ADIT (E) II (1), MUMBAI V. GOREGAON SPORTS CLUB, MUMBAI

ITA 6621/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83912 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 13-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 31-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Keywords: Business income; Charitable institution; Competent authority; Benefit of exemption
• Section: 143(3); 12A; 11; 15

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , , BEFORE SHRI B.R. BASKARAN , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER . / ITA NO. 6621 /MUM./ 2012 ( / ASSESSMENT YEAR : 200 8 09 ) ADDL. DIRECTOR OF INCOME TAX (EXEMPT) PIRAMAL CHAMBERS, LALBAUG MUMBAI 400 012 . . / APPELLANT V/S GOREGAON SPORTS CLUB LINK ROAD, OPP. SWAGAT PARK MALAD (W), MUMBAI 400 064 .. . . / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAATG0279P / ASSESSEE BY : SHRI HARESH P. SHAH / REVENUE BY : SHRI PAVAN KUMAR BEERLA / DATE OF HEARING 13 . 10 .2014 / DATE OF ORDE R 21.10.2014. / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL S HA VE BEEN PREFERRED BY THE REVENUE, CHALLENGING THE IMPUGNED ORDER DATED 9 TH AUGUST 2012 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) I, MUMBAI, FOR THE ASSESSMENT YEAR 200 8 09 , ON THE FOLLOWING GROUNDS: GOREGAON SPORTS CLUB 2 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT(A) ERRED IN DIRECTIN G THE A.O. TO ALLOW BENEFIT OF EXEMPTION U/S 11 OF THE ASSESSEE RELYING ON THE DECISION OF THE HON,BLE BOMBAY HIGH COURT FOR A . Y. 2003 - 04 AND DECISION OF THE HON'BLE TRIBUNAL FOR A.YRS . 1998 - 99 TO 2003 - 04 AND 2006 - 07 IN ASSESSEE ' S OWN CASE WHEN THE ACTIVI TIES OF ASSESSEE ARE MUTUAL AND DO NOT FALL WITHIN THE DEFINITION OF (I CHARITABLE PURPOSE' AS PER SECTION 2(15) OF THE INCOME TAX ACT , 1961 . 2. THAT ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR SET OFF AND CARRY FORWARD OF DEFICIT OF EARLIER YEARS, IGNORING THE FACT THAT THERE WAS NO EXPRESS PROVISION IN THE IT ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM . 3. THE APPELLANT PRAYS THAT, TO THE EXTENT OF ABOVE GROUNDS, THE ORD ER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) I, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2 . FACTS IN BRIEF : THE ASSESSEE HAS BEEN GRANTED REGISTRATION UNDER SECTION 12A, VIDE ORDER DATED 21 ST JUNE 1980, ON ITS OBJECTS WHICH WAS MAINLY FOR PROMOTION OF SPORTS AND GAMES. IN THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAS FILED ITS RETURN OF INCOME AT NILL ON THE BASIS OF AUDIT REPORT UNDER SECTION 12A(B) IN FORM NO.10B, WHEREIN THE ASSESSEE HAS CLAIMED EXEMPTION UNDER SECTION 11. BEFORE THE ASSESSING OFFICER, THE ASSESSEE GAVE DETAIL REASONS AS TO WHY THE EXEMPTION UNDER SECTION 11 IS APPLICABLE TO THE ASSESSEE AND HOW IT HAS COMPLIED WITH ALL THE CONDITIONS LAID DOWN IN SECTION 11. IT WAS ALSO BROUGHT TO THE NOTICE OF THE ASSESSIN G OFFICER