TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 341
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.... for the sake of brevity, we are narrating the facts involved in the appeal in ITA no. 648/Mum./2013, for assessment year 2009-10, which is taken up as the lead appeal. 4. Brief facts are, the assessee is a public charitable trust providing swimming pool facilities for training and for other aquatic events. It also provides facilities for other sports such as Squash, Billiards, etc. The assessee is not only registeredwith the Charity Commissioner, Mumbai, but has also been granted registration under section 12A of the Act. For the assessment year under dispute, the assessee filed its return of income on 15th September 2009, declaring loss of Rs. 22,19,047. In the course of assessment proceedings, the Assessing Officer, on verifying materials on record, found that the assessee is also providing facilities of playing Cards and also having Permit Room, Bar and Restaurants for Catering and Soft Drinks. Noticing this, the Assessing Officer called upon the assessee to explain how providing facilities of playing Cards at stake, Permit Room, Bar and Restaurants, constitute charitable activities and why it should not be treated as business activity as provided in section 11(4A) of the Act.....
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....d with its proviso. Accordingly, the Assessing Officer held that the assessee is not entitled to exemption under section 11 of the Act and its income has to be computed as normal business income. However, treating the assessee as a mutual concern, the Assessing Officer proceeded to tax the receipts from non-members and other sources such as dividend, interest, etc., and accordingly determined the taxable income at Rs. 3,89,29,816. The assessee challenged the aforesaid decision of the Assessing Officer by filing appeal before the first appellate authority. 5. However, learned Commissioner (Appeals) also concurred with the view expressed by the Assessing Officer. 6. Shri Porus Kaka, the learned Sr. Counsel for the assessee submitted, the assessee is a premier institution providing facilities for swimming. He submitted, many swimmers trained in the swimming facilities provided by the assessee have represented the Country and their respective States in national and international events and won several medals. Drawing our attention to the trust deed, a copy of which is placed at Page-1 of the paper book, the learned Sr. Counsel submitted, the trust was created in the year 1970 as a pu....
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.... of the Club have won a number of medals in different categories and he also drew our attention to the individuals who excelled in such events. As regards the observation of the Assessing Officer that the assessee provides facilities of playing Cards at stake, the learned Sr. Counsel submitted, the assessee does not provide any facility of playing Cards for stakes. He submitted, the assessee has a Bridge Room where only Bridge Tournaments are held twice a year and there is no playing of Cards for stakes. The learned Sr. Counsel submitted, from the very inception, the assessee is carrying on the same activity in furtherance of the objects mentioned in the trust deed. He submitted, in the return of income filed for the assessment year 1975-76, the assessee claimed exemption under section 11 of the Act which was denied by the Assessing Officer. He submitted, when the issue again came back to the Assessing Officer after being set aside by the Tribunal, he granted exemption to the assessee under section 11 of the Act which continued continuously for ten years. In this context, he drew our attention to the order dated 29th September 1982, passed in ITA no.1918/Bom./1981. He submitted, as....
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....egation of the Departmental Authorities that the facilities of Bar and Restaurants, renting of Room, etc., are provided only to the members which is a mutual activity, learned Sr. Counsel submitted, the money received from these activities subsidize and supplement the main objects and activities of the assessee in maintaining and running swimming and other sports facilities and providing them for the training and competition of the public at large. The learned Sr. Counsel submitted, after the insertion of proviso to section 2(15) of the Act, assessee's registration granted under section 12A of the Act was also cancelled for the very same reason on which the Assessing Officer rejected assessee's claim of exemption. He submitted, while deciding assessee's appeal against the cancellation of registration under section 12A of the Act, the Tribunal vide order dated 15th June 2018, passed in ITA no.2658/Mum./2012, restored the registration granted under section 12A of the Act. While doing so, he submitted, the Tribunal held that merely because of insertion of proviso to section 2(15) of the Act, the nature of assessee's activity does not change. The learned Sr. Counsel submitted, even the....
