DIRECTOR OF INCOME TAX (EXEMPTION) vs. GOREGAON SPORTS CLU

PDF · subscribers
ITXA/6301/2010HC Bombay14 February 2012Bench: HON'BLE SHRI JUSTICE DR. D.Y. CHANDRACHUD, HON'BLE SHRI JUSTICE M.S. SANKLECHA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the assessee is a charitable institution. Regarding question (a), the proceedings were remitted back to the Assessing Officer to determine whether the requirements of Section 11 have been duly fulfilled concerning the application of funds. The AO was directed to carry out this exercise expeditiously. Consequently, questions (b), (c), (d), and (e) were held not to arise. The Court noted that the AO had not previously considered the application of funds under Section 11 as he had concluded the assessee did not fulfill the charitable purpose under Section 2(15). The Court's decision was influenced by its judgment in Director of Income Tax (Exemption) Vs. The Chembur Gymkhana, which followed Supreme Court precedent stating that membership open to a section of the community does not detract from a club being constituted for the advancement of general public utility, provided it is not formed for the benefit of individuals as such. The principle of mutuality was not the sole determinant for denying exemption if the object was charitable.

What were the facts?

The Revenue appealed against an Income Tax Appellate Tribunal (ITAT) order for Assessment Year 2003-04. The assessee, Goregaon Sports Club, is registered under the Bombay Public Trusts Act and Section 12A of the Income Tax Act, with its main object being the promotion of sports and athletic activities. The Assessing Officer (AO) initially denied exemption under Section 11, later reopening the assessment and treating the assessee as a mutual concern, thus denying the exemption. The Commissioner (Appeals) held that promoting sports falls under Section 2(15) as an object of general public utility, noting that the club's Olympic size swimming pool was open to the public on an annual membership basis without restriction. The ITAT confirmed the Commissioner's order, relying on its previous decisions concerning the assessee.

What were the issues?

1. Whether, on the facts and in law, the ITAT was right in directing the AO to grant exemption under Section 11, ignoring the AO's reasoning? (Assessee: Charitable Institution, Revenue: Mutual Concern) 2. Whether, on the facts and in law, the ITAT was right in ignoring that sports and recreational amenities are mainly for members, making the assessee a mutual concern and not a charitable institution? (Revenue's contention) 3. Whether, on the facts and in law, the ITAT was right in holding the assessee club is not covered by the principle of mutuality, thereby violating Section 13 and disentitling it from Section 11 exemption? (Revenue's contention) 4. Whether, on the facts and in law, the ITAT was right in ignoring the ratio in CIT Vs. Bankipur Club Ltd (226 ITR 97 SC) regarding the principle of mutuality in sports activity income and taxability of income from non-members? (Revenue's contention) 5. Whether, on the facts and in law, the ITAT was right in granting relief on income from other sources, ignoring that such income was earned from non-members? (Revenue's contention) Assessee's arguments: Not explicitly recorded, but implied reliance on the Commissioner (Appeals) and ITAT findings that the club is a charitable institution. The club's object is the promotion of sports and athletic activities, and facilities like the swimming pool are open to the public. Revenue's arguments: The assessee is a mutual concern, not a charitable institution, as its amenities are primarily for members. This violates Section 13, disentitling it from Section 11 exemption. The decision in CIT Vs. Bankipur Club Ltd is applicable, and income from non-members should be taxed.

Which sections of the Income-tax Act were involved?

Section 260A,Section 11,Section 143(3),Section 12A,Section 2(15),Section 13

AI-generated summary — verify with the full judgment below

itxa-6301-2010.sxw 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 6301 OF 2010 Director of Income Tax (Exemption) ...Appellant Vs. Goregaon Sports Club ...Respondent Mr.Suresh Kumar for appellant. Mr.Avinash D. Kango with Mr.Narendra Saxeria for respondent. ...... CORAM :  DR.D.Y.CHANDRACHUD & M.S. SANKLECHA, JJ.

