KHAR GYMKHANA, MUMBAI v. DIT (E), MUMBAI

ITA 373/MUM/2012 | 2009-2010
Pronouncement Date: 10-07-2013 | Result: Allowed

Appeal Details

RSA Number 37319914 RSA 2012
Assessee PAN AAATK5163C
Bench Mumbai
Appeal Number ITA 373/MUM/2012
Duration Of Justice 1 year(s) 5 month(s) 23 day(s)
Appellant KHAR GYMKHANA, MUMBAI
Respondent DIT (E), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-07-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 10-07-2013
Date Of Final Hearing 26-06-2013
Next Hearing Date 26-06-2013
Assessment Year 2009-2010
Appeal Filed On 17-01-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI . ! ' #'' '$ % ! & BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI VIVEK VARMA JUDICIAL MEMBER . : 373 / / 2012 A.Y. 2009-10 ITA NO. : 373/MUM/2012 (ASSESSMENT YEAR: 2009-10) KHAR GYMKHANA 13 TH ROAD KHAR WEST MUMBAI -400 052 .: PAN: AAATK 5163 C VS DIT(E) PIRAMAL CHAMBERS 6 TH FLOOR LALBAUG MUMBAI -400 012 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.H. DALAL RESPONDENT BY : SHRI SURINDER JIT SINGH /DATE OF HEARING : 26-06-2013 !' / DATE OF PRONOUNCEMENT : 10 -07-2013 * O R D E R #'' '$ : PER VIVEK VARMA JM: THE INSTANT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINS T THE ORDER OF DIT DATED 08.12.2011 CANCELLING THE REGISTRATION O F THE ASSESSEE SOCIETY. 2. THE FACTS ARE THAT THE ASSESSEE CAME INTO BEING BY VIRTUE OF DEED OF TRUST DATED 04.10.1934 FOR THE PROMOTION OF SPORTS PHY SICAL CULTURE AND SOCIAL INTER-COURSE AMONG MEMBERS. THE ASSESSEE TRU ST HAS THE FACILITIES SUCH AS PROMOTION AND ADVANCEMENT OF GAMES LIKE CRICKET TENNIS BADMINTON A LIBRARY CONSISTING OF SPORTS BOOKS AND PERIODICALS OTHER INDOOR AND OUTDOOR GAMES FACILITIES. VIDE SA NCTION KHAR GYMKHANA ITA NO. 373/MUM/2012 2 LETTER DATED 20.03.1984 THE CIT BOMBAY CITY IV BOMBAY A LLOWED THE REGISTRATION OF THE TRUST UNDER SECTION 12A(A) OF THE INCO ME TAX ACT 1961 AND WAS GRANTED REGISTRATION NO. TR/21085. SINCE TH EN THE ASSESSEE WAS ENJOYING THE EXEMPTION GRANTED BY THE IN COME TAX DEPARTMENT ON ACCOUNT OF TAXES IF ANY. 3. IN THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2009-10 THE AO CAME TO A CONCLUSION THAT THE ASSESSEE TRUST WAS CARRYING ON THE ACTIVITIES WHICH WERE IN THE NATURE OF TRADE COMMERCE BUS INESS ETC. THIS HE CONCLUDED BY NOTICING THAT OUT OF THE RECEIPTS T HE ASSESSEE HAD EARNED INCOME BY THE SALE OF LIQUOR AT RS. 1 45 99 037/- CANTEEN COMPENSATION AT RS. 20 67 807/- CARD AND DAILY GAMES AT RS. 81 883/- GUESTS FEE AT RS. 31 50 078/- AND INCOME FROM BAN QUET HALL. THE AO THEREFORE SHOW CAUSED THE ASSESSEE TO EXPLAIN A S TO WHY THE REGISTRATION MAY NOT BE CANCELLED IN VIEW OF THE NEWLY INSE RTED SECTION 2(15) APPLICABLE FROM 2009-10 AS THE OBJECTS ARE NOT MERE LY THE ADVANCEMENT OF GAMES AND SOCIAL INTERACTION WHICH CLEARLY FELL IN THE NON ALLOWANCE FIELD I.E.: A) ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINES S OR B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE COMMERCE OR BUSINESS . AS PRESCRIBED BY CIRCULAR NO. 11/2008 DATED 19.12.2008. 4. IN ITS REPLY TO THE SHOW CAUSE NOTICE NO. DIT/E/ITO(HQ)/WITHDRAWAL/49/2011-12 DATED 08.11.2011 ISSUE D BY THE DIT(EXEMPTION) ON THE ISSUE OF OTHER ACTIVITIES TH E ASSESSEE RESPONDED AS REFERRED IN YOUR SHOW CAUSE WHY THE ACTIVITIES OF SALE OF LIQUOR CANTEEN COMPENSATION CARD GAMES GUEST FEES AND BA NQUET HALL RECEIPTS CARRIED ON THE GYMKHANA SHOULD NOT BE TREA TED AS ACTIVITIES AMOUNTING TO TRADE OR COMMERCE. IN RESPONSE TO THE SAME WE WOULD LIKE TO STATE HEREUNDER:- THESE ACTIVITIES ARE INCIDENTAL AND ANCILLARY TO TH E MAIN OBJECTS. THE ACTIVITIES OF THE SALE OF LIQUOR AND COMPENSATION F ROM RUNNING OF CANTEEN DOESNT AT ALL LEAD TO ANY SURPLUS ON THE CONTRARY WE HAVE DEFICIT ARISING FROM THE ACTIVITY OF SALE OF LIQUOR. HOWEVER THIS A CTIVITY HELPS US TO ATTRACT MORE AND MORE MEMBERS AND PARTICIPANTS TO C ONTRIBUTE TO THE KHAR GYMKHANA ITA NO. 373/MUM/2012 3 TRUST WHEREBY THE TRUST CAN USE AND DEPLOY THE SAI D FUNDS FOR BETTERMENT OF FACILITIES AND UTILITIES UPGRADING OF THE INSTRUMENTS AND EQUIPMENTS FOR THE SPORTS AND PROMOTION OF THE TRUS T. THE GYMKHANA HAS SEPARATE CARD ROOMS WHERE IN THE GAMES OF THE C ARDS ARE PLAYED. ALSO THE GYMKHANA HAS DIFFERENT TYPES OF COMPETITIO NS IN THE GAMES OF CARDS. THE INCOME ARISING FROM THE CARD GAMES IS OU T OF THE SALE OF PACK OF CARDS TO THE PLAYERS. THE GYMKHANA IS EXTENSIVEL Y RENOVATING AND UPGRADING ITS FACILITIES FOR THE PROMOTION OF VARIO US SPORTS CATERED ON BOARD. THE GYMKHANA IS VERY OLD AND PRESENTLY REQUI RES A LOT OF REPAIRS AND RENOVATION. THESE REVENUE STREAMS AID THE GYMK HANA TO BETTER ITS FACILITIES AND SCALE AND THEREBY IMPROVE THE INFRA STRUCTURE WHICH IS REQUIRED FOR THE PROMOTION AND BETTERMENT OF THE QU ALITY OF THE PARTICIPANTS OF VARIOUS STEAMS OF SPORTS. IT IS FURTHER BROUGHT TO YOUR KIND NOTICE THAT THE TRUST IS CLAIMING EXEMPTION U/S 11 FOR PAST OVER MANY YEARS. THE TRUS T IS HAVING THE SAME SOURCES OF INCOME FROM ITS ACTIVITIES AND HAS BEEN APPLYING THE SAME CONSISTENTLY OVER YEARS FOR THE OBJECTS LAID D OWN AS PER THE MEMORANDUM/TRUST DEED. THE TRUST HAS BEEN REGULARLY ASSESSED WITH THIS OFFICE AND THE ASSESSMENT ORDERS FOR PREVIOUS YEARS HAVE ALL UPHELD THE CONTENTION OF THE CHARITABLE NATURE AND PURPOSE OF THE TRUST. EVEN THE TRIBUNAL WHICH IS SUPPOSED TO BE THE ULTIMATE A UTHORITY AS REGARDS TO THE QUESTION OF FACTS HAVE UPHELD THE VERY CHARI TABLE NATURE/PURPOSE OF THE TRUST AND GRANTED EXEMPTION U/S 11 ON VARIOU S PREVIOUS INSTANCES. THE ITAT ORDERS ARE SUBMITTED ON RECORDS FOR YOUR KIND PERUSAL. THE OBJECTS OF THE TRUST BEING ENCOURAGEMENT OF SPO RTS AND GAMES ARE CLEARLY CHARITABLE IN NATURE AND IN TERMS OF THE DE FINITION CONTAINED IN SECTION 2(15) OF THE LT. ACT 1961. MERELY BECAUSE T HE TRUST CHARGES FEES FROM ITS MEMBERS WOULD NOT IN ANY MATTER INTRINSICA LLY ALTER THE NATURE AND CHARACTER OF THE SERVICE RENDERED BY THE TRUST. THE DOMINANT NATURE PURPOSE AND OBJECTIVE OF THE TRUST IS PROMO TION OF SPORTS AND GAMES AND FEES CHARGED FROM THE MEMBERS IS NOT MOTI VATED BY COMMERCIAL CONSIDERATIONS. THE FEE CHARGED ADMITTED LY IS FOR THE PURPOSE OF PROVISION AND MANAGEMENT OF SPORTS FACIL ITIES FOR GENERAL PUBLIC. THE FACT THAT WITHOUT BECOMING A MEMBER OF THE TRUST THE FACILITIES PROVIDED BY THE TRUST CANNOT BE AVAILED OF WOULD NOT BY ITSELF INDICATE THAT THE ACTIVITIES OF THE CLUB ARE NON-CH ARITABLE. THE WORD PUBLIC USED IN THE EXPRESSION OBJECT OF GENERAL PUBLIC UTILITY IN SECTION 2(15) DOES NOT NECESSARILY REFER TO THE ENT IRE PUBLIC. IT IS TO EMBRACE AND INCLUDE A SEGMENT OF THE PUBLIC TO BRIN G THE EXPRESSION WITHIN THE AMBIT OF SECTION 2(15). 5. THE DIT AFTER CONSIDERING ASSESSEE REPLY HELD I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE C AREFULLY AND AFTER GOING THROUGH THE FACTS OF THE CASE I AM NOT INCLI NED TO AGREE WITH THE SUBMISSIONS OF THE ASSESSEE. FIRST OF ALL I WOULD LIKE TO REPRODUCE THE RELEVANT PORTION OF THE SECTION 2(15) WHERE THE PRO VISO HAS BEEN ADDED THERETO W.E.F. 12.4.2009 WHICH READS AS UNDER: SECTION 2(15): CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR ED UCATION MEDICAL RELIEF [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES O R OBJECTS OF ARTISTIC INTEREST] AND THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY. PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT IN VOLVES THE CARRYING OUT OF KHAR GYMKHANA ITA NO. 373/MUM/2012 4 ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BU SINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE COMMERCE OR BUSINESS FOR A CESS OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH A CTIVITY. PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY F T HE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAC RUPEES OR LESS IN THE PREVIOUS YEAR. ON CAREFUL CONSIDERATION OF THE ABOVE PROVISO IT I S AMPLY CLEAR THAT IF ANY TRUST/INSTITUTION WHOSE MAIN OBJECT IS FOR ADV ANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY CARRIES OUT ANY ACTIVITIES WHICH ARE IN THE NATURE OF ANY TRADE COMMERCE OR BUSINESS FO R A CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF MAKES IT VE RY CLEAR AND IT BRINGS ALL ACTIONS OF A TRUST WHICH ARE RESULTING IN RECEI PTS AS PART OF ITS EARNINGS UNDER THE AMBIT OF AFORESAID PROVISO. THER EFORE IN THE ASSESSEES CASE THERE ARE RECEIPTS OF HUGE AMOUNTS ON ACCOUNT OF INCOME FROM SALE OF LIQUOR ETC. RS.1 45 99 037/- C ANTEEN COMPENSATION OF RS. 20 67 806/- CARD/DAILY GAMES RS. 81 883/- GUEST FEES RS. 31 50 078/- AND INCOME FROM BANQUET HALL AS MENTIO NED IN THE FOREGOING PARAS WHICH ARE CLEARLY IN THE NATURE OF BUSINESS INCOME AND SINCE THESE RECEIPTS ARE IN EXCESS OF MONITORY LIMI T AS LED DOWN IN THE AFORESAID PROVISO THERE IS A CLEAR CUT CONTRAVENTI ON OF THE PROVISIONS OF SECTION 2(15) R.W. PROVISO WHICH HAS COME INTO EFFE CT FROM A.Y. 2009-10. ONCE A CHARITABLE TRUST / INSTITUTION HIT BY AFORES AID PROVISO THEN THERE IS DEEMING PROVISION THAT SUCH ENTITY SHALL NOT BE FOR A CHARITABLE PURPOSE HENCE ONCE THE ASSESSEE TRUST/INSTITUTION LOOSES ITS CHARITABLE CHARACTER THEN OBVIOUSLY THERE IS CHANGE IN THE STA TUS OF SUCH ASSESSEE AND IT IS NO LONGER CAN BE HOLD TO BE FOR CHARITABL E PURPOSE. ONCE IT IS HELD THAT THE ASSESSEE IS NOT FOR CHARITABLE PURPOS E THEN THE TRUST ITSELF BECOMES NON GENUINE AS IT LOOSES ITS PUBLIC CHARITA BLE STATUS AND ACCORDINGLY THE PROVISION OF SECTION 12AA(3) OF THE ACT GET ATTRACTED. THUS IN VIEW OF THE FACTS AND CIRCUMSTANCES AS DISC USSED ABOVE I THEREFORE ACCORDINGLY HOLD THAT THE ASSESSEE TRUST HAS BECOME NON GENUINE AND THE REGISTRATION AS ALLOWED TO IT IN EA RLIER YEARS U/S 12AA IS HEREBY CANCELLED/WITHDRAWN W.E.F. A.Y. 2009-10 A ND THE ASSESSEE TRUST IS ACCORDINGLY HELD AS NON CHARITABLE TRUST / INSTITUTION. 6. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 7. BEFORE US THE AR REITERATED THE SUBMISSIONS MADE BEFO RE THE REVENUE AUTHORITIES AND SUBMITTED THAT SIMPLY BECAUSE T HE ASSESSEE TRUST IS PROVIDING CERTAIN OTHER ACTIVITIES DOES NOT PER SE MEAN THE CANCELLATION OF REGISTRATION U/S 12AA(3) OF THE INCOME TAX ACT 1961. 8. ACCORDING TO THE AR THERE ARE TWIN REASONS IF SATISFIED THE RIGORS OF SECTION 12AA SHALL GET ATTRACTED I.E. IF THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEIN G CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST AS THE CASE MA Y BE . THE AR SUBMITTED THAT JUST BECAUSE THE LEGISLATURE HAS INSERTED SECTION 2(15) KHAR GYMKHANA ITA NO. 373/MUM/2012 5 REGISTRATION AS ALLOWED BY THE INCOME TAX DEPARTMENT CA NNOT GET CANCELLED WITHOUT THE CHANGE OF OBJECTS AND CHARACTER OF THE TRUS T. 9. HE FURTHER PLACED RELIANCE ON CERTAIN DECISIONS INCLUDING THE DECISION IN ITAS NO. 4315 & 4316/MUM/2010 IN ASSESSEES OWN CASE WHEREIN THE REVENUE HAD RAISED THE ISSUE AS TO WHY THE ASSESSEE WAS TREATED AS CHARITABLE INSTITUTION THE MOMENT THE TRUST GETS COVERED U/S 2(15) OF THE ACT. THE COORDINATE BENCH RELYING ON ITS EARLIER DECISION IN ITA NO. 332/MUM/2005 IN THE ASSESSEES OWN CASE DISMISSED THE APPEAL FILED BY THE DEPARTMENT. 10. THE AR PLEADED THAT THE REGISTRATION BE RESTORED. 11. THE DR ON THE OTHER HAND SUBMITTED THAT WITH THE INSERTION OF THE SECTION 2(15) THE CHARACTER OF THE CHARITABLE TRUST H AS GOT VERY LIMITED SCOPE AND THAT IN ITSELF WILL RENDER A TRUST UN-ELIGIBLE FOR REGISTRATION IF THE PURPOSE OF THE TRUST CROSSES THE LINE OF CHARITY AND GETS INTO THE FIELD OF TRADE OR PROFIT MAKING. 12. IN THESE CIRCUMSTANCES THE DECISION OF THE DIT TO C ANCEL THE REGISTRATION OF THE ASSESSEE TRUST WAS VALID . 13. WE HAVE HEARD THE ARGUMENTS OF THE RIVAL PARTIES. T HE BASIC OF CANCELLATION OF REGISTRATION IS THE IMPORT OF SECTION 2(15) BRO UGHT IN BY THE LEGISLATURE. IT IS NOT THE CASE OF THE DEPARTMENT THA T THE ASSESSEE CROSSED THE TWIN CONDITIONS AS MENTIONED IN THE SECTION 12AA(3) WHICH ARE THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION . IN THE INSTANT CASE THE DEPARTMENT HAS NOWHERE MENTIONED THAT SOCIAL INTER-COURSE AMONG MEMBERS WAS NOT ONE OF THE OBJECTS OF THE TRUST WHEN IT WAS ORIGINALLY FORMED ON 04.1 0.1934. THIS ASPECT ALONG WITH THE TWO ORDERS OF THE COORDINATE BENC H OF ITAT IN MUMBAI IN ITAS NO. 4315 & 4316/MUM/2010 DATED 25.11.201 1 AND THE EARLIER ORDER AND ITA NO. 332/MUM/2005 WHICH WAS RE LIED UPON KHAR GYMKHANA ITA NO. 373/MUM/2012 6 IN THE ORDER DATED 25.11.2011 IN THE CASE OF THE ASSESS EE TRUST WHEREIN THE ASPECT OF SECTION 2(15) HAD BEEN TAKEN AND A DJUDICATED UPON WERE PRIOR TO THE IMPUGNED ORDER WHICH IS DATED 08.12.2011. 14. IN OUR OPINION THE DIT SHOULD HAVE TAKEN INTO CONSID ERATION THE ORDERS OF THE HIGHER JUDICIAL AUTHORITY AT LEAST ON THE ASPECT OF RELIA NCE ON NEWLY INSERTED PROVISION OF SECTION 2(15) WHICH HE IGNORED. 15. WE NOTICE NONE OF THE REVENUE AUTHORITIES HAVE MADE ANY OBSERVATION/COMMENTS ON THE OBJECTS RECITED AS EARLY AS 04.10.1934 OF THE ASSESSEE TRUST THE TWIN CONDITIONS EXISTING IN SECTIO N 12AA(3) AND IGNORING THE EXISTING ORDERS OF THE COORDINATE BENCH IN T HE CASE OF THE ASSESSEE. 16. AS PER THE JUDICIAL PROPRIETY AS WELL AS THE FACTS COM ING OUT OF THE DOCUMENTS PLACED BEFORE US WE ARE OF THE OPINION TH E REVENUE AUTHORITIES HAVE ERRED IN CANCELLING THE REGISTRATION U/S 1 2AA(3). WE THEREFORE DIRECT THE REVENUE AUTHORITIES TO RESTORE THE REGISTRATION AS GRANTED U/S 12A. 17. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY 2013. SD/- SD/- ( . ) ( #'' '$ ) ! ! (B. RAMAKOTAIAH) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATE: 10 TH JULY 2013 KHAR GYMKHANA ITA NO. 373/MUM/2012 7 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE DIT (E)/CIT(A)-CONCERNED _________ MUMBAI. 4) & & ' CONCERNED _________ MUMBAI / THE CIT/CONCERNED_________ MUMBAI. 5) ()* + & + -. / THE D.R. A BENCH MUMBAI. 6) */ 0 COPY TO GUARD FILE. &12 / BY ORDER [ 3 / 4 5 & + -. DY. / ASSTT. REGISTRAR I.T.A.T. MUMBAI *784 . . * CHAVAN SR. PS