DEPUTY COMMISSIONER OF INCOME TAX, MUMBAI vs. OTTERS CLUB, MUMBAI

आयकर अपीलीय अिधकरण �ायपीठ मुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM I.T.A. Nos. 8216, 6710 & 8217/Mum/2025 (Assessment Years:2009-10, 2017-18 & 2018-19) Deputy Commissioner of Otters Club Income Tax 29C, Otters Club, Carter Road, Bandra Room No.608, 6th Floor, MTNL Vs. (W), Mumbai-400050 Building, Cumballa Hill, Peddar Road, Mumbai-400026 PAN: AAATO0013F Revenue - अपीलाथ� / Appellant Assessee -��थ�/ Respondent :

Assessee by : Shri Porus Kaka, Ld.Sr.Adv.& Shri Nitesh Joshi, Adv. : Shri Ajay Soneji, Sr. DR Revenue by : 22.06.2026 Date of Hearing Date of Pronouncement : 18.09.2026

O R D E R Per Arun Khodpia, AM:

The captioned appeals preferred by the Revenue are directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 22.09.2025 (AY 2009- 10), 28.08.2025 (AY 2017-18) and 22.09.2025 (AY 2018-19), arises from the assessment order under section 143(3) r.w.s 147of the Income Tax Act, 1961 [in short, “the Act”] dated 28.03.2016 (AY 2009-10), u/s 143(3) dated 03.12.2019

ITA No. 6710, 8216-8217/Mum/2025 Otters Club (AY 2017-18) and u/s 143(3) dated 27.09.2021 (AY 2018-19), passed by respective assessing officers [in short, “the Ld. AO”].

Assessment Year 2017-18 being taken as the lead year, with the consent of both parties. The Grounds of Appeal raised by the Revenue for Assessment Year 2017-18 are reproduced hereunder:

Ground of appeal 2017-18 “1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee is meaning of section 2(15) of the Income-tax Act, 1961, despite the assessee's charitable organization within the activities being restricted to a limited group of members and involving substantial commercial components such as sale of liquor, catering, and sports facilities." 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in granting exemption under section 11 of the Act, overlooking the fact that the assessee was hit by the proviso to section 2(15) owing to the commercial nature of its activities and that its receipts exceeded the threshold prescribed for charitable institutions". 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred by treating the assessee as a charitable trust and not a mutual concern, despite clear findings that benefits were extended exclusively to members, and surplus was generated from controlled access and fee-based activities." 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing deduction of capital expenditure of Rs. 6,00,10,068/- as application of income under section 11, without establishing whether such expenditure was made out of current year income or accumulated funds/corpus, thus permitting double deduction in contravention of settled principles". 5. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating interest income earned from fixed deposits and bank accounts to the extent of Rs. 5,88,17,998/- as exempt under section 11, ignoring the ratio laid down by the Hon'ble Supreme Court in Bangalore Club v. CIT (2013) 350 ITR 509 (SC)] that such interest income is not covered by the principle of mutuality and is taxable" 6. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in treating the income from other club activities of Rs. 2,49,50,527/-i.e. subscription and contribution from members, game charges, sports activities, social activities and income from 2

ITA No. 6710, 8216-8217/Mum/2025 Otters Club non members i.e. guest fees as exempt under section 11 ignoring the ratio of decision of Hon'ble Supreme Court in the case of Ranchi Club Ltd 194 ITR (ST) 236(SC). 7. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in placing undue emphasis on intent rather than actual conduct, ignoring evidence that public outreach activities are minimal, selective, and often fee-based, thereby negating the requirement of benefit to the public at large." 8. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the carry forward of excess expenditure/deficit of Rs. 5,96,25,016/-, ignoring that section 11 does not provide for computation of loss and that such allowance results in unintended double benefit." 9. "On the facts and circumstances of the case and in law and in light of the law laid down by Hon'ble Supreme Court in the case of New Noble Educational Society vs Chief Commissioner of Income Tax [2022] 143 taxmann.com 276 (SC) and in Civil Appeal No.21762 of 2017 in various batch of appeals and SLP's [lead case ACIT (Exemptions) Vs. Ahmedabad Urban Development Authority (2022) 143 taxmann.com 278 (SC)), the Ld. CIT(A) erred in not appreciating that even if the activities of the assessee are held to be covered under residuary part of section 2(15) as "advancement of any other object of general public utility" even then it is not entitled to exemption u/s 11 because it is hit by the proviso to section 2(15) as the income of the assessee consists of membership fees, sale of food, liquor, facility of playing cards, etc. which are in the nature of trade, commerce or business." 10. The appellant craves leave to add, amend, alter vary and/or withdraw any of the grounds of appeal.”

