Tamilnadu Golf Federation, CHENNAI V. ACIT, CHENNAI

ITA 712/CHNY/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2646 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 15-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2014
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: V RA VICHANDRAN; P B SRINIVASAN
• Keywords: Charitable institution; Capital receipt
• Section: 12AA; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.712/MDS/2014 / ASSESSMENT YEAR : 2009-10 TAMILNADU GOLF FEDERATION NO.334, ANNA SALAI, NANDANAM CHENNAI 600 015 VS. THE ASSTT. COMMISSIONER OF INCOME-TAX (EXEMPTIONS-III) CHENNAI [PAN AAATT 2341 E ] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI V RAVICHANDRAN & SHRI P B SRINIVASAN , CA /RESPONDENT BY : SHRI A B KOLI, JCIT / DATE OF HEARING : 15 - 1 2 - 2015 ! / DATE OF PRONOUNCEMENT : 14 - 01 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VII, CHEN NAI, DATED 28.1.2014 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. SHRI V RAVICHANDRAN, LD. REPRESENTATIVE FOR THE AS SESSEE SUBMITTED THAT THE ASSESSEE-SOCIETY IS REGISTERED AS A CHARITABLE INSTITUTION U/S 12AA OF THE ACT. THE MAIN OBJECT OF THE SOCIETY IS TO ITA NO.712/14 :- 2 -: PROMOTE THE GAME OF GOLF IN THE STATE OF TAMILNADU. THE ASSESSEE IS ALSO MAINTAINING LIAISON WITH OTHER GOLF CLUBS IN T HE COUNTRY. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE IS MAINTAI NING A GOLF COURSE. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT WHILE GRANTING REGISTRATION U/S 12AA, THE DIT(E) EXAMINED THE OBJ ECT OF THE SOCIETY AND FOUND THAT IT IS A CHARITABLE INSTITUTION COVER ED UNDER THE 4 TH LIMB OF SEC. 2(15) OF THE ACT ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED ` 3,55,92,060/- UNDER VARIOUS HEADS IN THE COURSE OF ITS CHARITABLE ACTIVITY. THE ASSESSING OFFICER, BY REF ERRING TO PROVISO TO SEC. 2(15) OF THE ACT, FOUND THAT THE ACTIVITY OF T HE ASSESSEE-SOCIETY IS COMMERCIAL IN NATURE AND ACCORDINGLY, REJECTED THE CLAIM OF THE ASSESSEE U/S 11 OF THE ACT. THE LD. REPRESENTATIV E CLARIFIED THAT THE ASSESSEE IS NOT ENGAGED IN ANY COMMERCIAL ACTIVITY, THE ACTIVITY OF THE ASSESSEE IS RESTRICTED TO SPORT OF GOLF. ACCORDING TO THE LD. REPRESENTATIVE, PROMOTION OF SPORT IS A CHARITABLE ACTIVITY AS CLARIFIED BY THE CBDT. 3. REFERRING TO THE PROVISO TO SEC. 2(15) OF THE ACT, THE LD. REPRESENTATIVE CLARIFIED THAT PROVISO TO SEC. 2(15) APPLIES ONLY TO THE INSTITUTION WHICH WAS SET UP FOR ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY AND THAT CARRIED OUT ACTIVITY IN THE NATURE OF TRADE, ITA NO.712/14 :- 3 -: COMMERCE OR BUSINESS. IN THIS CASE, ACCORDING TO T HE LD. REPRESENTATIVE, THE ASSESSEE HAS NOT CARRIED OUT A NY ACTIVITY WHICH IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THE ACTIVITIES OF THE ASSESSEE ARE INCIDENTAL TO THE ACTIVITY OF PROMOTIN G THE SPORT OF GOLF IN THE STATE OF TAMILNADU, THEREFORE, ALL THE INCOMES ARE INCIDENTAL TO THE CHARITABLE ACTIVITY. THE LD. REPRESENTATIVE PLACED HIS RELIANCE ON THE CIRCULAR ISSUED BY CBDT IN CIRCULAR NO.395 DATED 24 .9.1984 AND THE JUDGMENTS OF THE DELHI HIGH COURT IN INDIA