TaxTMI 
TaxTMI 
2021 (5) TMI 62
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....vered by the principle of mutuality thereby violating provisions of section 13 which disentitles the trust from claiming exemption u/s. 11 . 3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in ignoring the ratio involved in the case of Bangalore Club vs. CIT & Anr. Being Civil Appeal No.124 of 2007 dated 14.01.2013 relied upon by the A.O., without even considering the same wherein the Hon'ble Apex Court has held that the interest earned by the assessee from the banks will not fall within the ambit of the mutuality principle and will therefore eligible to Income tax in the hands of the assessee which is squarely applicable to this case. 4. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was right in ignoring the ratio involved in the case of CIT V/s. Common Effluent Treatment Plant (Thane-Belapur) Association reported at (2010) 328 ITR 362 (Bom) relied upon by the A.O., without even considering the same wherein the Hon'ble Bombay High Court has held that interest on surplus fund invested in fixed deposits in Banks is not income from receipt from members of the assessee but was from third ....
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.... activity of earning interest income fell within the realm of Sec.2(15) of the Act and was not in the nature of business, trade or commerce. Observing, that as per the post amended Sec.2(15) of the Act wherein the definition of the term 'advancement of any other object and general public utility' was narrowed down a/w insertion of Sec.13(8) w.e.f 01.04.2009 as per which no exemption under Sec. 11 was to be allowed to such entities which were hit by the 'first proviso' to Sec.2(15) of the Act, the A.O was of the view that though development of sports was a charitable object however, as in the case of the assessee the dominant, substantial or main object of the club was to provide services to its members thus, it cannot be said to have been created for a charitable purpose. Observing that the actual activities of the assessee revealed that its dominant or rather the predominant object was to provide services to its members, viz. facilities such as restaurant, residential rooms, swimming pool, card rooms, sport related facilities etc. which to some extent were also provided to the non-members, the A.O held a conviction that the assessee could not be held to be a charitable associat....
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....It was further observed by the A.O that the assessee was in receipt of an entrance fee of Rs. 65,10,000/- during the year in question. On being queried, it was stated by the assessee that the aforesaid amount was received on account of entrance fee from new members during the year. Observing, that the fees raised by the assessee at the time of the entrance of new members was a receipt of a revenue nature and was chargeable to tax in its hands, the A.O brought the aforesaid amount to tax in the hands of the assessee. On the basis of his aforesaid deliberations the A.O vide his order passed under Sec. 143(3), dated 29.03.2016 assessed the income of the assessee trust at Rs. 2,16,82,750/-. 3. Aggrieved, the assessee carried the matter in appeal before the CIT(A). It was observed by the CIT(A) that the facts and the issue involved in the case before him remained the same as were therein involved in the assessee's own case for A.Y. 2012-13. It was noticed by the CIT(A) that the Tribunal in the assessee's case for A.Y. 2010-11 to A.Y. 2012-13 had decided the issue of exemption under Sec. 11 in favour of the assessee. Accordingly, taking note of the fact that the issue involved in the ....
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....ed by the Tribunal while disposing off the assessee's appeal for AYs. 2010-11, 2011-12 in ITA No. 1039 and 1040/Mum/2016, dated 21.03.2018, wherein the exemption under Sec.11 was restored to the assessee, as under: "11. Having considered relevant facts, we do not find any merit in the findings of the lower authorities for the reason that providing sports facilities to general public without restriction to any caste, creed, religion or profession is squarely comes within the definition of charitable purpose as defined u/s 2(15) of the Income-tax Act, 1961 and hence, the assessee is eligible for exemption u/s 11 of the Act. In this case, on perusal of the facts, it is abundantly clear that the assessee is running its activities in accordance with its main object and continued to provide services to its members by collecting nominal fee. We further observe that the assessee has deficits from its core activity of promoting swimming for all the years. The assessee's collections from its members is less than the amount spent for its objects. But for income from investments, the assessee is always incurring deficit for all the years. Therefore, we are of the considered vie....
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....leting assessment for those assessment years, the Assessing Officer took a completely identical view by holding that the assessee was a mutual concern, hence, receipts from non-members by way of canteen fee, interest, coaching, etc., is taxable. However, the Tribunal while deciding the appeals of the assessee for assessment years 1996-97 to 2000-01, held that as per the object of the trust, it is to be considered as a charitable organisation as the objects show that the assessee-trust was engaged in the broad areas of games and sports as well as in promotion and/or management of social intercourse or athletic sport and cultural and educational activities for its members. Considering the objects and activities of the assessee, the Tribunal held that it Pransukhlal Mafatlal Hindu Swimming Bath & Boat Club Trust is in the nature of general public utility as it is for the well being of a section of public at large. While dealing with the objection of the revenue that there is restriction on the membership admission, the Tribunal held that so long as members admission into the club is not arbitrary, the committee's discretion to restrict the membership does not interfere wi....
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....ding that the objects of the assessee are not for charitable purpose in view of the first proviso to section 2(15). On the contrary, the Assessing Officer by treating the assessee as a mutual concern, has brought to tax the receipt from non-members only. For invoking the first proviso to section 2(15), it is necessary and incumbent on the part of the Assessing Officer to give a factual finding that the assessee has derived income by engaging itself in trade, business or commercial activity. In the absence of any such finding the first proviso to section 2(15) cannot be attracted. More so, when the Tribunal and the High Court in the preceding assessment years have held that the objects of the assessee qualify the object of general public utility, hence, is existing for charitable purpose as per section 2(15). * In view of the aforesaid, the Commissioner (Appeals) was justified in allowing assessee's claim of exemption under section 11." 13. The assessee also relied upon the decision of ITAT, Mumbai Bench in the case of Dahisar Sports Foundation vs ITO (supra) wherein it was Pransukhlal Mafatlal Hindu Swimming Bath & Boat Club Trust held that where main object or purpose....
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....ion for a fee or money. An activity would be considered "business" if it is undertaken with a profit motive. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. The expressions "business", "trade" or "commerce" as used in the first proviso must, thus, be interpreted restrictively and where the dominant object of an organization is charitable any incidental activity for furtherance of the object would not fall within the expressions "business", "trade" or "commerce". (e) If the object or purpose of an institution is charitable, the fact that the institution collects certain charges does not alter the character of the institutions. It is not necessary that it should provide something for nothing or for less than it costs or for less than the ordinary price. 11.1 find that the above case law also supports the assessee's point of view. It isPransukhlal Mafatlal Hindu Swimming Bath & Boat Club Trust undeniable that the object or purpose of this trust is promotion of sports and games and thus charitable. The fact that the trust collects certain charges from coaching camps meant for promotion ....