AY 2017-18 (lead Year)

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 4. In the course of assessment, the Assessing Officer examined the assessee's claim for exemption under sections 11 to 13 of the Act. He held that the assessee was essentially functioning as a mutual association, as the facilities were provided predominantly to its members, and that its activities did not qualify as charitable activities within the meaning of section 2(15) of the Act. The Assessing Officer further examined the activities relating to the restaurant, permit room and other facilities and held that the proviso to section 2(15) was attracted. On these findings, the exemption claimed under sections 11 to 13 of the Act was denied.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club Tribunal and the Hon'ble Bombay High Court in its own case for earlier assessment years, wherein exemption under section 11 had been allowed in respect of its activities, subject to the issue relating to playing cards.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club except in respect of income from playing cards, which issue was remanded to the Assessing Officer for verification. The Ld. CIT(A) also took note of the subsequent orders for assessment years 2014-15 and 2015-16, including the order of the Tribunal dated 21.03.2025, wherein the Tribunal had held that promotion of sports falls within the charitable object of advancement of an object of general public utility and that the activities of the assessee were not in the nature of trade, commerce or business so as to attract the proviso to section 2(15) of the Act.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club under section 11 in respect of such capital expenditure and the ground was allowed.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 13. In respect of the issues raised in appeal for Assessment Year 2017-18, the Revenue, through its written submissions, has advanced the following contentions: “Arguments: All grounds of appeal taken up together as they are inter related as to whether assessee is a charitable organization within the meaning of section 2(15) and whether it is entitled to claim benefit u/s 11 of the Act or it is not. 1. The activities of assessee trust are totally different from the objects of the trust. It is beneficial to limited persons i.e. members of the Club House only. 2. Moreover the assessee source of receipt which is not attributable to the main objects of the trust is more than double of the income attributable to the main activities of the trust. 3. Entrance fee is not corpus donation within meaning of Section 11(1)(d). Section 11(1)(d) grants exemption only where:  contribution is voluntary;  contribution is accompanied by a specific direction;  donor directs that amount shall form part of corpus. In present case:  payment of entrance fee is mandatory;  no written direction from contributor exists.  member cannot obtain membership without payment;  there is no clement of volition 4. A compulsory payment under contract cannot be equated with a voluntary corpus contribution. The nomenclature "corpus donation" adopted in books cannot determine taxability. Substance of transaction must prevail over accounting treatment. Exemption can be claimed only if conditions of section 11(1)(d) are fulfilled. The assessee credited entrance fee directly to corpus. However, accounting entries do not determine taxability but the nature of receipt determines taxability. 5. The receipt arises from core revenue earning activity. The receipt is recurring, operational and revenue in character and falls within section 2(24)(iia) read with section 5. The entrance fee is collected regularly, is linked directly to admission of members and forms part of club's operational structure. The receipts therefore bear all characteristics of revenue income. Further, the membership fees, entrance fees, food and liquor sales and recreational charges, constitute commercial receipts. Hence proviso to section 2(15) becomes applicable. The assessee serves a closed class of persons and not the public and the activities are conducted on commercial lines through collection of substantial fees and provision of member-centric facilities. Hence charitable character is diluted.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 6. As per the Ground No. 1 of appeal the Hon'ble SC in the case of New Noble Educational Society v CCIT (2022) 142 Taxmann.com 276 (SC) and in Civil appeal No. 21762 of 2017 in various batch of appeals and in SLPs (lead case being ACIT v. Ahmedabad Urban Development Authority (2022) 143 Taxamann.com 278 (SC)) Ld. CIT(A) erred in not appreciating that even if the activities of the assessee are held to be covered under residuary part of section 2(15) as 'advancement of any other object of general public utility even then it is not entitled to exemption u/s 11 because it is hit by proviso to section 2(15) as income of the assessee consists of membership fees, sale of food, liquor, facility of playing cards etc. which are in the nature of trade commerce or business. The proviso to section 2(15), particularly in light of Ahmedabad Urban Development Authority (SC), requires denial of exemption where activities assume commercial character. 7. The Ld. CIT(A) erred in mechanically following earlier years without conducting independent verification of facts for the year under appeal. Prayer: Hence in light of the facts and circumstances of the case and legal proposition put forward appeal filed by department be allowed and additions made by AO be upheld.” 14. Per contra, the Ld. Sr. Counsel appearing for the assessee submitted that the issues arising for consideration in the present appeals stand squarely covered by the decisions rendered by the Jurisdictional ITAT, Mumbai, in the assessee’s own case for the preceding assessment years, wherein the identical issues were considered and adjudicated upon after due deliberation. It was further submitted that the Ld. CIT(A), while granting relief to the assessee, has duly followed the aforesaid judicial precedents. The Ld. Sr. Counsel contended that there is neither any distinguishing fact or fresh material on record for the year under consideration nor any subsequent judicial pronouncement taking a contrary view. In these circumstances, it was submitted that, in keeping with the principle of consistency and judicial discipline, the view already taken by the Jurisdictional Tribunal in the assessee’s own case ought to be followed. Accordingly, it was

ITA No. 6710, 8216-8217/Mum/2025 Otters Club contended that the order of the Ld. CIT(A), having been rendered in conformity with the prevailing judicial precedent, warrants no interference.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club decisions, has directed the AO to delete the additions wherein the assessee is being consistently held to be a charitable institution carrying on the object of general public utility which is primarily engaged in promotion of sports including swimming, squash, gymnasium, other sports activities like yoga, aqua aerobics, table tennis, bridge, billiards and snooker.