THAT SIMILAR EXEMPTION UNDER SECTION 11 HAS BEEN ALLOWED NOT ONLY BY THE LEARNED COMMISSIONER (APPEALS) BUT ALSO BY THE TRIBUNAL RIGHT FROM THE ASSESSMENT YEAR 1998 99 ONWARDS. IT WAS ALSO CLARIFIED THAT THE ASSESSEE IS NOT CLAIMING ANY BENEFIT U NDER THE PRINCIPLES OF MUTUALITY GOREGAON SPORTS CLUB 3 AS THE SAME IS NOT APPLICABLE IN THE ASSESSEE S CASE. THE ASSESSEE S DETAIL SUBMISSIONS HAVE BEEN INCORPORATED FROM PAGE 2 TO 6 OF THE ASSESSMENT ORDER. HOWEVER THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS PROVIDING SERVICES NOT ONLY TO ITS MEMBERS BUT ALSO SOME OF THE NON MEMBERS ARE ALSO AVAILING THE SERVICES THROUGH MEMBERS. ON THESE FACTS, IN THE EARLIER YEARS, IT HAS BEEN HELD BY THE ASSESSING OFFICER THAT THE ASSESSEE IS NOT AN ASSOCIATION CREATED / ESTABLISHED FOR CHARITABLE PURPOSE WITHIN THE MEANING OF PROVISIONS UNDER SECTION 2(15). THUS, IT WAS HELD TO BE MUTUAL CONCERN AND INCOME WAS TAXED ACCORDINGLY. HE ALSO NOTED THAT IN THE ASSESSMENT YEAR 2000 01, THE TRIBUNAL HAS HELD THAT IT IS NOT A MUTUAL CONCERN R ATHER IT IS A CHARITABLE ORGANISATION ENTITLED FOR EXEMPTION UNDER SECTION 11. IN THIS YEAR AGAIN, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PROVIDE THE DETAILS OF FACILITIES WHICH WERE OPEN FOR GENERAL PUBLIC AND EXAMINING THE CASE MOSTLY FROM THE AN GLE OF AS MUTUAL CONCERN. HE FURTHER NOTED THAT THE ASSESSEE IS ALSO HAVING INCOME FROM HIRING OF TERRACE , PARKING SPACE , BANQUETTE HALLS AND ROOMS AND ALSO INCOME FROM ROYALTY RECEIVED FROM CONTRACTOR S RUNNING THE RESTAURANTS IN THIS PREMISE FROM EMPANEL LED CATERERS AND DECORATORS. THUS, THE ASSESSEE S MAJOR INCOME IS FROM THESE OPERATIONS. HE ALSO REQUIRED THE ASSESSEE TO CLARIFY WHETHER ANY SUPPORTING BOOKS OF ACCOUNT HAVE BEEN MAINTAINED FOR THESE ACTIVITIES. IN RESPONSE, THE ASSESSEE FILED DETAIL SUBM ISSIONS CONT ENDING THAT INCOME FROM HIRING AND ROYALTY WAS NOT A BUSINESS INCOME BUT WAS INCOME DERIVED BY LETTING OUT THE PROPERTY OF THE TRUST GOREGAON SPORTS CLUB 4 WHICH HAS BEEN USED TO FULFILL THE OBJECT S OF THE TRUST. RELIANCE WAS ALSO PLACED ON SEVERAL DECISIONS IN SUPPO RT OF THIS CONTENTION. THE ASSESSING OFFICER REJECTED THE ASSESSEE S CONTENTION AND HELD THAT RECEIPT FROM HIRING OF SPACE AND ROYALTY INCOME IS TO BE TREATED AS BUSINESS INCOME AND THE CALCULATED AT RS. 3,07,05,637. HE ALSO CALCULATED THE INCOME UNDER SECTI ON 11. HOWEVER, HE DID NOT MADE ANY COMPUTATION UNDERN SECTION 11 IN THE FINAL ASSESSMENT AND ONLY WORKED OUT THE DISALLOWANCE AFTER CONSIDERING THE INCOME FROM NON MEMBER AS IF HE WAS MAKING THE ASSESSMENT OF MUTUAL CONCERN. 3 . THE LEARNED COMMISSIONER (APP EALS) REVERSED THE FINDINGS OF THE LEARNED ASSESSING OFFICER AND HELD THAT THE NATURE OF THE ACTIVITIES OF THE TRUST IS THE SAME AS CARRIED OUT FROM YEAR TO YEAR AND ON IDENTICAL FACTS, THE TRIBUNAL IN ASSESSEE S OWN CASE, HAS HELD THAT THE ASSESSEE IS A C HARITABLE INSTITUTION ENTITLED TO EXEMPT UNDER SECTION 11. NOT ONLY THIS, THE HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEE S CASE HAS UPHELD THE CONTENTION OF THE ASSESSEE THAT IT IS A CHARTABLE INSTITUTION WHOSE INCOME IS LIABLE TO BE COMPUTED UNDER SECT ION 11. 