AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 218
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....pressing ground of appeal no. 2 to 13 and only ground of appeal no. 1 and 14 are pressed . The learned counsel for the assessee has also given written letter dated 14th April 2018 to that effect which is placed in file. The learned DR did not raised any objection to the dismissal of ground of appeal no. 2 to 13 raised by the assessee in memo of appeal filed with the tribunal. After hearing both the parties and perusing the material on record, we dismiss ground of appeal no. 2 to 13 raised by the assessee in memo of appeal filed with the tribunal. The ground of appeal no.1 and 14 raised by the assessee in memo of appeal filed with the tribunal read as under:- "(1) On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the A.O. in treating the assessee trust as mutual association and confirmed addition of interest income at Rs. 14,84,407/- and income from non-members at Rs. 1,30,625/- relying on the various judgments. *** *** *** (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 and Anr, Vs. Direc....
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....(SC). The Ld. DR fairly did not raised any objection more so that similar additional grounds of appeal were admitted in the immediately preceding assessment year 2010-11 by the tribunal in ITA no. 6489/Mum/2016 vide orders dated 24-08-2017. Thus, after hearing both the parties we are of the considered view that these additional grounds of appeal bearing S.No 1 to 4 need to be admitted keeping in view ratio of the judgment of Hon'ble Supreme Court in the case of NTPC v. CIT(Supra), as these four additional grounds of appeal are purely legal in nature and hence we direct admission of these four additional grounds of appeal raised by the assessee. We order accordingly. 4. The main controversy in this appeal is with respect to the denial of the exemption to the assessee u/s. 11 as the assessee was held to be not an association created/established for charitable purposes within the meaning of provisions of Section 2(15) although assessee was registered under Section 12A of the Act, however the AO and the learned CIT(A) considered the assessee to be eligible for benefits of principle of mutuality by treating assessee trust as mutual association. We have observed that similar situat....
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....ess" ," trade" or "commerce" as used in the first proviso to section 2(15) must be interpreted and where dominant object of an organization is charitable, any incidental activity for furtherance of the object would not fall within the expression "business", "trade" or "commerce". 2.1 The assessee also filed on 01.03.2017 additional grounds of appeal which are as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the appellant trust is registered u/s. 12A which indicates that the appellant trust is genuine and has charitable objects entitled to claim benefits of Sections 11 & 12, and, therefore, its fundamental status cannot be changed to mutual association to impose tax by denying exemption u/s.11 so long as registration u/s.12A is subsisting and in force. 2. The Ld. CIT(A) erred in not appreciating that the proviso to Section- 2(15) which denies exemption to a charitable institution carrying on commercial activities does not apply to institutions carrying out relief to the poor, education or medical relief but applies only to sports and athletic activities carried out by the appellant tru....
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....rovisions of section 2(15) of the Act. Therefore, he held that the assessee-trust was not entitled to exemption u/s 11 of the Act. The AO held that the income of by way of interest is clearly taxable as the same is not covered under the principals of mutuality. He relied on the decision in the case of Rajpath Club Ltd. 17 ITD 192, Bangalore Club vs. CIT350 ITR 509 and CIT vs. Common Effluent Treatment Plant (Theme-Belapur) Association reported at (2010) 328 ITR 362 (Bom.). In view of the above, the AO brought to tax interest income of Rs. 24,37,386/- and income from non-members of Rs. 1,42,530/-. 4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that in the statement of facts filed before the CIT(A), the assessee- trust has stated that (i) it is registered as a public charitable trust under the Societies Registration Act, 1860, (ii) it is a registered u/s 12A of the Income Tax Act 1961 and its owners are entitled to exemption u/s 80G, (iii) none of its activities are restricted to any members and it is open to the benefit of general public, (iv) it has never claimed any income as arising out of 'mutuality' an....
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....ant to assist the assessee-trust to fulfil its charitable objects and not generated with the intention of earning profits, (v) the assessee-trust is not in the business of investment, the surplus amount is invested in Bank FDs, (vi) the interest amount earned on the FDs is used for the activities of the assessee-trust. 5.1 In respect of income from non-members of Rs. 1,42,530/- the Ld. counsel submits that the assessee-trust is serving members of general public for over 40 years and has been actively involved in many activities like promotion of sports, providing several social services to members of general public. 6. Per contra the Ld. DR relies on the order passed by the Ld. CIT(A). He submits that a club is generally a mutual association as its membership is restricted to a particular section and only the members and their guests are entitled for the services of the club. A charitable institution can run a club but the income attributable to the activities of the club would be governed by the principles of mutuality and not charitable purpose as its activities are not meant for the advancement of any other object of general public utility. The Ld. DR ....
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....een the contributors and the participators. If these requirements are fulfilled, it is immaterial what particular form the association takes. Trading between persons associated together in this way does not give rise to profits which are chargeable to tax. Where the trade or activity is mutual, the fact that, as regards certain activities, certain members only of the association take advantage of the facilities which it offers does not affect the mutuality of the enterprise. *But+ if the object of the assessee company claiming to be a 'mutual concern' or a 'club', is to carry on a particular business and the money is realised both from the members and the non-members, for the same consideration by giving the same or similar facilities to all alike in respect of the one and the same business carried on by it, the dealings as a whole, disclose the same profit-earning motive and are alike tainted with commerciality and the resultant surplus is profit-income liable to tax." B. In respect of proviso inserted by the Finance Act 2008 to section 2(15), one has to keep in mind that such entities shall not be eligible for exemption u/s 11 or u/s 10(23C) of the Act, if they carry on ....