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....:- i) Delhi & District Cricket Association v/s DIT(E), [2015] 58 taxmann.com 292 (Del.)(Trib.); ii) DDIT(E) v/s Matunga Gymkhana, ITA no.1809/Mum./ 2010, etc., dated 30.11.2016; iii) DIT(E) v/s Chambur Gymkhana, [2013] 33 taxmann.com 526 (Bom.); iv) DIT(E) v/s Shri Vile Parle Kelavani Mandal, [2015] 58 taxmann.com 288 (Bom.); v) DIT(E) v/s Goregaon Sports Club, [2012] 21 taxmann.com 479 (Bom.); vi) Calcutta Cricket & Football Club v/s ITO, [2017] 88 taxmann.com 384 (Kol.) (Trib.); and vii) PHD Chamber of Commerce & Industry v/s DIT(E), [2012] 28 taxmann.com 161 (Del.). 9. Thus, he submitted, assessee's claim of exemption under section 11 of the Act should be allowed. 10. Shri Abirama Kartikeyan, the learned Departmental Representative strongly relying upon the observations of learned Commissioner (Appeals) and the Assessing Officer submitted, the activities relating to sale of liquor, food, etc., cannot be considered to be activities of charitable nature, hence, are commercial activities coming within the proviso to section 2(15) of the Act. If the assessee claims that it is providing sporting facilities like Swimming Pools, Squash, Billiard, etc., it is not necessa....
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....er section 11 of the Act afresh. In pursuance to the directions of the Tribunal, the Assessing Officer allowed assessee's claim of exemption under section 11 of the Act. 12. Further, the Department allowed assessee's claim of exemption continuously for succeeding 10 years and again in the year 1985-86, the Department rejected assessee's claim of exemption primarily on the ground that the activity of providing food and liquor in the Club premises and the facilities for playing Cards at stake are not activities which can be said to be objects of general public utility. Further, the Assessing Officer observed, such activities amount to carrying on business as per section 11(4A) of the Act. While deciding assessee's appeal for assessment years 1985-86 and 1991-92, the Tribunal in ITA no.5576/Bom./1993 and ITA no.6413/Bom./1994, dated 23rd August 2001, after following the Special Bench decision of the Tribunal in Breach Candy Swimming Bath Trust v/s ITO, concluded that except the income derived from the activity of providing facilities for playing Cards at stake, all other income from Swimming Pool and other sport activities, Bar and Restaurants, etc., will be from the activities of ca....
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.... on commercial activities by letting out rooms, selling liquor, food stuff, etc. The Club premises are not open to general public and it charges huge membership fees for admitting different categories of members. Thus, it has been concluded by the Departmental Authorities that with the introduction of proviso to section 2(15) of the Act, activities carried on by the assessee are of commercial/business nature, hence, it cannot be considered to be for charitable purpose. As discussed earlier, till the assessment year 2008-09 assessee's claim of exemption under section 11 of the Act has been accepted by the Tribunal and in some other assessment years, the Hon'ble Jurisdictional High Court has approved the view expressed by the Tribunal. 14. At the cost of repetition, it needs to be reiterated, the objects and activities carried on by the assessee in the impugned assessment year remained unchanged. The only distinguishing feature in the impugned assessment year which needs examination is, the applicability of proviso to section 2(15) of the Act. 15. As could be seen from the language of the aforesaid proviso, it applies only to the 4th category of activity coming within the expre....
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....ng facilities of the assessee. In these circumstances, it cannot be said that the services and facilities of the assessee are not accessible to the general public. On the contrary, the facts on record prove that the assessee had been carrying on its activities fully in conformity with the objects for which it was created. Having said so, it is now necessary to deal with the applicability of the proviso to section 2(15) of the Act to the assessee. Undisputedly, referring to the aforesaid proviso, the Departmental Authorities have held that assessee's activities of selling liquor, food stuff, letting out rooms for fees amounts to commercial activities not only as per the aforesaid provision, but also under section 11(4A) of the Act. The proviso to section 2(15) of the Act which was brought to the statute by Finance Act, 2010, with retrospective effect from 1st April 2009, came up for judicial scrutiny time and again. The Courts while interpreting the said provision have held while applying the proviso to section 2(15), the predominant object of the assessee has to be seen. If the predominant object of the assessee is of general public utility and while carrying out such object incide....
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....ent year, merely due to introduction of proviso to section 2(15) of the Act, assessee's claim of exemption under section 11 of the Act cannot be denied. As regards the observations of the Departmental Authorities that the assessee is a mutual concern providing facilities/services to its members only, we do not find it acceptable. As per the discussions in the forgoing paragraphs, it is established that the assessee provides its infrastructure and facilities to a large section of public and many of them have benefited by utilizing the faculties and training provided by the assessee. Even, in case of various other Clubs the Tribunal has held that the claim of exemption under section 11 of the Act is allowable. The facts of assessee's case is more or less identical to the facts of the other Clubs in respect of whom the Tribunal has rendered decisions allowing claim of exemption under section 11 of the Act. In various decisions cited before us, the Tribunal has also held that income derived from sale of liquor, food stuff, etc., cannot be considered to be a commercial activity without considering the predominant object of the assessee. It is not the case of the Department that the asse....