2017 (8) TMI 1381

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....he CIT(A) erred in not appreciating that the play ground plus hall of the assessee trust was let out only for sports activities to schools and colleges which is one of the main object of the assessee trust. Promotion of sports and games is a dominant activity of the assessee trust. 10. The CIT(A) erred in not appreciating that the assessee trust does not run any cafeteria but the same is run by professional caterer and he pays only rent to the assessee trust which is the essential requirement for running the assessee trust. 11. The CIT(A)erred in not appreciating that the assessee trust had charged following fees for a duration of 30 years at the time of construction of the swimming pool to meet partly the cost of construction:- Category Duration Regn. Fees Membership Security deposit Building Fund Single 30 yrs Rs.5000/- Rs.5000/- Rs.5000/- Rs.60,000/- Family 30 yrs Rs.5000/- Rs.5000/- Rs.5000/- Rs.1,10,000/-   14. The CIT(A) erred in not appreciating the Hon'ble Delhi High Court judgment in the case of Institute of Chartered Accountants of India vs.Director General of Income-tax (E) 358 ITR 0091 (Del.) that th....

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....ome of the activities falling out of the scope of proviso to Section-2(15) of the Income-tax Act, 1961 and since there was a deficit, no tax can be levied on the same. 2.2 We have examined the additional grounds of appeal filed by the assessee on 01.03.2017. We find that these are purely legal in nature. We admit the same, keeping in mind the judgment of the Hon'ble Supreme Court in NTPC vs. CIT 229 ITR 383 (SC). 3. Briefly stated, the facts of the case are that the Assessing Officer (AO) on verification of the details found that the assessee-trust had received interest income of Rs. 24,37,386/- on investments. The AO took into account the fact that the predominant object of the assessee-trust was to provide service to its members. The assessee was providing various facilities such as restaurant, residential rooms, swimming pool, card rooms, sports facilities to its members. To some extent, such facilities were also provided to non-members. Membership to this Gymkhana or Club is extremely difficult and expensive thereby making it exclusive. Therefore, the AO held that the assessee-trust was not an association created/established for charitable purpose within the meaning of th....

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....ng up to Rs. 1,25,000/- as membership fee (Ozone Club) which could not be afforded by a common man. In view of the above, the Ld. CIT(A) held that the assessee-trust was not a charitable organization, hence not eligible for exemption u/s 11. However, since it was engaged in providing services to its members it was a mutual association. Thus the Ld. CIT(A) held that the AO was right in holding that its income arose out of mutuality. The Ld. CIT(A) followed the decision in Bangalore Club (supra) and upheld the addition of interest income of Rs. 24,37,386/- made by the AO. He also upheld the addition of income from non-members of Rs. 1,42,530/-. 5. Before us, the Ld. counsel of the assessee submits in respect of interest income of Rs. 24,37,386/- that (i) the assessee-trust is in existence since 1972, (ii) all the investments made by the assessee-trust are as per the mode specified u/s 11(5), (iii) the assessee-trust has operating deficit of Rs. 4,817,606/- in AY 2010-11 and it attempts to cover its operating deficits out of other receipts such as interest on investments, donation, grants and other ancillary revenues, (iv) all these receipts are meant to assist the assessee-trust t....

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....s, 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." [ Emphasis supplied] 7.2 The above proviso to section 2(15) shall apply to entities whose purpose is 'advancement of any other object of general public utility' i.e. the fourth limb of the definition of 'charitable purpose' contained in section 2(15). Hence, such entitles will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. 7.3 We now sum up the issue. A. After an exhaustive survey of most of the landmark rulings, the law in different facet in respect of mutual concerns is now well summed up by the Hon'ble Supreme Court in CIT vs Bankipur Club(1997) 226 ITR 97, thus : "Where a number of persons combine together and contribute to a common fund for financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to those persons cannot be regarded in any sense as profit. There must be complete identity between the contributors and the participators. If these requirements are fulfil....