7.1 We find that all the issues in the instant appeal have been elaborately dealt with by the coordinate Bench of ITAT, Mumbai in assessee's own case in ITA Nos. 3078 and 3080/Mum/2024 2015-16 and 2014-15 dated21.03, 2025. Relevant parts of the order are extracted as below for the sake of brevity: "7. It is an undisputed fact on record that the main objects of the assessee based on which registration was granted u/s. 12A of the Act and, which objects have been accepted to be of charitable nature have not undergone any change till date. Therefore, it is to be accepted that assessee is a charitable organization existing for charitable purpose having the object of general public utility in terms of Section 2(15) of the Act. 8. At this stage, it is relevant to observe, Section 2(15) of the Act as was existing in the statute in its original form which underwent change through amendment by Finance Act, 2008, with effect from 01.04.2009 with introduction of the following proviso:-"15) "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity;" 8.1. A careful reading of the proviso clearly indicates that it applies only to advancement of any other objects of general public utility'. Pertinently, proviso introduced to Section 2(15) has undergone further changes, subsequently. However, for the purpose of deciding the present appeal, the proviso as originally introduced by Finance Act, 2008, effective from 01.04.2009 would be relevant. As could be seen from the reading of the proviso noted above, it carves out an exception in the sense that advancement of any other object of general public utility shall not be regarded as charitable purpose in the following situations: i. if it involves any activity in the nature of trade, commerce or business. ii. or it involves any activity of rendering of any service in relation to any trade, commerce or business, iii. the activities in item (i) and (ii) are for a fee or cess or any other consideration. 8.2. Meaning of the words 'trade', 'commerce' and "business' have to be understood in their ordinary sense and as known in common parlance. The word 'trade' would mean exchange of goods for goods or for money. The word "business', though, has been 11

ITA No. 6710, 8216-8217/Mum/2025 Otters Club defined under section 2(13) of the Act, however, is generic. 'Business' in its ordinary sense would mean an occupation, or profession which occupies time, attention or labour of a person and is generally undertaken with a profit motive. The word 'commerce' again is of same connotation as 'trade' or 'business'. 8.3. As could be seen from the main objects of the assessee, it is not in any manner involved in any activity of trade, commerce or business. In the year under consideration, ld. Assessing Officer has not disputed that the activities are not commercial but has held that they satisfy the test of mutuality for which the Revenue has raised ground no.4 in the present appeal. Therefore, on no account these activities could be said to be in the nature of trade, commerce or business. Further, it is necessary to see whether the second condition of any activity of rendering any service in relation to any trade, commerce or business is applicable. Since the assessee itself is not carrying on any trade, commerce or business, it cannot be said that it is involved in any activity of rendering service in relation to any trade, commerce or business. 9. Coordinate Bench has already dealt with the proviso to section 2(15) invoked by the ld. Assessing Officer in assessee's own case for Assessment Year 2009-10 to 2013-14 as discussed above. To further elaborate on this issue, we refer to the memorandum explaining the provision of Finance Bill, 2008 spells out the legislative intent for insertion of the proviso to section 2(15) of the Act. The relevant part of the memorandum reads as under: "Streamlining the definition of "charitable purpose" Section 2(15) of the Act defines "charitable purpose" to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility. It has been noticed that a number of entities operating on commercial lines are claiming exemption on their income either under section 10(23) or section 11 of the Act on the ground that they are charitable institutions. This is based on the argument that they are engaged in the "advancement of an object of general public utility" as is included in the fourth limb of the current definition of "charitable purpose". Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision. With a view to limiting the scope of the phrase "advancement of any other object of general public utility", it is proposed to amend section 2(15) so as to provide that "the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of a) any activity in the nature of trade, commerce or business or b) any activity of rendering of any service in relation to any trade, commerce or business, for a fee or cess or any other consideration, irrespective of the nature of use or application of the income from such activity, or the retention of such income, by the concerned entity. This amendment will take effect from the 1st day of April, 2009 and will accordingly apply in relation to the assessment year 2009-10 and subsequent assessment years." 12

