR EGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THE REIN IS 58A [ TEN LAKH RUPEES ] OR LESS IN THE PREVIOUS YEAR;] NO DOUBT, IT HAS BEEN SPECIFICALLY PROVIDED IN THE FIRST PROVISO THAT ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR RENDERING ANY SERVICE IN C ONNECTION WITH TRADE, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION . THE THIRD PROVISO EXCLUDES FROM THE RESTRAINTS IMPOSED BY FIRST PROVI SO, WHERE SUCH RECEIPTS WERE LESS THAN ` 10 LAKHS. THE QUESTION HERE IS WHETHER SPONSORSHIP FEE, WHICH FORMS SUBSTANTIAL PART OF TH E AMOUNTS LISTED ABOVE, CAN BE CONSIDERED AS RECEIPT FROM ACTIVITY I N THE NATURE OF TRADE, COMMERCE AND BUSINESS. IN OUR OPINION, ADVA NCEMENT OF TRADITIONAL MUSICAL CULTURE OF TAMIL NADU AND CONDU CTING MUSIC PROGRAMMES FOR THAT PURPOSE, WHERE SUCH MUSIC AND D ANCE PROGRAMMES WERE SPONSORED BY VARIOUS PERSONS AND SP ONSORSHIP FEE SO RECEIVED, DISTRIBUTED AMONG THE ARTISTS, CAN NEVER BE I.T.A. NO. 494/MDS/11 9 CONSIDERED AS AN ACTIVITY IN THE NATURE OF TRADE, C OMMERCE OR BUSINESS. WHEN A PERSON SPONSORS A MUSIC PROGRAMME AND SPONSORSHIP FEE IS PAID TO ARTIST CONCERNED, WE CAN NOT SAY THAT SPONSORSHIP FEE IS A RECEIPT IN THE HANDS OF THE AS SESSEE WHICH IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. SIMILAR LY, CONDUCTING MUSIC COACHING FOR THE PURPOSE OF ADVANCEMENT OF VA RIOUS TRADITIONAL MUSIC FORMS OF STATE OF TAMIL NADU, WHICH IS AN INT EGRAL PART OF CULTURAL LIFE OF PEOPLE OF TAMIL NADU, CANNOT ALSO BE CONSIDERED TO BE AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE AND BU SINESS. THIS CAN AT THE BEST BE CONSIDERED AS AN EDUCATIONAL PURSUIT . WHEN THERE ARE COLLEGES RUN FOR COACHING MUSIC, WE CANNOT SAY THAT TRAINING IMPARTED IN MUSIC IS NOT EDUCATION. IN OUR OPINION, THE LD. DIT(E) TOOK A VERY NARROW VIEW IN THIS REGARD AND CAME TO A CONCLUSION THAT THE SPONSORSHIP FEE AND MUSIC COACHING FEE RECEIVED BY THE ASSESSEE WERE FROM THE ACTIVITY IN THE NATURE OF TRADE, COMM ERCE OR BUSINESS. ASSESSEE, IN OUR OPINION, WAS NOT CARRYING ON ANY A CTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS BUT WAS CARRY ING ON ITS AVOWED OBJECT OF ADVANCEMENT OF FINE ARTS AND TRADI TIONAL ART FORMS, WHICH CANNOT BE CONSIDERED AS A COMMERCIAL OR BUSIN ESS ACTIVITY. I.T.A. NO. 494/MDS/11 10 THE NATURE OF RECEIPTS OF THE ASSESSEE, IN OUR OPIN ION, WILL NOT COME WITHIN THE PURVIEW OF FIRST PROVISO TO SECTION 2(15 ) OF THE ACT EXCEPT FOR SALE OF TICKETS AND THE RECEIPTS FROM SALE OF T ICKETS WERE WELL BELOW A SUM OF ` 10 LAKHS. WE ALSO NOTE THAT THE ASSESSEE HAS BEEN REGISTERED UNDER SECTION 12AA OF THE ACT AND SUCH R EGISTRATION IS STILL IN VOGUE. IN OUR OPINION, ASSESSEE WAS ELIGIBLE FO R RENEWAL OF APPROVAL UNDER SECTION 80G OF THE ACT WITHOUT DOUBT . ORDER OF DIT(E) IS QUASHED AND HE IS DIRECTED TO GRANT THE ASSESSEE RENEWAL OF APPROVAL UNDER SECTION 80G OF THE ACT. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 16 TH JANUARY, 2012. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 16 TH JANUARY, 2012. KRI. COPY TO: APPELLANT/RESPONDENT/DIT(EXEMPTIONS), CHE NNAI/ D.R./GUARD FILE