TRADE PR OMOTION ORGANISATION VS DIT(E), 374 ITR 333, INSTITUTE OF C HARTERED ACCOUNTANTS OF INDIA VS DGIT(E), 347 ITR 99, AND TH E ORDER OF THIS TRIBUNAL IN TAMIL NADU CRICKET ASSOCIATION VS DIT(E ), 42 ITR(TRIB) 546 4. THE LD. REPRESENTATIVE FURTHER CLARIFIED THAT THE ASSESSEE HAS ALSO CLAIMED EXEMPTION ON THE PRINCIPLES OF MUT UALITY. ACCORDING TO THE LD. REPRESENTATIVE, NO PERSON CAN MAKE A PRO FIT BY HIMSELF. THE ASSESSEE-SOCIETY COLLECTS MONEY FROM ITS MEMBERS AN D PROVIDES CERTAIN FACILITY TO ITS MEMBERS. PLACING RELIANCE ON THE J UDGMENT OF THE APEX COURT IN THE CASE OF CIT VS BANKIPUR CLUB LTD 226 I TR 97, THE LD. REPRESENTATIVE SUBMITTED THAT THE INCOME OF THE MUT UAL ASSOCIATION CANNOT BE BROUGHT TO TAX. REFERRING TO GREEN FEES RECEIVED FROM THE NON-MEMBERS, THE LD. REPRESENTATIVE SUBMITTED THAT GREEN FEES WAS RECEIVED FROM NON-MEMBERS FOR USING THE GROUNDS MAI NTAINED BY THE ITA NO.712/14 :- 4 -: ASSESSEE-SOCIETY. IF AT ALL ANYTHING IS TO BE TAXA BLE ON THE PRINCIPLES OF MUTUALITY, THE FEE COLLECTED FROM NON-MEMBERS COULD ALONE BE SUBJECTED TO TAX AND NOT THE FEE RECEIVED FROM THE MEMBERS. THE NON-REFUNDABLE MEMBERSHIP FEE COLLECTED AT THE TIME OF ADMISSION OF MEMBERS IS IN THE NATURE OF CAPITAL. THEREFORE, IT IS NOT LIABLE FOR TAXATION. THE LD. REPRESENTATIVE PLACED HIS RELIAN CE ON THE JUDGMENT OF THE BOMBAY HIGH COURT IN CIT VS DINERS BUSINESS SERVICES PVT. LTD., 263 ITR 1. THE ASSESSEE HAS ALSO CLAIMED EXEMPTIO N BEFORE THE ASSESSING OFFICER ON THE GROUND THAT IT PRESERVES T HE ENVIRONMENT. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE WAS IN POSSESSION OF 82 ACRES OF LAND IN THE MIDDLE OF THE METROPOLITAN CITY AND MAINTAINING A UNIQUE ECOSYSTEM. ACCORDING TO THE LD. REPRESENTA TIVE, THE GOLD CLUB IS SITUATED ON THE BANKS OF ADYAR RIVER AND MAINTAI NING ECOLOGY OVER 50 YEARS. THOUSANDS OF BIRDS RESTED IN THE CAMPUS AND MIGRATORY BIRDS TOOK REFUGE IN THE WINTER. THE ASSESSEE HAS ALSO INSTALLED A TREATMENT PLANT FOR TREATING THE WASTE WATER. THER EFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE IS ELIGIBLE F OR EXEMPTION U/S 11 FOR PRESERVING THE ENVIRONMENT. 5. ON THE CONTRARY, SHRI A B KOLI, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ADMITTEDLY, THE ASSE SSEE-SOCIETY WAS ESTABLISHED FOR PROMOTING THE SPORT GOLF IN THE STA TE OF TAMILNADU. ITA NO.712/14 :- 5 -: THE ASSESSEE RECEIVED CONTRIBUTIONS NOT ONLY FROM MEMBERS BUT ALSO FROM NON-MEMBERS IN THE NAME OF GREEN FEES. REFERR ING TO CIRCULAR ISSUED BY CBDT NO.11 OF 2008 DATED 19.12.2008, THE LD. DR POINTED OUT THAT WHEN THE ASSESSEE IS ENGAGED IN TRADING A ND COMMERCE, IT IS NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. WHE N THE ASSESSEE CLAIMS AS A CHARITABLE INSTITUTION AS WELL AS MUTUA L ORGANIZATION, ITS ACTIVITIES ARE NOT RESTRICTED TO CONTRIBUTION FROM ITS MEMBERS, ACCORDING TO THE LD. REPRESENTATIVE, THE PRINCIPLES OF MUTUAL ITY IS NOT APPLICABLE. ACCORDING TO THE LD. REPRESENTATIVE, THE THIRD PART IES WHO ARE NON- MEMBERS ARE ALSO CONTRIBUTING TO THE CORPUS OF THE ASSESSEE, THEREFORE, IT CANNOT CLAIM EXEMPTION ON MUTUALITY. ACCORDING TO THE LD. REPRESENTATIVE, WHEN THE ASSESSEE WAS DEALING WITH NON-MEMBERS AND COLLECTING FEES FROM NON-MEMBERS ALSO, THE PR OVISO TO SEC.2(15) WOULD COME INTO OPERATION, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION ON THE PRINCIPLES OF MUTUALITY ALSO. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSEE IS COLLECTING SPONSORS HIP FEE FOR TOURNAMENT, ROUND FEE, GREEN FEE ETC. FROM MEMBERS AS WELL AS NON- MEMBERS. THEREFORE, THE CIT(A) HAS RIGHTLY FOUND T HAT THE COLLECTION OF SPONSORSHIP FEE FOR TOURNAMENT, ROUND FEE, GREEN FEE ETC IS MORE OR LESS IN THE LINE OF COMMERCIAL ACTIVITY, THEREFORE, THE PROVISO TO SEC. 2(15) WOULD COME INTO OPERATION. ADMITTEDLY, THE T OTAL RECEIPT OF THE ITA NO.712/14 :- 6 -: ASSESSEE EXCEEDED ` 40 LAKHS, THEREFORE, THE ASSESSEE-SOCIETY CANNOT BE CONSTRUED AS A CHARITABLE INSTITUTION. 6. REFERRING TO THE CLAIM OF THE ASSESSEE ON THE PRIN CIPLES OF MUTUALITY, THE LD. DR SUBMITTED THAT THE OBJECT OF THE ASSESSEE-SOCIETY IS TO PROVIDE BENEFITS TO GENERAL PUBLIC IN THE STA TE OF TAMILNADU. THERE IS NOTHING IN THE OBJECT TO INDICATE THAT THE BENEFITS OF THE SOCIETY WOULD BE RESTRICTED TO ITS MEMBERS ONLY. W HEN THE OBJECT OF THE ASSESSEE-SOCIETY IS TO PROVIDE BENEFITS TO THE ENTIRE SOCIETY BY PROMOTING THE SPORT OF GOLF IN THE STATE OF TAMILNA DU AND THE MEMBERS AND NON-MEMBERS ARE ALSO PARTICIPATING IN THE SPORT CONDUCTED BY THE ASSESSEE, CONTRIBUTIONS WERE ALSO RECEIVED FROM THE MEMBERS AND NON-MEMBERS, ACCORDING TO THE LD. DR, THE PRINCIPLE S OF MUTUALITY CANNOT BE APPLIED. THE LD. DR FURTHER CLARIFIED TH AT THE BENEFICIARIES CANNOT BE IDENTIFIED IN THIS CASE, THEREFORE, THERE IS NO QUESTION OF APPLICATION OF PRINCIPLES OF MUTUALITY. REFERRING TO THE CONTENTION OF THE LD. REPRESENTATIVE FOR THE ASSESSEE THAT THE A SSESSEE IS ALSO MAINTAINING ECOLOGY, THE LD. DR CLARIFIED THAT TO C ONDUCT SPORT OF GOLF, THE ASSESSEE HAS TO NECESSARILY MAINTAIN THE GOLF FIELD. IT IS AN INCIDENTAL ACTIVITY IN THE COURSE OF MAINTAINING TH E GOLD CLUB, THEREFORE, IT IS NOT AN ACTIVITY FOR MAINTAINING ECOLOGY SYSTE M. ACCORDING TO THE LD. DR, THE ASSESSEE CANNOT BE CONSIDERED TO BE A CHARITABLE ITA NO.712/14 :- 7 -: INSTITUTION, HENCE, THE CIT(A) HAS RIGHTLY CONFIRME D THE ORDER OF THE ASSESSING OFFICER. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, THE ASSESSEE-SOCIETY IS REGISTERED U/S 12AA OF THE ACT AS CHARITABLE INSTITUTION. THE MAIN OBJECT OF THE SOCIETY IS TO PROMOTE THE SPORT OF GOLF IN THE STATE OF TAMILANDU. THE ASSESSEE IS A LSO ORGANIZING COACHING CAMPS FOR THE BENEFIT OF GOLFERS IN OTHER PARTS OF THE STATE. IN FACT, THE ASSESSING OFFICER HAS REPRODUCED THE O BJECT OF THE ASSESSEE-SOCIETY AT PAGES 2 & 3 OF HIS ORDER. THIS OBJECT CLEARLY SHOWS THAT THE ASSESSEE IS ENGAGED IN THE PROMOTION OF S PORT OF GOLF. IN THE COURSE OF CARRYING ON ITS ACTIVITY, THE ASSESSEE C OLLECTED SUBSCRIPTION FROM ITS MEMBERS TOWARDS TOURNAMENT FEES ETC. IN F ACT, THE ASSESSEE HAS COLLECTED FOLLOWING FEES: FEES COLLECTED - TYPE/RECEIPT ` ANNUAL SUBSCRIPTION 2,01,90,350 TOURNAMENT FEE 1,30,704 SPONSORSHIP TOURNAMENT 7,30,981 SPONSORSHIP OTHERS 2,00,000 GREEN FEE 98,87,764 CATERIN G INCOME 2,41,131 ROUND CHARGES 42,11,130 TOTAL 3,55,92,060 ITA NO.712/14 :- 8 -: 8. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER C OLLECTION OF SPONSORSHIP FEE FOR CONDUCTING TOURNAMENT, GREEN FE E FOR ALLOWING NON-MEMBERS TO USE THE GOLF GROUND WOULD BE AN ACTI VITY IN THE NATURE OF TRADE OR COMMERCE? THIS TRIBUNAL IS OF THE CON SIDERED OPINION THAT SPONSORSHIP FEE COLLECTED FOR CONDUCTING TOURNAMENT AND GREEN FEE FOR USE OF GOLD GROUND CANNOT BE CONSIDERED TO BE A COM MERCIAL ACTIVITY AND THEREFORE, IT IS NOT IN THE NATURE OF TRADE OR COMMERCE. IT MAY BE A COMMERCIAL ADVERTISEMENT FOR THE INDIVIDUAL OR IN STITUTION WHO IS PAYING THE SPONSORSHIP FEE BUT AS FAR AS THE ASSES SEE IS CONCERNED, THE SPONSORSHIP FEE RECEIVED IS AN INCOME INCIDENTA L TO THE MAIN ACTIVITY OF PROMOTING GOLF IN THE STATE OF TAMILNAD U, THEREFORE, AT ANY STRETCH OF IMAGINATION, THE COLLECTION OF SPONSORSH IP FEE CANNOT BE CONSIDERED AS COMMERCIAL ACTIVITY BY THE ASSESSEE. SIMILARLY, THE TOURNAMENT FEE, ANNUAL SUBSCRIPTION FEE, GREEN FEE, CATERING INCOME, ROUND CHARGES ETC. ARE INCIDENTAL TO THE MAIN ACTIV ITY OF PROMOTING THE SPORT OF GOLF. AS RIGHTLY SUBMITTED BY THE LD. REP RESENTATIVE FOR THE ASSESSEE, THE NON-REFUNDABLE MEMBERSHIP FEE COLLECT ED AT THE TIME OF ADMISSION IS IN THE NATURE OF CAPITAL RECEIPT, THER EFORE, IT CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN SAYING THAT THE ASSESSEE IS ENGAGED I N ACTIVITY WHICH IS SIMILAR TO COMMERCE OR TRADE. THIS TRIBUNAL IS OF THE CONSIDERED ITA NO.712/14 :- 9 -: OPINION THAT THE ASSESSEE IS ENGAGED ONLY IN PROMO TING THE SPORT OF GOLF AND RECEIVING SUBSCRIPTION, TOURNAMENT FEE, SP ONSORSHIP FEES ETC. ARE IN THE COURSE OF ITS CARRYING ON THE CHARITABL E ACTIVITY. THEREFORE, THE ACTIVITY OF THE ASSESSEE IS NOT SIMILAR TO COM MERCE OR TRADE. 9. NOW COMING TO THE CLAIM ON THE PRINCIPLES OF MUTUAL ITY, AS RIGHTLY SUBMITTED BY THE LD. DR, THE INDIVIDUAL BEN EFICIARIES SHALL BE IDENTIFIED FOR THE PURPOSE OF CLAIMING PRINCIPLES O F MUTUALITY. IN THIS CASE, THE OBJECT OF THE ASSESSEE IS TO PROMOTE THE GAME OF GOLF IN THE STATE OF TAMILNADU. THE BENEFITS CAN BE AVAILABLE NOT ONLY FOR THE MEMBERS OF THE ASSESSEE-SOCIETY BUT ALSO NON-MEMBE RS. THEREFORE, THE BENEFICIARIES CANNOT BE IDENTIFIED. IN FACT, T HE OBJECT OF THE SOCIETY ENABLES TO PROVIDE TRAINING AND FINANCIAL ASSISTANC E TO ALL INDIVIDUALS. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE PRINCIPLES OF MUTUALITY IS NOT APPLICABLE TO TH E FACTS OF THIS CASE. 10. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE F OR EXEMPTION U/S 11 OF THE ACT AS CHARITABLE INSTITUTION IN RESPECT OF THE INCOME GENERATED IN THE COURSE OF ITS ACTIVITIES IN FURTHERANCE OF I TS OBJECTS. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE A ND THE ASSESSING OFFICER IS DIRECTED TO GRANT EXEMPTION U/S 11 OF T HE ACT IN RESPECT OF ITA NO.712/14 :- 10 -: THE INCOME OF THE ASSESSEE WHICH IS UTILIZED FOR T HE OBJECT OF THE SOCIETY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 14 TH JANUARY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF