TaxTMI 
TaxTMI 
2021 (11) TMI 850
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.... Act, ought to be allowed as the appellant is a charitable institution imparting education in the field of science of medicine. 3. Briefly stated, relevant material facts are like this. The assessee before us is a charitable trust registered with charity commissioner, under the Bombay Public Trust Act, as also under section 12A of the Income Tax Act 1961, with the Director of Income Tax (Exemptions). During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee's object was "solidarity and endowment it's members, to encourage and advance the knowledge, study and practice of the science of medicine in all ways among members". The Assessing Officer proceeded to treat the claim of tax exempt on account of mutuality. The submission of the assessee that the assessee has been charitable in nature was simply brushed aside. The Assessing Officer proceeded to decide the matter, on the mutuality issue, against the assessee. While doing so, the Assessing Officer, inter alia, observed as follows:- 6. The above submissions of the assessee is considered but the same cannot be accepted as the assessee is based on the principle of mutuality and in view of....
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....e contributors to the common fund and the participators in the surplus must be an identical body. That does not mean that each member should contribute to the common fund or that each member should participate in the surplus or get back from the surplus precisely what he has paid. What is required is that the members as a class should contribute to the common fund and participators as a class must be able to participate in the surplus. It is immaterial whether the surplus is paid back to the members in cash or put to reserve with the trust for its development and for providing benefits to its members. CIT v/s Natraj Finance Corporation 169 ITR 732, 735 Andhra Pradesh. iv. The application of the principle of Mutuality is not destroyed by the presence of transactions with, or profits derived from, non members. The said principle could apply to transactions with members. The two activities in appropriate cases be separated and the profits if any from the members can be taken for exemption on the basis of actual from the accounts or at any rate by estimate if it should become necessary (CIT v/s Madras Race Club 105 ITR 433 Madras) and the profits derived from non-members can be broug....
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....of each other. In the mutual association the members subscribe for the primary purpose of benefiting themselves, while in a charitable institution people subscribe for charitable object without any expectation in return. In the case of the assessee, the members have contributed only for the purpose of their own benefit and for acquiring certain benefits. Therefore, the assessee is treated as mutual association and not as charitable institution. ix. It may also be stated that the concept of charity is necessarily altruistic in nature and involves the idea of benefit to others. The essence of charity is that the person(s) doing charity exclude themselves from the benefits of the charity. Non exclusion of contributors to 'charity' fund from the benefits arising out of that is nothing but serving the interest of self in an organized manner. In fact the entire scheme of sec 11 to 13 and particularly sec. 13(l)(c) and 13(3) is based on this basic principle or essence of 'charity'. Thus in a case of even charitable institution, if benefit is proved to be for certain categories of people referred to in sec. 13(3) the Exemption u/s. 11, 12 is not admissible. Therefore, the....
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....assessee from banks will not fall within the ambit of the mutuality principle and will therefore, be eligible to Income-tax in the hands of the assessee. This view is also supported by the decision of the Hon'ble Bombay High Court in the case of CIT V/s Common Effluent Treatment Plan (Theme-Belapur) Association reported at (2010) 328 ITR 362 (Bom.) wherein it has been 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 party and therefore principle of mutuality does not apply. In the light of these judicial pronouncements, the rent received from Mobile Towers the donation received are also not he receipt from members. Thus interest income, the rent received from Mobile Towers and the donation received by the assessee is brought to tax separately and no expenses are allowed as no real expenditure in incurred to earn these incomes. 4. Aggrieved, assessee carried the matter in appeal but without any success. The Learned CIT(A) confirmed the exemption being declined on the ground of mutuality. As for the plea of the assessee that the assessee was pursuing charitable activities, the learned CI....
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....in all ways. 4.2 To encourage research, including experimental work, in the science of medicine. 4.3 To organize, establish, conduct, superintend or control institutions for promoting, whether directly or indirectly, the study of and research in problems, prevention and control of various diseases relating to the science of medicine. 4.4 To hold meetings and organize conferences, exhibitions, study circles or conventions for the study and discussion of problems relating to and allied with the science of medicine. 4.5 To provide instruction and education to deserving persons in the science of medicine. 4.6 To make pecuniary grants by way of scholarships, donations, subscriptions, allowances, gratuities, guarantees arid otherwise to and for the benefit of deserving students, scholars and other persons who are worthy of receiving such grants by reasons of their skill and proficiency in the science of practice of medicine or their contribution to the cause of promotion of learning, research and practice of the science of medicine 4.7 To award prizes, medals or other certificates or diploma of proficiency in the science of medicine to persons found deserving after such tests....
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.... generally in such manner as may be determined from time to time. 4.22 To engage such officials, servants or other persons as may be found necessary or useful for the conduct and management of the affairs of the Association. 4.23 To make bye-laws, rules and regulations of the Association and to delete, change, or add to the same from time to time. 4.24 To do all such other acts as may be necessary, incidental, conducive or convenient to the attainment of the above objects or any of them. EXPLANATION It is hereby declared that none of the objects or powers enumerated above shall be deemed subsidiary or auxiliary to the objects mentioned in any one or more them. 8. It is thus clear that the authorities below have proceeded on the misconception that the assessee trust has claimed tax exemption on the basis of mutuality principle alone. Learned CIT(A) has rather summarily dismissed the contention of the assessee with respect of exemption under section 11 by the virtue of being a charitable institution, and simply observed that "all the case laws relied upon by the AR are distinguishable". Learned CIT(A) has observed that "in view of discussions at length in the preceding par....
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.... itself is no ground to hold that the purpose is not charitable. The exemption under section 11 can be claimed and bearing in mind the object of the Trust. We are of the opinion that the Tribunal and the CIT (Appeals) have approached the issue correctly and in the light of the definition so also the tests laid down came to a factual conclusion that the Respondent is entitled to exemption under section 11 of the Act. This is not a case where the purpose can be said to run a coaching class or a centre. This is an institution which imparts education in the area of presea and postsea training to seamen so as to prepare them for all duties. In such circumstances, we do not find that the concurrent findings of fact are vitiated by error of law apparent on the face of the record or perversity enabling us to entertain this Appeal. There is no substantial question of law. The Appeal is therefore dismissed with no order as to costs. 9. We find support for our conclusion from a co-ordinate bench decision in the case of Gujarat Safety Council vs ITO [(2020) 180 ITD 711 (Ahd)] wherein our esteemed colleagues have, inter alia, observed as follows:- 11.1 The main thrust being on the objects of....