ITA No. 6710, 8216-8217/Mum/2025 Otters Club

9.1. From the reading of above explanatory notes, it transpires that it was brought to the statute keeping in view the fact that in the garb of advancement of object of general public utility, many institutions/organizations are actually engaged in income generating commercial activities. Therefore, to prevent misuse of the exemption provision in the statute intended for genuine charitable institutions/organizations, the proviso was introduced. 10. It is further observed that as per the proviso to section 2(15), activity of trade, commerce or business or services related thereto, must be for a cess or fee or any other consideration. In the facts of the present case, admittedly, assessee recovers only the cost incurred for providing its facilities. In this respect, the factual details have been elaborately narrated in the above paragraphs which includes financial statistics as well as fees/charges recovered by the assessee for providing various sports and other facilities. The income and expenditure statement of the assessee is in deficit if the interest earnings are excluded from the total receipts of the assessee, details of which are already extracted above. 11. This issue of proviso to section 2(15) in the case of Institutions carrying out object of General Public Utility has been dealt by Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra). In this respect, certain paragraphs from the said judgement are reproduced for the sake of ready reference. "170. Classically, the idea of charity was tied up with eleemosynary. However, "charitable purpose" and charity as defined in the Act have a wider meaning where it is the object of the institution which is in focus. Thus, the idea of providing services or goods at no consideration, cost or nominal consideration is not confined to the provision of services or goods without charging anything or charging a token or nominal amount. This is spelt out in ballon Chamber of Commerce (supra) where this Court held that certain GPUs can render services to the public with the condition that they would not charge "more than is actually needed for the rendering of the services, may be it may not be an exact equivalent, such mathematical precision being impossible in the case of variables, may be a little surplus is left over at the end of the year the broad inhibition against making profit is a good guarantee that the carrying on of the activity is not for profit". 171. Therefore, pure charity in the sense that the performance of an activity without any consideration is not envisioned under the Act. If one keeps this in mind, what section 2(15) emphasizes is that so long as a GPU's charity's object involves activities which also generates profits (incidental, or in other words, while actually carrying out the objectives of GPU, if some profit is generated), it can be granted exemption provided the quantitative limit (of not exceeding 20%) under second proviso to section 2(15) for receipts from such profits, is adhered to. 172. Yet another manner of looking at the definition together with sections 10(23) and 11 is that for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profit, the prohibition against carrying on business or service relating to business is not attracted - if the quantum of such profits do not exceed 20% of its overall receipts.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 173. It may be useful to conclude this section on interpretation with some illustrations. The example of Gandhi Peace Foundation disseminating Mahatma Gandhi's philosophy (in Surat Art Silk) through museums and exhibitions and publishing his works, for nominal cost, ipso facto is not business. Likewise, providing access to low- cost hostels to weaker segments of society, where the fee or charges recovered cover the costs (including administrative expenditure) plus nominal mark up; or renting marriage halls for low amounts, again with a fee meant to cover costs; or blood bank services, again with fee to cover costs, are not activities in the nature of business. Yet, when the entity concerned charges substantial amounts over and above the cost it incuts for doing the same work, or work which is part of its object (de, publishing an expensive coffee table bookon Gandhi, or in the case of the marriage hall, charging significant amounts from those who can afford to pay, by providing extra services, far above the cost-plus nominal markup) such activities are in the nature of trade, commerce, business or service in relation to them. In such case, the receipts from such latter kind of activities where higher amounts are charged, should not exceed the limit indicated by proviso (ii) to section 2(15)" "253. In view of the foregoing discussion and analysis, the following conclusions are recorded regarding the interpretation of the changed definition of "charitable purpose" (w.e.f. 1-4-2009), as well as the later amendments, and other related provisions of the IT Act........ A. General test under section 2(15) A.3. Generally, the charging of any amount towards consideration for such an activity (advancing general public utility), which is on cost-basis or nominally above cost, cannot be considered to be "trade, commerce, or business" or any services in relation thereto. It is only when the charges are markedly or significantly above the cost incurred by the assessee in question, that they would fall within the mischief of "cess, or fee, or any other consideration" towards "trade, commerce or business". In this regard, the Court has clarified through illustrations what kind of services or goods provided on cost or nominal basis. would normally be excluded from the mischief of trade, commerce, or business, in the body of the judgment. H. Application of interpretation H. At the cost of repetition, it may be noted that the conclusions arrived at by way of this judgment, neither precludes any of the Assessee's (whether statutory, or non-statutory) advancing objects of general public utility, from claiming exemption, nor the taxing authorities from denying exemption, in the future, if the receipts of the relevant year exceed the quantitative limit. The assessing authorities must on a yearly basis, scrutinize the record to discern whether the nature of the Assessee's activities amount to "trade, commerce or business" based on its receipts and income (de, whether the amounts charged are on cost-basis, or significantly higher). If it is found that they are in the nature of "trade, commerce or business", then it must be examined whether the quantified limit (as amended from time to time) in proviso to section 2(15), has been breached, thus disentitling them to exemption." 11.1. From the above, it is noted that intention to earn profit is an essential ingredient for an activity to be considered in the nature of trade, commerce or business. If a charitable trust or institution charges a nominal profit above cost in respect of its activities, it would not fall within the vice of proviso to section 2(15). As elaborately dealt in the above paragraphs in the present case, assessee has not even covered its expenses in respect of activities offered by it, there being deficit in its income and 14

ITA No. 6710, 8216-8217/Mum/2025 Otters Club expenditure statement. Furthermore, Id. Assessing Officer has also not disputed this fact, who has held these to be mutual activities. 11.2. We also take note of the decision of Coordinate Bench of ITAT, Mumbai in the case of Media Research Users Council vs. ADIT [2024] 205 ITD 170 (Mum) wherein the judgement of Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) was analysed and is relevant in the present case. The analysis made by the Coordinate Bench in para-19 of its order is extracted below for ease of ready reference: "19. The Hon'ble Supreme Court after analyzing the law when was prevalent and applicable prior to insertion of proviso w.e.f. 01/04/2009 and amendments made thereafter, have clarified the amended position of law in the following manner:- ➤ if at all any activity in the nature of trade, commerce or business, or a service in the nature of the same, for any form of consideration is permissible, then activity should be intrinsically linked to, or is part of the GPU category charity's object. ➤ the test of the charity being driven by a predominant object is no longer good law. Likewise, the ambiguity with respect to the kind of activities generating profit which could feed the main object and incidental profit-making also is not good law. What instead, the definition under section 2(15) through its proviso directs and thereby marks a departure from the previous law, that if a GPU charity is to engage in any activity in the nature of trade, commerce or business, for consideration it should only be a part of this actual function to attain the GPU objective; and equally important consideration is the imposition of a quantitative standard i.e., income (fees, cess or other consideration) derived from activity in the nature of trade, business or commerce or service in relation to these three activities, should not exceed the quantitative limit. The Hon'ble Apex Court has further held that the idea of providing services or goods at no consideration or at cost may not be relevant factor as it has to be given a wider meaning. But now there is an inhibition against making profit though there may be a little surplus left over the end of the year. Thus, concept of pure charity i.e. the performance of an activity without consideration is not envisioned under the Act, however, as long as GPUs object involves activities which also generates profits, it can be granted exemption provided the quantitative limit under second proviso to section 2(15) for receipts from such profits, is adhered to. ➤ In para 171, it has been stated that if the charity involves itself in activities that entail charging amounts only at cost or marginal markup over cost and also derives from profit, the prohibition against carrying on business or service relating to business is not attracted (if the quantum of such profits did not exceed 20% of its overall receipts) has been adhered to. 12. Considering the factual matrix of the case, extensive documents placed on record, elaborate discussion made on the applicable provisions of the Act and the decisions in the assessee's own case as well as those by Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) and by Coordinate Bench of ITAT, Mumbai in the case of Media Research Users Council (supra), we summarise 15

ITA No. 6710, 8216-8217/Mum/2025 Otters Club our conclusions on the core issue as stated above. We find that assessee has been held to be a charitable institution carrying on the object of General Public Utility which is primarily engaged in promotion of sports including swimming, squash, gymnasium, other sports activities like yoga, aqua aerobics, table tennis, bridge, billiards and snooker. Activities carried out by the assessee has led to nurturing of talent in all these sports fields, details of which are elaborately discussed by ld. CIT(A) in his order in paragraph 7.7. Assessee has also placed on record details of performance and achievements of various sports persons in the above stated sports at national as well as international levels. Keeping the litigation history and the entire discussion made above in perspective, it is held that assessee is a charitable trust and principles of mutuality has been erroneously applied by the ld. Assessing Officer for denying the claim of exemption u/s.11 of the Act. 12.1. Further, we note that almost for four decades, assessee has been found to be pursuing these activities for charitable purpose, which is available for the benefit of persons of all communities and castes. It is undisputed that promotion of sports falls within the charitable cause of advancement of any other object of General Public Utility. Merely because proviso has been inserted in Section 2(15), it does not render activities which has been consistently found to be charitable to become commercial in nature. We find that in absence of intention to generate profit from the activities undertaken by the assessee, in view of continuous deficit, the same cannot be regarded as commercial in nature. Furthermore, we find that ld. Assessing Officer considered the activities on the principles of mutuality. In our considered view as discussed in detail in the above paragraphs, once the activities are held to be mutual, the same cannot be simultaneously held in the nature of trade, commerce or business, because a person cannot trade with oneself. Application of principles of mutuality has already been negated by us, also the activities of the assessee are held not to be in the nature of trade, commerce or business. It is adequately demonstrated by the assessee that fees/charges recovered by it for its activities are to meet its cost which in fact is not sufficient since assessee incurs deficit year on year basis which is met out from the interest earnings. Thus, in view of these findings and observations, we hold that assessee is not hit by the proviso to Section 2(15) of the Act and thus, claim of exemption u/s.11 is allowed. Accordingly, grounds raised by the Revenue are dismissed." 7.2 In so far as the conclusion drawn by the AO based on the principles of mutuality, we find that the issue has been elaborately dealt with in aforesaid judicial decisions holding that once the activities are held to be mutual, the same cannot be simultaneously held in the nature of trade, commerce or business, because a person cannot trade with oneself. Application of principles of mutuality has already been negated by us, also the activities of the assessee are held not to be in the nature of trade, commerce or business. 7.3 Respectfully following the cited decisions above, we do not find any infirmity in the conclusion drawn by the ld.CIT(A) which is consistent view taken by the courts/tribunal over last several years holding the assessee to be engaged in charitable activity with none of its activities liable to be taxed under the Act. The grounds of the Revenue therefore, are dismissed.”

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 16. Respectfully following the aforesaid decision, wherein the coordinate Bench, after considering the earlier orders rendered in the assessee’s own case, found the issue arising in the year under consideration to be covered by the consistent view of the Tribunal on identical facts and circumstances, we find no basis to take a different view. We have also examined whether any distinguishing feature has been brought on record for the year under consideration. The Revenue has neither identified any material change in the facts, nature of activities or circumstances relevant to the issue, nor demonstrated that the factual matrix obtaining in the present year differs in any material respect from that considered by the Tribunal in the earlier years. Further, no subsequent judicial pronouncement taking a contrary view has been brought to our notice. Thus, there is no factual or legal circumstance warranting a departure from the view consistently taken by the Tribunal in the assessee’s own case and followed by the Ld. CIT(A).

ITA No. 6710, 8216-8217/Mum/2025 Otters Club distinguishing feature, either on facts or in law, has been brought on record warranting a different view for the year under consideration. Accordingly, for the reasons recorded hereinabove while adjudicating the appeal for Assessment Year 2017-18, our findings and conclusions shall apply mutatis mutandis to the issues arising in Assessment Year 2018-19. Consequently, the order of the Ld. CIT(A) for Assessment Year 2018-19 calls for no interference, and the grounds raised by the Revenue are, accordingly, dismissed. In result appeal of revenue for AY 2018-19, stands dismissed.

AY 2009-10

Ground of appeal for AY 2009-10 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the entrance fees/corpus receipts of Rs. 6,11,28,000/- are capital in nature and exempt, without appreciating that such receipts were compulsory. recurring, and not supported by any specific written direction as required under section 11(1)(d) of the Income-tax Act." 2 "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the said receipts are not voluntary contributions and therefore fall outside the scope of section 11(1)(d), and are taxable as income under section 2(24)(ita) read with section 5 of the Income-tax Act." 3 "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee is a charitable organization within the meaning of section 2(15) of the Income-tax Act, 1961, despite the assessee's activities being restricted to a limited group of members and involving substantial commercial components such as sale of liquor, catering, and sports facilities." 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in granting exemption under section 11 of the Act, overlooking the fact that the assessee was hit by the proviso to section 2(15) owing to the commercial nature of its activities and that its receipts exceeded the threshold prescribed for charitable institutions". 5. "On the facts and in the circumstances of the case and in law, the Ld. CITIA) erred by treating the assessee as a charitable trust and not a mutual concern, despite clear findings that benefits were extended exclusively to members, and surplus was generated from controlled access and fee-based activities." 18