4 . BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER , WHEREAS THE LEARNED COUNSEL RELIED UPON THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) AND ALSO THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE EARLIER YEARS AND SPECIFICALLY FOR THE ASSESSMENT YEAR 2006 07 AND ORDER OF THE HON'BLE GOREGAON SPORTS CLUB 5 JURISDICTIONAL HIGH COURT IN IN ASSESSEE S CASE NOW REPORTED IN 347 ITR 338 (BOM.) 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS BEEN RECOGNISED AS A CHARITABLE INSTITUTION LOOKING TO ITS OBJECTS AND CERTIFICATE UNDER SECTION 12A HAS BEEN GRANTED BY THE COMPETENT AUTHORITY , VIDE CERTIFICATE DATED 21 ST JUNE 1980. SINCE THEN, THE A SSESSEE HAS BEEN CLAIMING EXEMPTION UNDER SECTION 11, IN ACCORDANCE WITH THE PROVISIONS CONTAINED FROM SECTIONS 11 TO 13. IT HAS BEEN FILING ITS RETURN OF INCOME DULY ACCOMPANIED UNDER SECTION 12A(B) IN FORM 10B. IN THE CURRENT YEAR, THERE WAS A DEFICIT AS PER INCOME AND EXPENDITURE INCOME OF RS. 36,93,729. ONCE A REGISTRATION UNDER SECTION 12A, HAS BEEN GRANTED RECOGNISING THE ASSESSEE AS A CHARITABLE INSTITUTION, THEN IT IS A FAIT ACCOMPLI AND THE INCOME HAS TO BE COMPUTED STRICTLY IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 11. SUCH AN EXEMPTION CAN BE FORFEITED ONLY IF THERE IS VIOLATION OF SECTION 13 OR INCOME HAS NOT BEEN APPLIED IN THE MANNER PROVIDED IN SECTION 11. RIGHT FROM THE BEGINNING, THE ASSESSING OFFICER HAS BEEN TREATING THE ASSESSEE AS A MUT UAL CONCERN AND ASSESSING THE INCOME ON ACCOUNT OF INCOME FROM NON MEMBER. THIS IS EVIDENT FROM THE COMPUTATION MADE BY THE ASSESSING OFFICER AT PAGE 13 OF THE ASSESSMENT ORDER ALSO . AS BROUGHT OUT BY THE LEARNED COUNSEL, THE TRIBUNAL INVARIABLY IN ALL THE EARLIER YEARS HAS HELD THAT THE ASSESSEE IS LIABLE FOR BENEFIT UNDER GOREGAON SPORTS CLUB 6 SECTION 11 AND SUCH AN EXEMPTION CANNOT BE DENIED. FOR THE SAKE OF READY REFERENCE, THE RELEVANT OBSERVATIONS AS MADE BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2006 07, VIDE ORDER DATED 30 T H SEPTEMBER 2011, IN ITA NO.5065/MUM./2010, IS REPRODUCED HEREIN BELOW: 4. WE HAVE HEARD THE PARTIES. THE ID. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON IDENTICAL SET OF FACTS, THIS ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEE'S OWN CA S E FOR AY 2 000 - 01 IN ITA NO. 1491/MUM/2004 VIDE ORDER DATED 18.07.2008 . THE ID. CO U N SE L HAS FILED THE COPY OF THE ORDER OF THE TRIBUNAL , WHICH IS PLACED ON RECORD. ON PERUSAL OF THE ORDER OF TRIBUNAL IN ASSESSEE'S OWN CASE, THERE SHOULD NOT BE CONTROVERSY IN RESPECT OF THE FACT THAT THE SAME ISSUE HAS BEEN DECIDED