14 February 2012. ORAL JUDGEMNT (PER DR.D.Y.CHANDRACHUD,J.) : 1. This Appeal by the Revenue under Section 260A of the Income Tax Act, 1961 arises out of a decision of the Income Tax Appellate Tribunal dated 24 March 2010 for Assessment Year 2003-04. The following questions of law are raised in the Appeal: (a) Whether on the facts and circumstances of the case and in law, the ITAT was right in directing the AO to grant exemption under Section 11 of the IT Act ignoring the detailed reasoning given by the AO? CNR No : HCBM020194732010 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:45:27

itxa-6301-2010.sxw 2 (b) Whether on the facts and circumstances of the case and in law, the ITAT was right in ignoring the fact that the sports activities and other recreation amenities are mainly for members and hence assessee is a mutual concern and not a charitable institution? (c) Whether on the facts and circumstances of the case and in law, the ITAT was right in holding that the assessee club is not covered by the principle of mutuality thereby violating provisions of Section 13 which disentitles the trust from claiming exemption under Section 11? (d) Whether on the facts and circumstances of the case and in law, the ITAT was right in ignoring the ratio involved in the case of CIT Vs. Bankipur Club Ltd 226 ITR 97 (SC) wherein the Supreme Court has discussed the principle of mutuality in respect of income from sports activity and the taxability of income received from non members which is squarely applicable to this case? Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:45:27

itxa-6301-2010.sxw 3 (e) Whether on the facts and circumstances of the case and in law, the ITAT was right in granting relief to the assessee on income from other sources, ignoring the fact that such incomes are earned from the non-members? 2. In the present case the Assessee is registered under the Bombay Public Trusts Act, 1950 and under Section 12A of the Income Tax Act, 1961. The main object of the Assessee is to promote sports and athletic activities. The Assessing Officer upon the return of the income being filed, passed an order of assessment under Section 143(3) but denied the exemption claimed under Section 11. Subsequently, the assessment was reopened since there was a mistake in calculations and while completing the reassessment the Assessing Officer treated the Assessee as a mutual concern and denied an exemption under Section 11. In Appeal, the Commissioner (Appeals) came to the conclusion that the promotion of sports and games fell within the purview of Section 2 (15) since it constituted an advancement of any other object of general pubic utility. The Commissioner (Appeals) noted that the Assessing Officer rejected the claim of the Assessee merely on the ground that the facilities for the promotion of sports are provided to a limited group of people, being the members of the club. The Commissioner (Appeals) held on the basis of factual material on record that the Assessee had Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:45:27

itxa-6301-2010.sxw 4 acquired land from the State government which was utilised for facilities such as providing an Olympic size swimming pool which was open to the general public on an annual membership basis without restriction as to caste, creed, religion or profession. The order of the Commissioner (Appeals) has been confirmed in Appeal by the Tribunal relying upon its decision dated 18 September 2008 and 29 July 2009 in respect of the Assessee. 3. This Court had the occasion to consider similar issues in a Judgment delivered in the case of Director of Income Tax (Exemption) Vs. The Chembur Gymkhana (Income Tax Appeal No.5568 of 2010) decided on 13 February 2012. This Court, following the law laid down by the Supreme Court, has held that the fact that the membership of the club is open to a section of the community would not detract from the fact that the club has been constituted for the advancement of any other object of general public utility. The Club is not formed for the benefit of an individual or a group of individuals as such. However, while affirming that the object of the Club falls within the purview of Section 2(15), this Court had remanded the proceedings back to the Assessing Officer to determine whether as regards the application of the funds, the requirements of Section 11 have been duly fulfilled. In the present case also the Assessing Officer did not Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:45:27

itxa-6301-2010.sxw 5 have an occasion to consider the application of the funds with reference to provisions of Section 11, since he had come to the conclusion that the Assessee does not fulfill the charitable purpose as defined in Section 2(15). 4. As regards question (a), we remit the proceedings back to the Assessing Officer to determine whether the requirements of Section 11 have been duly fulfilled as regards the application of the funds. The Assessing Officer shall carry out the exercise expeditiously. So far as question (b) is concerned, we hold that the Assessee is a Charitable Institution. Consequently, questions (c), (d) and (e) do not arise. 5. The Appeal shall accordingly stand disposed of. There shall be no order as to costs. (Dr. D.Y. Chandrachud, J.) (M.S. Sanklecha, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:45:27 Powered by TCPDF (www.tcpdf.org)

More judgments on Section 11

All 7,190 judgments and leading authorities on Section 11 →

Recent GST High Court judgments

Search GST case law →