ITA No. 6710, 8216-8217/Mum/2025 Otters Club

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 22. In the reassessment proceedings, the Assessing Officer treated the amount of ₹6,11,28,000/- received by the assessee as corpus donation as taxable income. The Assessing Officer also observed that the entrance fees received from new members, though credited to the corpus, were recurring in nature and constituted revenue receipts. The amount was accordingly treated as income under section 2(24)(iia) of the Act.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 25. On the merits of the corpus receipt, the assessee submitted that the entrance fees were capital receipts forming part of the corpus of the trust, supported by its bye-laws and the applications submitted by new members. It also relied upon earlier Tribunal orders in its own case for A.Ys. 1992-93 and 1994-95, as well as the decision of the Bombay High Court in CIT v. WIAA Club Ltd. [136 ITR 569(Bom)], contending that entrance fees received towards the corpus were capital in nature.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 29. On the issues raised in appeal for AY 2009-10, the revenue through their written submissions, contends as under: “Arguments: All grounds of appeal taken up together as they are inter related as to whether assessee is a charitable organization within the meaning of section 2(15) and whether it is entitled to claim benefit u/s 11 of the Act or it is not. 1. Entrance fee is not corpus donation within meaning of Section 11(1)(d). Section 11(1)(d) grants exemption only where:  contribution is voluntary,  contribution is accompanied by a specific direction;  donor directs that amount shall form part of corpus, In present case:  payment of entrance fee is mandatory;  no written direction from contributor exists.  member cannot obtain membership without payment;  there is no element of volition; 2. Thus, the amount of Rs. 6,11,28,000/- is not a corpus donation but a compulsory entrance fee collected as consideration for membership and therefore taxable. Section 11(1)(d) requires voluntary contribution with specific written direction. Both conditions are absent. Therefore entrance fee fails the basic statutory conditions prescribed u/s. 11(1)(d). 3. A compulsory payment under contract cannot be equated with a voluntary corpus contribution. The nomenclature "corpus donation" adopted in books cannot determine taxability. Substance of transaction must prevail over accounting treatment. Exemption can be claimed only if conditions of section 11(1)(d) are fulfilled. The assessee credited entrance fee directly to corpus. However, accounting entries do not determine taxability but the nature of receipt determines taxability. 4. The receipt arises from core revenue earning activity. The receipt is recurring. operational and revenue in character and falls within section 2(24)(iia) read with section 5. The entrance fee is collected regularly, is linked directly to admission of members and forms part of club's operational structure. The receipts therefore bears all characteristics of revenue income. Further, the membership fees, entrance fees, food and liquor sales and recreational charges, constitute commercial receipts. Hence proviso to section 2(15) becomes applicable. The assessee serves a closed class of persons and not the public and the activities are conducted on commercial lines through collection of substantial fees and provision of member-centric facilities. Hence charitable character is diluted. 5. As per the Ground No. 7 of appeal the Hon'ble SC in the case of New Noble Educational Society v CCIT (2022) 142 Taxmann.com 276 (SC) and in Civil appeal No. 21762 of 2017 in various batch of appeals and in SLPs (lead case being ACIT v. 22

ITA No. 6710, 8216-8217/Mum/2025 Otters Club Ahmedabad Urban Development Authority (2022) 143 Taxamann.com 278 (SC)) Ld. CIT(A) erred in not appreciating that even if the activities of the assessee are held to be covered under residuary part of section 2(15) as 'advancement of any other object of general public utility' even then it is not entitled to exemption u/s 11 because it is hit by proviso to section 2(15) as income of the assessee consists of membership fees, sale of food, liquor, facility of playing cards etc. which are in the nature of trade commerce or business. The proviso to section 2(15), particularly in light of Ahmedabad Urban Development Authority (SC). requires denial of exemption where activities assume commercial character. 6. The Ld. CIT(A) erred in mechanically following earlier years without conducting independent verification of facts for the year under appeal. Prayer: Hence in light of the facts and circumstances of the case and legal proposition put forward appeal filed by department be allowed and additions made by AO be upheld”

ITA No. 6710, 8216-8217/Mum/2025 Otters Club receipts, being attributable to the acquisition of membership rights and forming part of the capital structure of the assessee, were capital in nature and not revenue receipts. The Ld. Sr. Counsel accordingly contended that the entrance fee/corpus receipts in the present case are required to be considered in the light of the aforesaid binding proposition, notwithstanding the Revenue’s contention regarding their recurring nature and the absence of specific written directions under section 11(1)(d) of the Act. The relevant question of law and observations of the Hon’ble High Court are reproduced hereunder:

“2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 4,08,950 made by the Assessing Officer on account of non- refundable entrance fees received by the assessee?" “5. As stated above, the Assessing Officer made an addition of Rs. 4,08,950 to the income of the assessee on account of non-refundable entrance fees received by the assessee. The Commissioner (Appeals) found that the entrance fees were charged by the assessee for enrolment of its customers as members of the "executive centre". The entrance fees were a one-time fee and only members were eligible to avail of the facilities available in the "executive centre". The Commissioner (Appeals) found that the entrance fees were non-refundable. In the case of CIT v. W.I.A.A. Club Ltd. [1982] 136 ITR 569 (Bom.), it has been held that the entrance fees were paid to the club in order to acquire the right to avail of services and facilities extended by the club. It was held that the entrance fees constituted receipt in the capital field. Hence, the Commissioner (Appeals) ordered deletion of Rs. 4,08,950 made by the Assessing Officer on account of non-refundable entrance fees received by the assessee. In view of the judgment of the Bombay High Court in the case of W.I.A.A. Club Ltd. (supra), the Tribunal was right in ordering deletion of Rs. 4,08,950 made by the Assessing Officer on account of non-refundable entrance fees” 32. Ld. AR further placed his reliance on the decision of Hon’ble Supreme Court in the case of PCIT Vs. Royal Western India Turf Club Ltd. (2023) 151 Taxmann.com 383 (SC), wherein the Hon’ble Apex Court had dismissed the SLP filed by the Revenue against the order of High Court challenging the issue wherein the Hon’ble High Court has held that the entrance fees paid by members 24

ITA No. 6710, 8216-8217/Mum/2025 Otters Club to acquire the rights of a club were capital receipts. While the aforesaid SLP was filed by the Revenue against the decision of Hon’ble Bombay High Court arising from the order in the case of PCIT Vs. Royal Western India Turf Club Ltd. has held as under: “3. Revenue impugned the said order before the Income Tax Appellate Tribunal (ITAT) which by an order dated 27th July, 2016 dismissed the appeal of the Revenue. The ITAT held that there is no dispute to the fact that right from practically the date of incorporation i.e., 1925 onwards, the entrance fee from the members was treated as capital in nature and majority of these orders were passed under section 143(3) of the Income-tax Act, 1961 (the Act). The ITAT also relied upon the judgment of this Court in CIT v. Diners Business Services (P.) Ltd. [2003] 132 Taxman 758/263 ITR 1 (Bom.) and held that any sum paid by a member to acquire the rights of a club is a capital receipt. The ITAT has relied upon various receipts and loopholes that the view of the Assessing Officer to treat the entrance fee as revenue receipt and not capital receipt was incorrect. 4. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 34. In this regard, the Ld. Counsel drew our attention to page 92 of the assessee’s Paper Book, containing the letter dated 24.04.2015 whereby the reasons recorded for reopening were furnished to the assessee. It was submitted that the reasons proceeded on the basis that the assessee had received corpus donations of ₹6,11,28,000/- which, according to the Assessing Officer, ought to have been included in the assessee’s income, particularly in view of the denial of exemption under section 11, and consequently constituted income chargeable to tax which had escaped assessment. According to the Ld. Counsel, however, the reasons recorded did not contain any satisfaction or finding that such escapement had occurred by reason of any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. It was therefore contended that the essential jurisdictional condition prescribed under the proviso to section 147 for reopening an assessment beyond four years remained unsatisfied. 35. The Ld. Counsel further submitted that the issue relating to the admission fee received by the assessee had already been examined during the original assessment proceedings, which culminated in the order under section 143(3) dated 25.10.2011, and no addition was made on this account. It was contended that the assessee had furnished the relevant particulars during the course of the original assessment proceedings and that there was no failure on its part to disclose fully and truly all material facts necessary for the assessment. According to the Ld. Counsel, the subsequent reopening, insofar as it sought to bring the 26

ITA No. 6710, 8216-8217/Mum/2025 Otters Club same receipts to tax, could not be sustained in the absence of the specific jurisdictional condition stipulated by the proviso to section 147. 36. In support of the aforesaid legal contention, the Ld. Counsel placed reliance upon various judicial precedents, including the decision of the Hon’ble Supreme Court in ACIT v. Meer Gems [2023] 154 taxmann.com 406 (SC), whereby the Revenue’s Special Leave Petition against the judgment of the Hon’ble Bombay High Court in Meer Gems v. ACIT was dismissed. The Ld. Counsel relied upon the following observations of the Hon’ble High Court: “Where Assessing Officer issued a reopening notice under section 148 after expiry of four years on ground that genuineness of amount payable to sundry creditors which was pending for long period was not ascertained during original assessment and same should have been treated as cessation of liability in terms of section 41(1), since said reason for reopening was based on same material facts which were present during original proceedings and no new information was brought on record during considering year, impugned reopening notice issued was liable to be quashed.”

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 38. In this context, we find it apposite to refer to the decision of the Hon’ble Jurisdictional High Court of Bombay in PCIT v. Royal Western India Turf Club Ltd. (supra), wherein the nature of amounts received from members towards acquisition of membership rights was examined and it was held that a sum paid by a member for acquiring such rights constitutes a capital receipt. The principle emerging from the said decision is relevant to the facts before us, since the receipt in the present case arises from the assessee’s admission/entrance fee payable in connection with acquisition of membership of the club and the consequential right to avail the facilities and privileges attached to such membership. The character of the receipt is thus required to be examined with reference to the purpose and occasion for which it is received, rather than merely by reference to the fact that the amount is collected from members.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 40. We, therefore, respectfully follow the aforesaid judicial proposition, which, though carried in further appeal before the Hon’ble Supreme Court, did not result in any interference with the decision of the Hon’ble Jurisdictional High Court, the Revenue’s SLP having been dismissed. The said principle, when considered in the context of the nature and purpose of the entrance fee received by the assessee, supports the treatment of such receipt as a capital receipt.

ITA No. 6710, 8216-8217/Mum/2025 Otters Club 43. In result, the appeal of Revenue for AY 2009-10 stands dismissed.

Order pronounced in the open court on 18-09-2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated : 18-09-2026. Ankit K., Sr. PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai