INDIAN BEAUTY AND HYGIENE ASSOCIATION, MUMBAI V. ITO(E)1(3), MUMBAI

ITA 566/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2377 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 04-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Charitable institution; Set aside
• Section: 12A; 13; 119; 22; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC II BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 566 /MUM. /201 9 ( ASSESSMENT YEAR : 20 13 14 ) INDIAN BEAUTY AND HYGIENE ASSOCIATION 504, MIDAS, 5 TH FLOOR, SAHAR PLAZA COMPLEX, M.V. ROAD, NEAR KOHINOOR HOTEL, ANDHERI (E), MUMBAI 400 059 PAN AAATHI1252J . APPELLANT V/S INCOME TAX OFFICER (EXEMP.) WARD 3, MUMBAI . RESPONDENT REVENUE BY : S HRI SANJAY J. SETHI ASSESSEE BY : SHRI MADHUR AGGARWAL DATE OF HEARING 09 .11.2020 DATE OF ORDER 25.11.2020 O R D E R CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 30 TH NOVEMBER 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 1, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2013 14. 2. THE GRIEVANCE OF THE ASSESSEE IN THE PRESENT APPEAL IS WITH REGARD TO DENIAL OF EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). 2 INDIAN BEAUTY AND HYGIENE ASSOCIATION 3. BRIEF FACTS ARE, THE ASSESSEE IS A COMPANY WITH CHARITABLE OBJECT FORM ED UNDER SECTION 26 OF THE COMPANIES ACT, 1956. THE ASSESSEE HAS ALSO BEEN GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT BY THE DIRECTOR OF INCOME TAX (EXEMP.), LONG BACK. FOR THE ASSESSMENT YEAR UNDER DISPUTE, T HE ASSESSEE FILED ITS RETURN OF INCOME ON 22 ND AUGUST 2013, DECLARING DEFICIT/ LOSS OF ` 28,92,292 AFTER CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSEE SHOULD NOT BE TREATED AS A MUTUAL CONCERN NOT HAVING ANY CHARITABLE OBJECT AND WHY PROVISO TO SECTION 2(15) OF THE ACT SHOULD NOT APPLY TO THE ASSESSEE. THOUGH, THE ASSESSEE OBJECTED TO THE PROPOSED DISALLOWANCE OF EXEMPTION CLAIMED UNDER SECTION 11 OF THE ACT, HOWEVER, THE ASSESSING OFFICER ULTIMATELY CONCLUDED THAT THE ASSESSEE MERELY IS A MUTUAL CONC ERN HAVING NO CHARITABLE OBJECT. THEREFORE , INSOFAR AS INCOME EARNED FROM THE MEMBERS , APPLY ING THE PRINCIPLES OF MUTUALITY HE DID NOT BRING IT TO TAX. HOWEVER, INSOFAR AS INTEREST INCOME EARNED FROM THE BANKS AND STAFF LOAN AMOUNTING TO ` 4,58,792, THE ASSESSING OFFICER TREATED IT AS INCOME OF THE ASSESSEE AND BROUGHT TO TAX. WHILE DECIDING ASSESSEES APPEAL AGAINST SUCH ADDITION, LEARNED COMMISSIONER (APPEALS) WHILE AGREEING WITH THE DECISION OF THE ASSESSING OFFICER THAT THE ASSESSEE IS A MUTUAL CONCERN, HENCE, PRIN CIPLES OF MUTUALITY WOULD APPLY, F URTHER , HELD THAT 3 INDIAN BEAUTY AND HYGIENE ASSOCIATION AS PER THE PROVISO TO SECTION 2(15) OF THE ACT, THE ASSESSEE CANNOT CLAIM EXEMPTION UNDER SECTION 11 OF THE ACT AS THE ASSESSEE WAS INVOLVED IN COMMERCIAL ACTIVITY. 4. THE LEANE D COUNSEL FOR THE ASSESSEE SUBMITTED , THE ASSESSEE WAS FORMED LONG TIME BACK AND HAS BEEN GRANTED REGISTRATION UNDER SECTION 12A FOR MORE THAN 50 YEARS. HE SUBMITTED , AS SESSEES OBJECTS HAS REMAINED SA ME OVER THE YEARS AND IT IS HAVING THE CHARITABLE OBJEC T OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY WHICH IS ONE OF THE LIMB OF CHARITABLE PURPOSE AS PER SECTION 2(15) OF THE ACT. THE LEANED COUNSEL FOR THE ASSESSEE SUBMITTED , THE OBJECTS OF THE ASSESSEE WOULD S H O W THAT IT IS NOT ONLY PROVI DING SERVICES TO ITS MEMBERS BUT OTHERS AS WELL. THUS, HE SUBMITTED , THERE IS NO JUSTIFIABLE REASON FOR DENYING ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT. HE SUBMITTED , THOUGH , THE ASSESSEE HAD BEEN CLAIMING EXEMPTION UNDER SECTION 11 OF TH E ACT FROM ITS VERY INCEPTION, HOWEVER, PRIOR TO THE IMPUGNED ASSESSMENT YEAR THE DEPARTMENT HAS NEVER DISALLOWED SUCH EXEMPTION. THUS, HE SUBMITTED , THE ASSESSEE SHOULD BE ALLOWED EXEMPTION UNDER SECTION 11 OF THE ACT. IN SUPPORT, HE RELIED UPON THE FOLLO WING DECISIONS: I) DIT V/S GEMOLOGICAL INSTITUTE OF INDIA, [2019] 105 TAXMANN.COM 180 (SC); II) ACIT V/S SURAT CITY GYMKHANA, [2008] 170 TAXMAN 612 (SC); 4 INDIAN BEAUTY AND HYGIENE ASSOCIATION III) ITO V/S CHEMBUR GYMKHANA, [2017] 80 TAXMANN.COM 354 (MUM.) (TRIB.); IV) CONFEDERATION OF REAL ESTATE DEVELOPERS ASSOCIATION OF INDIA V/S ACIT, [202 - 0] 119 TAXMANN.COM 491 (MUM.) (TRIB.); AND V) FRAGRANCE & FLAVOURS ASSOCIATION OF INDIA V/S DDIT, [2018] 92 TAXMANN.COM 325 (MUM.)(TRIB.). 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON THE OBSERV ATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS). 6. I HAVE CONSIDERED RIVAL SUBMISSIONS IN THE LIGHT OF DECISIONS RELIED UPON AND PERUSED THE MATERIAL ON RECORD. A PERUSAL OF THE ASSESSMENT ORDER REVEAL S THAT , THOUGH , IN THE SHOW CAUSE NOTICE THE ASSESSING OFFICER HAD RAISED THE ISSUE OF APPLICABILITY OF PROVISO TO SECTION 2(15) OF THE ACT, HOWEVER, ULTIMATELY HE HAS NOT DENIED ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT BY APPLYING THE AFORESAID PROVISO. HE HAS SIMPLY DISA LLOWED ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT BY TREATING THE ASSESSEE AS A MUTUAL CONCERN. WHEREAS, LEARNED C OMMISSIONER (APPEALS) APART FROM AGREEING WITH THE ASSESSING OFFICER THAT THE ASSESSEE IS A MUTUAL CONCERN HAS WENT A STEP AHEA D HOLDING THAT THE PROVISO TO SECTION 2(15) OF THE ACT APPLIES TO THE ASSESSEE. 7. A PERUSAL OF THE OBSERVATIONS OF LEARNED COMMI SSIONER (APPEALS) IN PARA 6.3.1 WOULD S H O W THAT ON THE ONE HAND HE OBSERVES THAT IT 5 INDIAN BEAUTY AND HYGIENE ASSOCIATION CANNOT BE SAID THAT THE ASSESSEES MAIN OBJE CT IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY , W HEREAS , O N THE OTHER HAND HE CONTRADICTS HIMSELF BY STATING THAT THE PROVISO TO SECTION 2(1 5) APPLIES TO THE ASSESSEE. A READING OF SECTION 2(15) OF THE ACT WOULD MAKE IT CLEAR THAT THE SAID PROVISO WOULD BE APPLICABLE IN A CASE WHERE THE ASSESSEE IS HAVING THE MAIN OBJECT OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY , BUT , ITS ACTIVITIES ARE COMMERCIAL IN NATURE. IN THAT EVENTUALITY, ITS OBJECT WOULD NOT BE REGARDED TO BE OF CHARITABLE PURPOSE. HOWEVER, NOW IT IS FAIRLY WELL SETTLED THAT IF THE INCOME DERIVED FROM COMMERCIAL ACTIVITY IS INCIDENTAL TO CARRYING OUT THE OBJECTS, IT WILL BE REGARDED AS CHARITAB LE PURPOSE. 8. FURTHER, IT IS A FACT ON RECORD THAT THE ASSESSEE HAD BEEN GRANTED REGISTRATION UNDER SECTION 12A OF THE ACT LONG BACK AND SUCH REGISTRATION CONTINUES TILL DATE. ON A QUERY, THE LEARNED AUTHORISED REPRESENTATIVE FURTHER STATED THAT OBJECTS OF THE ASSESSEE HAVE NOT CHANGED. IN CASE OF DIT(E) VS. GEMOLOGICAL INSTITUTE OF INDIA [2019] 105 TAXMANN.COM 179 (BOMBAY) THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT ONCE REGISTRATION UNDER SECTION 12A IS GRANTED TO THE ASSESSEE, THEN IT IS NOT OPEN TO THE ASSESSING OFFICER TO REVISIT THE OBJECTS OF THE ASSESSEE AGAIN WHILE EXAMINING THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT. THEREFORE, IF THE OBJECTS ON THE BASIS OF WHICH THE ASSESSEE WAS GRANTED REGISTRATION UNDER SECTION 12A OF THE 6 INDIAN BEAUTY AND HYGIENE ASSOCIATION ACT BY CONSIDERING THEM TO BE OF CHARITABLE NATURE, THEN , IN ABSENCE OF ANY CHANGE IN SUCH OBJECT S OF THE ASSESSEE, IT IS NOT UNDERSTOOD HOW IT CAN LOSE ITS IDENTITY OF A CHARITABLE INSTITUTION IN THE IMPUGNED ASSESSMENT YEAR , THAT TOO , WHEN THE REGISTRATION GRA NTED UNDER SECTION 12A OF THE ACT IS STILL IN VOGUE. UNDISPUTEDLY, THE DEPARTMENTAL AUTHORITIES HAVE DISALLOWED ASSESSEES CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT ON THE REASONING THAT IT PROVIDES SERVICES ONLY TO ITS MEMBERS. HOWEVER, BEFORE US, RE FERRING TO THE OBJECTS LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT SERVICES ARE PROVIDED TO OTHERS AS WELL. THIS CLAIM HAS NOT BEEN FACTUALLY VERIFIED BY THE DEPARTMENTAL AUTHORITIES . THEREFORE, IN MY VIEW, ASSESSEES CLAIM OF EXEMPTION UNDER SECTI ON 11 OF THE ACT HAS TO BE CONSIDERED PROPERLY HAVING DUE REGARD TO THE RELEVANT FACTS AND MORE PARTICULARLY AFTER EXAMINING WHETHER THE OBJECTS OF THE ASSESSEE ON THE BASIS OF WHICH REGISTRATION WAS GRANTED UNDER SECTION 12A OF THE ACT REMAINS THE SAME OR HAS UNDERGONE ANY CHANGE IN THE MEANWHILE. WITH THE AFORESAID OBSERVATIONS, I SET ASIDE THE IMPUGNED ORDER OF LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER PROVIDING REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7 INDIAN BEAUTY AND HYGIENE ASSOCIATION 9. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25.11.2020 SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 25.11.2020 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI