THE PRANSUKHLAL MAFATLAL HINDU SWIMMING BATH & BOAT CLUB TRUST, MUMBAI V. DIT (E), MUMBAI

ITA 558/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2585 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Charitable institution; Cancellation of registration
• Section: 12A; 12AA; 2; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI BEFORE S/SHRI G.S.PANNU (AM) AND PAWAN SINGH, (JM) ./I.T.A. NO.558/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) THE PRA NSUKHAL MAFATLAL HINDU SWIMMING BATH & BOAT CLUB TRUST, NETAJI SUBHASH ROAD, CHOWPATTY, MUMBAI-400007. / VS. DIRECTOR OF INCOME TAX (EXEMPTION N), MUMBAI. ( / APPELLANT) .. ( / RESPONDENT) ./ ./PAN/GIR NO. : AAATT9571H / APPELLANT BY SHRI NISHANT THAKKAR, SURENDRA NIJSURE /RSPONDENT BY SHRI J. SASIKUMAR (DR) ! / DATE OF HEARING : 15.09.2015 ! /DATE OF PRONOUNCEMENT : 30.10.2015 / O R D E R PER PAWAN SINGH (JM) THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 16.12.2011 PASSED BY DIRECTOR OF INCOME TAX (EXEMPT ION), MUMBAI U/S 12AA(3) FOR WITHDRAWAL / CANCELLATION OF REGISTRATI ON U/S 12A OF THE INCOME TAX ACT, 1961(THE ACT). ON THE FOLLOWING GRO UNDS OF APPEAL: 1. THE LEARNED DIT(E) ERRED IN LAW AND ON FACTS BY HOLDING THAT ALLOWING THE GUESTS ACCOMPANIED BY MEMBERS WAS AN A CTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND THE FEES RECEIVED FORM GUESTS AMOUNTING TO RS.35,57,960/- WAS IN THE NATUR E OF BUSINESS INCOME. 2. THE LEARNED DIT(E) ERRED IN LAW AND ON FACTS IN HOLDING THAT LEARN TO SWIM CAMPS CONDUCTED BY THE APPELLANT WAS AN ACT IVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND THE FEES RECEIVED FORM LEARN TO SWIM AMOUNTING TO RS.5,10,136/- WAS IN THE NATURE OF BUSINESS INCOME. 3. THE LEARNED DIT(E) ERRED IN LAW AND ON FACTS BY HOLDING THAT OBJECTS OF YOUR APPELLANT TRUST ARE NOT CHARITABLE PURPOSE' UNDER THE ITA NO.558/MUM/2012 2 PROVISO TO SECTION 2(15) OF THE ACT AND THEREFORE T HE TRUST IS NOT GENUINE. 4. THE LEARNED DIT(E) ERRED IN LAW AND ON FACTS BY NOT APPRECIATING THAT THE SWIMMING AND OTHER SPORTS ACTIVITIES CONDU CTED BY THE APPELLANT TRUST CAN ALSO BE CONSIDERED AS AN ACTIVI TY OF 'EDUCATION' AND THEREFORE THE PROVISO TO SECTION 2(15) IS NOT A PPLICABLE. 5. THE LEARNED DIT(E) ERRED IN LAW AND ON FACTS IN MAKING ERRONEOUS OBSERVATION THAT REGISTRATION WAS GRANTED TO US UND ER SECTION 12AA OF THE ACT 6. THE LEARNED DIT(E) ERRED IN LAW AND ON FACTS BY CANCELLING THE REGISTRATION UNDER SECTION 12AA(3) OF THE ACT 7. WITHOUT PREJUDICE TO ABOVE THE LEARNED DIT(E) ER RED IN LAW AND ON FACTS IN CANCELLING THE REGISTRATION WITH RETROSPEC TIVE EFFECT FROM A.Y.2009-10. 1. THE BRIEF FACTS OF THE CASE AS GATHERED FROM THE MA TERIAL AVAILABLE ON RECORD ARE THAT A PROPOSAL WAS RECEIVED FROM THE LT.O.(E) 11(1), MUMBAI FOR CANCELLATION OF REGISTRATION GRANTED TO THE ASSESSEE I.E. THE PRANSUKHLAL MAFATLAL HINDU SWIMMING BATH & BOAT CLUB TRUST, U/S.12A ON THE GROUND THAT THE ASSESSEE HAS BEEN CA RRYING ON ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSI NESS ETC AND GROSS RECEIPTS THERE-FROM ARE M EXCESS OF RS. 10 LACS. AC CORDINGLY, THE PROVISO TO SECTION 2(15) OF THE LT. ACT, 1961 IS AT TRACTED IN THE CASE FROM A.Y. 2009-10. 2. A SHOW CAUSE NOTICE VIDE OFFICE LETTER NO.DIT(E)/IT O(HQ)/ WITHDRAWAL/47/2011-12 DATED 08.11.2011 WAS ISSUED T O THE ASSESSEE AS TO WHY THE REGISTRATION AS GRANTED TO I T SHOULD NOT BE WITHDRAWN BY INVOKING THE PROVISIONS OF SECTION 12A A(3) OF THE IT. ACT, 1961. THE SHOW CAUSE CONTAINED THE ACTIVITIES AS CARRIED OUT BY THE ASSESSEE WHICH WERE IN THE NATURE OF TRADE, COM MERCE, BUSINESS ETC. DURING THE A.Y.2009-10. 3. IN RESPONSE TO THE NOTICE THE REPRESENTATIVE OF ASS ESSEE , APPEARED AND, FURNISHED HIS WRITTEN SUBMISSION VIDE THEIR RE PLY DATED 01.12.2011 AND DISCUSSED THE CASE. 4. AFTER CONSIDERING THE REPLY OF ASSESSEE THE DIT(E), HOLD AS UNDER: ITA NO.558/MUM/2012 3 IN THE ASSESSEE'S CASE THERE ARE RECEIPTS OF HUGE AMOUNTS BY WAY OF GUEST FEES RS.35,57,960/- AND OF BUSINESS INCOME AN D SINCE THESE RECEIPTS ARE IN EXCESS OF MONITORY LIMIT AS LAID DO WN IN THE AFORESAID PROVISO, THERE IS A CLEAR CUT CONTRAVENTION OF THE PROVISIONS OF SECTION 2(15) R.W. PROVISO WHICH HAS COME INTO EFFECT FROM A.Y. 2009-10. ONCE A CHARITABLE TRUST/INSTITUTION HIT BY AFORESAI D PROVISO, THEN THERE IS DEEMING PROVISION THAT SUCH ENTITY SHALL N OT BE FOR A CHARITABLE PURPOSE, HENCE, ONCE THE ASSESSEE TRUST / INSTITUTION LOASES ITS CHARITABLE CHARACTER THEN OBVIOUSLY THER E IS CHANGE IN THE STATUS OF SUCH ASSESSEE AND IT IS NO LONGER CAN BE HOLD TO BE FOR CHARITABLE PURPOSE. ONCE IT IS HELD THAT THE ASSESS EE IS NOT FOR CHARITABLE PURPOSE THEN THE TRUST ITSELF BECOMES NO N GENUINE AS IT LOOSES ITS PUBLIC CHARITABLE STATUS AND ACCORDINGLY THE PROVISION OF SECTION 12AA(3) OF THE ACT GET ATTRACTED. THUS IN V IEW OF THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE, I THEREFORE, ACCORDINGLY HOLD THAT THE ASSESSEE TRUST HAS BECOME NON-GENUINE AND THE REGISTRATION AS ALLOWED TO IT IN EARLIER YEARS U/S. 12AA IS 'HER EBY CANCELLED/WITHDRAWN W.E.F. A.Y. 2009-10 AND THE ASS ESSEE TRUST IS ACCORDINGLY HELD AS NON CHARITABLE TRUST/INSTITUTIO N. 5. WE HAVE HEARD LD. AR OF THE ASSESSEE AND DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. A R OF THE ASSESSEE RELIED UPON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT REPORTED VIDE (2015 TAXMANN.COM 34 (KAR) TITLED AS DIT(E) VS . KARNATAKA INDUSTRIAL AREA DEVELOPMENT BOARD WHEREIN THE HONB LE KARNATAKA HIGH COURT WHILE DEALING WITH THE SIMILAR ISSUE HEL D AS UNDER: A READING OF THE SECTION 12AA(3) MAKE IT VERY CLEA R, A REGISTRATION GRANTED, EARLIER UNDER SECTION 12A CAN BE CANCELLED UNDER TWO CIRCUMSTANCES: (A) IF THE ACTIVITIES OF THE TRUST O R THE INSTITUTION ARE NOT GENUINE,(B) THE ACTIVITY OF THE TRUST OR THE IN STITUTION NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TR UST OR THE INSTITUTION. ONLY ON THESE TWO CONDITIONS BEING SAT ISFIED, THE REGISTRATION GRANTED UNDER SECTION 12A COULD BE CAN CELLED BY THE AUTHORITIES.' ITA NO.558/MUM/2012 4 6. BEFORE US THE PRELIMINARY OBJECTION RAISED IS THAT DIT HAS INVOKED THE POWER OF CANCELLATION PROVIDED IN SECTION 12AA( 3) OF THE ACT WITHOUT COMPLYING IN THE PRESCRIBED CONDITION. 7. AS WE HAVE SEEN, IN THE IMPUGNED ORDER PASSED BY LD . DIT(E), THERE IS NO RECORDING OF SATISFACTION THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT GENUINE AND/OR ARE NOT BEING CARRIED OUT IN ACC ORDANCE WITH THE OBJECT OF THE TRUST, ARE TOTALLY MISSING, WHICH ARE THE ONLY THESE TWO CONDITION PRECEDENT FOR CANCELLATION OF REGISTRATIO N U/S 12AA(3) OF THE ACT. 8. SINCE THE LD. DIT(E) WHILE PASSING THE IMPUGNED ORD ER ON THE PROPOSAL OF ITO(E)-II(1),MUMBAI AS IGNORED THE BASI C PRINCIPLE OF LAW AS LAID DOWN BY HONBLE KARNATAKA HIGH COURT, H ENCE WE SET- ASIDE THE IMPUNGNED ORDER OF DIT(E) DATED. 16.12.20 11 PASSED U/S 12AA OF THE ACT AND ACCEPT THE APPEAL OF THE ASSESS EE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREAT ED AS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2015 $ %& '( 30 TH OCTOBER, 2015 SD/- SD/ - (G.S. PANNU ) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER % MUMBAI: 30 TH OCTOBER,2015. . ./ S HARWAN,PS !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 2 ( ) / THE CIT(A)- CONCERNED 4. 2 / CIT CONCERNED 5. 34 5 , ! 5 , % / DR, ITAT, MUMBAI CONCERNED 6. 6 / GUARD FILE. ITA NO.558/MUM/2012 5 //TRUE COPY// ( / BY ORDER, (ASSTT. REGISTRAR) ! 5 , % /ITAT, MUMBAI