BY THE TRIBUNAL BY HOLDING THAT EXEMP TI ON TO THE ASSESSEE CANNOT BE DENIED U/S 11 OF THE ACT. THE OPERATIVE PART OF THE TRIBUNAL ORDER I . E. PARA NO. 17, READS AS UNDER: 17. THE DECISION IN THE CASE OF SHR EE KANDIVALI VYAYAM MANDIR IN ITA NO. 331/MUM/200!5 ON SIMILAR FACTS IN WHICH ONE OF US WAS THE PARTY (JM) HAS PASSE D THE ORDER FOR GRANTING EXEMPTION U/S. 11. FOLLOWING THE DECISION OF CO - ORDINATE BENCH IN THE CASE OF SHREE KANDIVALI VYAYAM MANDIR (SUPRA) (UNREPORTED), WE ARE OF THE VIEW THAT THE ASSESSING OFFICER ERRED IN HOLDING THAT THE ASSESSEE IS ONLY A MUTUAL ASSOCIATION AND NOT A CHARITABLE TRUST. WE AGREE WITH THE CONCLUSION OF CIT(A) THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE I.T. ACT IN RESPECT OF THE INTEREST INCOME EARNED BY THEM FROM DEPOSITS MADE TO THE BANK. FOLLOWING THE ORDER FOR ASST. YEAR 2001 - 02, THE TRIBUNAL HAS ALLOWED THE BENEFIT OF EXEMPTION U/S.LL OF THE ACT TO THE ASSESSEE IN A . YS 2002 - 03, 2 003 - 04, 2004 - 05. THE ISSUE INVOLVED IN THE PRESENT APPEAL THUS IS SQUARELY COVERED BY THE ORDERS OF THE TRIBUNAL PASSED IN ASSESSEE ' S OWN CASE FOR THE EARLIER YEAR AND RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT{A) DIRE CTING THE A . O. TO ALLOW THE BENEFIT OF EXEMPTION U/S.11 TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. NOT ONLY THIS, THE HON'BLE JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE IN THE APPEAL FOR THE ASSESSMENT YEAR 2003 04 VIDE ORDER GOREGAON SPORTS CLUB 7 DATED 14 TH FE BRUARY 2012 CITED SUPRA, HAVE OBSERVED AND HELD AS UNDER: IN THE PRESENT CASE THE ASSESSEE IS RE G I STE R E D UNDER THE BOMBAY PUBLIC TRUSTS ACT, 1950 AND UNDER SECTION 12A OF THE INCOME TAX ACT , 1961 . THE MAIN OBJECT OF THE ASSESSEE IS TO PROMOTE SPORTS AND ATHLETIC ACTIVITIES . THE ASSESSING OFFICER UPON THE RETURN OF THE INCOME BEING FILED, PASSED AN ORDER O F ASSESSMENT UNDER SECTION 143(3) BUT DENIED THE EXEMPTION CLAIMED UNDER SECTION 11 . SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED SINCE THERE WAS A MISTAKE IN CALCULATIONS AND WHILE COMPLETING THE REASSESSMENT THE ASSESSING OFFICER TREATED THE ASSESSEE AS A MUTUAL CONCERN AND DENIED AN EXEMPTION UNDER SECTION 11 . IN APPEAL , THE COMMI SS I O N E R (A PPEALS ) CAME TO THE CONCLUSION THAT THE PROMOTION O F SPORTS AND GA MES FELL WITHIN THE PU RV IE W OF SEC T IO N 2 ( 15 ) SINCE IT CONSTITUTED AN ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBIC UTILITY. THE COMMISSIONER (APPEALS) NOTED THAT THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE MERELY ON THE GROUND THAT THE FACI LITIES FOR THE PROMOTION OF SPORTS ARE PROVIDED TO A LIMITED GROUP OF PEOPLE, BEING THE MEMBERS OF THE CLUB. THE COMMISSIONER (APPEALS) HELD ON THE BASIS OF FACTUAL MATERIAL ON RECORD THAT THE ASSESSEE HAD ACQUIRED LAND FROM THE STATE GOVERNMENT WHICH WAS UTILISED FOR FACILITIES SUCH AS PROVIDING AN OLYMPIC SIZE SWIMMING POOL WHICH WAS OPEN TO THE GENER A L PUBLIC ON AN ANNUAL M E MBER S HI P B AS I S W ITH O UT RESTRICTION AS TO CASTE , CREED , RELIGION O R PROFESSION. THE ORDER OF THE COMMISSIONER ( APPEALS) HAS BEEN CONF IRMED IN APPEAL BY THE TRIBUNAL RELYING UPON ITS DECISION DATED 18 SEPTEMBER 2008 AND 29 JULY 2009 IN RESPECT OF THE ASSESSEE. 3 . THIS COURT HAD THE OCCASION TO CONSIDER SIMILAR ISSUES IN A JUDGMENT DELIVERED IN THE CASE OF DIT ( EXEMPTION) V. CH E MBUR G Y M KHAN A [INCOM E T A X APPE A L NO . 5568 OF 2010 , DATED 13 - 2 - 2012]. THIS COURT , FOLLOWING THE LAW LAID DOWN BY THE SUPREME COURT , HAS HELD THAT THE FACT THAT THE MEMBERSHIP OF THE CLUB IS OPEN TO A SECTION OF THE COMMUNITY WOULD NOT DETRACT FROM THE FACT THAT THE CLUB HAS BEEN CONSTITUTED FOR THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE CLUB IS NOT FORMED FOR THE BENEFIT OF AN INDIVIDUAL OR A GROUP OF INDIVIDUALS AS SUCH. HOWEVER, WHILE AFFIRMING THAT THE OBJECT OF THE CLUB FALLS WITHIN THE P URVIEW OF SECTION 2(15) , THIS COURT HAD REMANDED THE PROCEEDINGS BACK TO THE ASSESSING OFFICER TO DETERMINE WHETHER AS REGARDS THE APPLICATION OF THE FUNDS , THE REQUIREMENTS OF SECTION 11 HAVE BEEN DULY FULFILLED. IN THE PRE SENT CASE ALSO THE ASSESSING OF FICER DID NOT HAVE AN OCCASION TO CONSIDER THE APPLICATION OF THE FUNDS WITH REFERENCE TO PROVISIONS OF SECTION 11 , SINCE HE HAD COME TO THE CONCLUSION THAT THE ASSESSEE DOES NOT FULFILL THE CHARITABLE PURPOSE AS DEFINED IN SECTION GOREGAON SPORTS CLUB 8 2(15). 4. AS REGARDS QUESTION (A) , WE REMIT THE PROCEEDINGS BACK TO THE ASSESSING OFFICER TO DETERMINE WHETHER THE REQUIREMENTS OF SECTION 11 HAVE BEEN DUL Y FULFILLED AS REGARDS THE APPLICATION OF THE FUNDS. THE ASSESSING OFFICER SHALL CARRY OUT THE EXERCIS E EX PEDITIOUSL Y. SO FAR AS QUESTION ( B) IS CONCERNED, WE HOLD THAT THE ASSESSEE IS A CHARITABLE INSTITUTION. CONSEQUENTLY, QUESTIONS (C), (D) AND (E) DO NOT ARISE. 5. THE APPEAL SHALL ACCORDINGLY STAND DISPOSED OF. THERE SHALL BE NO ORDER AS TO COSTS. THUS, IN PRINCIPLE, THE ASSESSEE S CLAIM THAT IT IS ENTITLED FOR EXEMPTION UNDER SECTION 11 HAS BEEN UPHELD FROM THE STAGE OF HIGH COURT. ONCE THE ASSESSEE IS A CHARITABLE INSTITUTION AND DULY RECOGNISED UNDER SECTION 12A, THEN INCOME IS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11 ONLY. THUS, THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE TOTAL INCOME OF THE ASSESSEE IN TERMS OF SECTION S 11 TO 13 OF THE ACT. THUS, THE GROUNDS RAISED BY THE DEPARTMENT ARE DISMISSED. 6 . 6 . IN THE RESULT, REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N 21 ST OCTOBER, 2014. SD/ - S D/ - . . B.R. BASKARAN ACCOUNTANT MEM BER SD/ - SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 21.10.2014. GOREGAON SPORTS CLUB 9 / 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 / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI