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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
आदेश / O R D E R
PER AMARJIT SINGH, AM:
All these appeals filed by the assessee are based on identical issue on similar facts, therefore, all these appeals are adjudicated together by taking the ITA No. 6393 as lead case and its finding on similar issue will be applied mutatis mutandis.
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ITA No. 6393/Mum/2016
“1(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) (hereinafter referred as "CIT(A)") erred in confirming the action of the Ld. Assessing Officer of denial of claim for exemption under section 11 of the Income Tax Act, 1961 mid the reasons assigned for doing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961, and Rules made there under.
l(b) (i) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) (hereinafter referred as "CIT(A)") erred in confirming the action of the Ld. Assessing Officer of denial of claim for exemption under section 11 of the Income Tax Act, 1961 to the appellant by invoking the proviso to section 2(15) of the Income Tax Act, 1961 and the reasons assigned for doing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961, and Rules made there under.
(ii) On the facts and in the circumstances of the case and in law, the lower authorities failed to appreciate that, the amended provisions of section 2(15) do not change the character or exempt status of the Assessee. l(c) On the facts and in the circumstances of the case and in law, the lower authorities erred in holding that the membership subscription and entrance fees are tainted with commerciality and beyond the scope of mutuality and thereby erred in denying the appellant's claim for exemption u/s 11 of the Income Tax Act, 1961, and the reasons assigned for doing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961, and Rules made there under.
l(d) (i) On the facts and in the circumstances of the case and in law the action of lower authorities in holding the appellant activity in the nature of trade, commerce or business and thereby in holding that the appellant is not eligible for claim of exemption u/s 11 of the Income Tax Act, 1961, which is contrary to the decision of the Hon'ble ITAT in the appellant's own case in ITA No. 285 & 286/Bom/95 for A.Y's 1989-90& 1990-91. (ii) That the order of the Assessing Officer is legally unsustainable as under section 13(8) read with section 2(15), the Assessing Officer cannot challenge the primary activities of the assessee based on which the charitable status was granted and reaffirmed by the Hon'ble ITAT in the appellant's own case in ITA no. 285 & 286/Bom/95 for A.Y's 1989-90 & 1990-91. l(e) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the Ld. Assessing Officer of denial of claim for exemption under section 11 of the Income Tax Act, 1961 to the appellant by invoking the provisions of section 13(l)(c)(ii)& 13(2)(g)
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r.w.s. 13(3)(cc) of the Income Tax Act, 1961 and the reasons assigned for doing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961 and Rules made there under. 2(a) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the learned Assessing Officer of treating subscription received from members Rs.1,45,12,844 and entrance fees of Rs.1,58,750/- as income chargeable to tax without appreciating that the said receipts are exempt from income tax under the principle of mutuality and the reasons assigned for doing so are wrong and contrary to the facts of the case , provisions of the Income tax Act, 1961 and rules made thereunder. 2(b) On the facts and in the circumstances of the case and in law, the action of lower authorities in charging to tax the subscription received from members and entrance fees is contrary to the decision of the Hon'ble ITAT in the appellant's own case in ITA No. 285 & 286/Bom/95 for A.Y's 1989-90 & 1990-91. The appellant craves leave to add, alter, amend and/or modify all or any of the above grounds of appeal on or before the date of hearing.”
All the grounds of appeal filed by the assessee as supra are interconnected therefore these grounds of appeal are adjudicatd together as follows. Fact in brief is that return of income declaring total income of Rs.nil was filed on 26.09.2012. The case was subject to scrutiny assessment and notice u/s 132 and 142(1) along with questionnaire were issued. The assessee company was incorporated as per the provision of Sec. 25 of the Company Act, for the purpose of securing accurate circulation figures and data relating to all periodical and media that sell advertising space. During the course of assessment the assessing officer asked the assessee to explain as to why provision of amended Sec. 2(15) should not be applied in its case for denial of exemption claimed u/s 11 of the Act. The assessee explained that it is a company registered u/s 25 of the Company Act, 1956 without share capital and also registered as charitable organization u/s 12(A) vide registration dated 11.11.1982. It is also submitted that the main object of the assessee to secure actual circulation figures and data relating to all periodicals and media that sell
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advertising space and in regard to such publication to obtain information as to area of distribution and fixed standard forms and methods for ascertaining the net sales figures and generally all information that will be all assistance to advertisers in estimating the value of any publication for advertising purposes and to record such information and circulate it to members of this association and generally to establish the bureau all information in regard to all publication and the circulation of them for the benefit of members of this association. It is also submitted that assessee also collect distribute amongst members of this association information relating to all forms and methods of advertising. The Assessing Officer has reproduced the submission of the assessee relating to the object and activities of the assessee at page 4 to 11 of the assessment order. The assessing officer stated that assessee has received contribution from members to the amount of Rs.1,45,12,844/- and interest fees of Rs.1,58,750/- and claimed the same as exempt in its computation. The assessee submitted that it gives a certificate of circulation to its members on the basis of the audit report which indicate the actual number of circulation of newspaper magazine etc. Such copies are printed and supplied to members on no profit and no loss basis and such services are used by members as authenticated prove of figures of circulation with advertisers and other agencies. However, the Assessing Officer observed that such activities of the assessee had no utility that benefit the general public. The A.O observed that the membership subscription is based on total circulation of copies of the publisher therefore the activity of conducting circulation audit is clearly a business activity for which consideration in the form of membership subscription and one time of entrance fee is received. The assessing officer mentioned that Sec. 2(15) that defines charitable purposes has been amended w.e.f
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1st April, 2009 i.e A.Y. 2009-10. As per amendment the definition of charitable purpose “the entities gathered by the advancement of any other object or general public utilities are not for charitable purpose if they involve the carrying of any activity in the nature of trade commerce or business, or renders any service in relation to trade, commerce or business.” The Assessing Officer observed that the following issue pertaining to the nature of activities of the assessee is required to be addressed:
(i) the assessee activity are in the nature of trade, commerce or business. (ii) The assessee is rendering any service in relation to any trade commerce or business. (iii) The assessee received any consideration in the nature of fees or cess for its business activities & (iv) Assessee’s income of such activity is more than Rs.25,00,000/-. Therefore, the Assessing Officer asked the assessee as to why provision of amended Sec. 2(15) should not be applied in its case. The assessee has made detailed submission vide letter dated 26.02.2015 which has been summarized as under:
(i) The assessee’s main revenue is contributions from from members and investment on deposit. (ii) Revenue earned is applied only towards general public utility; (iii) Activities are carried out for mutual benefit of members; (iv) Activities do not constitute business, trade or commerce since there is no profit motive; (v) Reliance was placed on CBDT Circular No. 11/2008, dated 15.09.2008.
The A.O was not satisfied with the submission of the assessee and he was of the view that it was the advertisers or advertising agencies that benefit from the circulation figure and this had no utility that benefit the
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general public as such. The AO has also stated that assessee received a predetermined fees in accordance with the slabs depending upon the circulation figures for carrying out audit under the garb of annual membership subscription and this was nothing but the consideration received for carrying out the audit of the publishers. Therefore, the assessing officer held that assesseee’s activity of conducting circulation audit was clearly a business activity for which consideration in the form of membership subscription and one time entrance fees was received. The A.O has further stated that income of the assessee on account of members and entrance fees was exceeded Rs.25,00,000/-, therefore, case of the assessee was not covered by the 2nd proviso to Sec.2(15) of the Act. The A.O also stated that there was no advancement of any public service but for maximizing the returns on advertisement based on circulation figures. Therefore, assessee’s case did not fall under the definition of the advancement of any other object of general public utility. In view of the above facts and observation the A.O has denied exemption u/s 11 to the assessee. The assessee has also claimed that the principle of mutuality would apply where business or commerce transaction takes place between persons who are associated together and not to the assessee. However, the A.O was of the view that assessee was rendering the commercial services to its members for consideration in the nature of annual membership and subscription fees, therefore the receipt towards membership and annual subscription/entrance fees were treated as commercial fees and were not entitled to the benefit of mutuality.
Violation of provision u/s 13 of the Act:
During the course of assessment the A.O observed that assessee has given the salary payment to Secretary General of Rs.30,08,400/-
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during the year in violation of provision of Sec.13 of the Act. On query the assessee explained that Secretary General was a qualified chartered accountant and he was an employee of the company with long experience of 25 years and salary was paid based on his qualification professional expertise in the field. However, the A.O has not accepted the explanation of the assessee and he was of the view that salary payment was unreasonable and not commensurate with the services rendered by the Secretary General, therefore, considered that assessee has violated the provision of Sec. 13 of the Act and assessee was not eligible to claim exemption u/s 11 of the Act.
Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.
During the course of appellate proceedings before us the ld. Counsel has filed paper book comprising copies of document and details of submission made before the A.O and ld. CIT(A) during the course of assessment and appellate proceedings. The assessee has also filed paper book comprising copies of judicial pronouncements relied upon by the ld. Counsel. The ld. Counsel contended that on the issue of denial of claim of exemption u/s 11 of the Act the coordinate bench of the ITAT, in the case of assessee vide ITA No. 5681/Mum/2015 & 6393/Mum/2016 A.Y. 2011-12 & 2012-13 has adjudicated the identical issue and similar facts in favour of the assessee. On the issue of payment of unreasonable salary to the Secretary General the ld. Counsel submitted that Secretary General was not the manager of the assessee, therefore, provision of Sec. 13 was not applicable to the case of the assessee. In this regard the ld. Counsel referred page no. 8 of the paper book pertaining to the detail related to salary payment made to Secretary General since 2007-08 to
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2012-13 and submitted that the salary was increased over a number of year in gradual stages and it was not the case of the assessee where the salary was paid unreasonably only in the year under consideration. The ld. Counsel also submitted that Secretary General of the assessee has to report to the counsel of management and takes their guidance and orders and clause 43 of Article of Association gives power to the counsel of management to appoint and dismiss a Secretary General, therefore, Secretary General was the employee of the assessee and not the manager. The ld. Counsel has also placed reliance on the decision of ACIT, Circle II, Faridabad Vs. Idicula Trust Society (Rgtd) Bench ‘C’ (2012) 21 taxman.com 144 (Delhi).
On the other hand, the ld. D.R supported the order of the ld. CIT(A) and submitted that Secretary General was the manager of the assessee and he was performing the function of the manager.
Heard both the sides and perused the material on record. During the course of assessment the A.O held that activities of the assessee was in the nature of trade, commerce or business and was rendering services in consideration of fees or cess. Since, the income of the assessee from such activities was more than Rs. 25 lac, therefore, the A.O had invoked the amended provision of Sec. 2(15) of the Act and denied the benefit of exemption u/s 11 of the Act.
6.1 The assessee company was registered u/s 25 of the Company Act, 1956 without share capital and it was also registered as a charitable organization u/s 12 (a) vide Registration No. INS/14619, dated 11.11.1982 and was eligible for claim of exemption u/s 11 of the I.T. Act.
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6.2 The assessee company was established for the main object to secure accurate circulation figures and data relating to all periodicals and media that sell advertising space and in regard to such publication to obtain information as to area of distribution and fixed standard forms and methods for ascertaining the net sales figures and generally all information that will be of assistance to advertisers and estimating the value of any publication for advertising purposes and to record such information and circulate it to members of this association and generally to establish a bureau of information in regard to all publication and the circulation of them for the benefit of members of the this association.
6.3 At the outset the ld. Counsel has submitted that the identical issue on similar facts that the amended provision of Sec. 2(15) of the Act has not application in the case of the assessee had been adjudicated by the coordinate bench of the ITAT vide order ITA No.5681/Mum/2015 & 6393/Mum/2016 A.Y. 2011-12 & 2012-13. With the assistance of the ld. Representative we have perused the decision of coordinate bench as supra. The coordinate bench had adjudicated the following grounds of appeal :– 1(a) to 1(b) and 4(a) 4(b):
“1(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) (hereinafter referred as CIT(A)') erred in confirming the action of the Ld. Assessing Officer of denial of claim for exemption under section II of the Income Tax Act, 1961 to the appellant by invoking the proviso to section 2(15) of the Income Tax Act, 1961 and the reasons assigned for doing so is wrong and contrary to the facts and circumstances of the case, provisions of Income Tax Act, 1961, and Rules made there under. 1(b) On the facts and in the circumstances of the case and in law, the lower authorities erred in holding the appellant activity in the nature of trades commerce or business and thereby erred in holding that the appellant is not eligible for claim of exemption u/s 11 of the Income Tax Act, 1961. 4(a) On the facts and in the circumstances of the case and in law, the learned C1T(A) erred in upholding the action of the learned Assessing Officer of treating subscription received from members Rs.1,22,92,183 and entrance fees of Rs.7,61,075/- as income chargeable to tax without appreciating that the said
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receipts are exempt from income tax under the principle of mutuality and the reasons assigned for doing so are wrong and contrary to the facts of the case, provisions of the income tax Act, 1961 and rules made thereunder. 4(b) On the facts and in the circumstances of the case and in law, the learned CIT(A) action of charging to tax the subscription received from members and entrance fees is contrary to the decision of the Hon'ble 1TAT in the appellant's awn case in ITA No. 285 & 286/Bom/95 for A.Ys 1989-90 & 1990-91.
The appellant craves leave to add, alter, amend and/or modify all or any of the above grounds of appeal on or before the date of hearing.”
These grounds of appeals are similar to the grounds of appeal filed by the assessee i.e 1(a) to 1(d) and 2(a)to 2(b). Relevant operating part of the finding of ITAT is reproduced as under:
Under this issue the assessee has challenged the denial of claim for exemption u/s 11of the Act, 1961 by invoking the provision u/s 2(15) of the Act. The Ld. Representative of the assessee has argued that the assessee company was incorporated on 28.04.1948 under the Companies Act, 1956 with the name as Audit Bureau Circulations Limited with a dominant object to secure accurate figures of circulation of newspapers and periodicals published in the country through a standard process of independent audit to assist the advertisers in estimating the value of any publication for reaching consumers. The Bureau gives ABC certificate at free of cost to members and in case members requires any extra copies, the same is provided on nominal charge to recover the cost of copying. The Bureau obtained the registration u/s 12A of the I.T. Act, 1961 on 11.11.1982 and thereafter, the appellant was continuously claiming the exemption u/s 11 of the I.T. Act and the exemption was allowed by Income Tax Authority but after the amendment of Section 2(15) of the Act, the claim of the assessee was declined whereas there was no change in the objects of the assessee, therefore, the finding of the CIT(A) is wrong against law and facts and is liable to be set aside. It is also argued that the claim by the assessee u/s 11 of the I.T. Act, 1961 was declined in the A.Y. 1989-90 &1990- 91 which was allowed by the Hon’ble ITAT in the assessee’s own case in ITA. No.285/Bom/1995 dated 28.04.1995 and the nature of the work of the assessee did not change till date but the claim of the assessee has wrongly been declined, therefore, the finding of the CIT(A) is not liable to be sustainable in the eyes of law. It is argued that the clause 3,4 & 8 of the Memorandum of Association speaks about object of the assessee which nowhere leads the nature of the work of assessee as commercial in nature, therefore, the finding of the CIT(A) is not sustainable and the claim of the Assessee is liable to be allowed. It is also argued that after amendment of Section 2(15) of the Act, the claim of the mutuality has also wrongly been declined by revenue which is also liable to be allowed in the interest of justice. In support of the said contention, the Ld. Representative of the assessee has relied upon the cases titled as Bombay Presidency Golf Club Ltd. Vs. DIT (Ex.) (23 taxmann.com 319) (Mum ITAT), Hiralal Bhagwati Vs. CIT (246 ITR 188) (2000) (Bom. High Court), Bar
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Council of Maharashtra Vs. CIT (126 ITR 27) (1980) (Bom. H.C.), Shri Khot Hindu Steel Mandal Vs. CIT (209 ITR 396 (1993) (Bom High Court), Banglore Club Vs. CIT (29 taxmann.com 29) (2013) (SC) and CIT Vs. Wellington Sports Club (302 ITR 279) (2008) (Bom. High Court). However, on the other hand, the Ld. Representative of the department has strongly relied upon the order passed by the CIT(A) in question. With due regards to the contention raised by the Ld. Representative of the parties and perusing the record, we noticed that the claim of the assessee has been rejected due to the change in definition of Section 2(15) of the I.T. Act, 1961. The assessee company was incorporated on 28.04.1948 under Companies Act 1956. The Bureau obtained license u/s 25 of the Companies Act 1956 on 25.11.1988 and name was changed to Audit Bureau Circulations. The company got the registration u/s 12A of the I.T. Act, 1961 on 11.11.1982. Since then the assessee was allowed to get the benefit of exemption u/s 11 of the I.T. Act, 1961. The claim of the assessee for exemption u/s 11 of the Act was declined in the year of 1989-90 & 1990-91 which was allowed by Hon’ble ITAT in appeal. In brief, the claim of assessee was allowed till the present order was passed after the amendment in Section 2(15) of the Act. Before going further it is necessary to advert the object of the assessee’s company on record. Clause 3 of the Memorandum of Association is hereby reproduced below:- “3. The objects for which the Association is established are: To secure accurate circulation figures and data relating to all periodicals and media that sell advertising space and in regard to such publications to obtain information as to area of and fix standard forms and methods for ascertaining the net sales figures and generally all information that Will be of assistance to advertisers in estimating the value of an publication for advertising purposes and to record such information and circulate it to members of this Association and, publications and the circulation of them for the benefit of members of this Association such service to be known as the A.B.C. service or by such other name or description as the Council fl91ttftn may determine from time to time.
aa)To set up a new division .of the Bureau to be known as 'National Readership Studies Council' in the field of Readership Studies for carrying out Readership Surveys covering all major publications published In India, whether or not such publications are audited by the Bureau or are publications of Bureau's members, arid to record, collect and distribute such readership surveys and all information relating thereto to all users thereof, who may require the same for estimating, the value of such publications published in India. irrespective of whether or not such users are members of the Bureau.
aaa) The company may undertake circulation audits, digital audits of publications printed and published within India or outside India as well as measurements of websites carrying advertisements through any electronic device and disseminate such information to all members,
b) To collect and distribute amongst members of this Association information relating to all forms and methods of advertising.
bb) To secure, collect, circulate and distribute information relating to all or any of the matters specified in the preceding three SubClauses (a), (aa) and (b) amongst any Government in India or abroad or any statutory authority
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constituted by any such Government interested, directly or indirectly in advertising, and amongst associations, bureau, societies, institutions and federations. whether in India or elsewhere and whether or not members of this Association, having objects similar to those of this Association.
bbb) To promote, join as member, associate, or otherwise he interested in, and take hold and dispose of shares in, any other company, association, bureau, society, institution, federation or other organisation, whether in India or elsewhere, having objects similar to those of this Association, or otherwise in any manner concerned with advertising or carrying on any business capable of being conducted so as directly or indirectly to benefit this Association.
C) To purchase, take on lease or in exchange, hire or otherwise acquire any real or personal properly and any rights or privileges which the Association may think necessary or Convenient for the promotion of its objects, and to construct, maintain and alter any buildings or erections necessary or convenient for the work of the Association.
d) To sell, let, mortgage, dispose of or turn to account all or any of the property or assets of the Association as may be thought expedient with a view to the promotion of its objects.
e) To undertake and execute any trusts which may law-fully be undertaken by the Association and may be conducive to its objects.
f) To borrow or raise money for the purposes 01 the Association on such terms and on such security as may be thought fit.
g) To invest the moneys of the Association rot immediately required for its purpose in or upon such investments, securities or property as may be thought fit.
h) To establish and support or aid in the establishment and support of any charitable or benevolent associations or institutions and to subscribe or guarantee money for charitable or benevolent purposes in any way connected with the purposes of the Association or calculated to further Its objects.
i) 10 do all such other things as are incidental as the association may think conducive to the attainment of the above objects or any of them.
j) To pay all the expenses connected with the formation and incorporation of the Association
k) Except as otherwise expressly stated to do all or any of the foregoing things anywhere.
PROVIDED that the Association shall not support with it funds any-object or endeavour to impose on or procure to be observed by its members or others, any regulation, restriction or condition which if an object of the Association would make it a Trade Union.”
However, clause 4, 5a and 8 is also necessary to be reproduced on record for ready reference:-
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“4. The income and property of the Association, whensoever derived, shall be applied solely towards the promotion of the objects of the Association as set forth in this Memorandum of Association and no portion thereof shall be paid or transferred directly or indirectly, by way of dividend, bonus or otherwise howsoever by way of profit to the members of the Association.
PROVIDED that nothing herein shall prevent the payment, in good faith, of reasonable and proper remuneration to any officer or servant of the Association, or to any memorandum of the Association in return for any services actually rendered to the Association, nor prevent the payment of interest at a rate not exceeding 6 percent per annum on money lent or reasonable and proper rent for premises demised or let by any member of the Association; but so that no member of the Council of Management or Governing Body of the Association shalt be appointed to any salaried office of the Association paid by fees, and that no remuneration or other benefit in money or money’s worth shell be given by the Association to any member of such Council or Governing Body except repayment of out-of-pocket expenses and interest at the rate aforesaid on money lent or reasonable and proper (ant for premises demised or let to the Association provided that the provision last aforesaid shall not apply to any payment to any gas, electric lighting, water or cable company of Which a member of the Council of Management or Governing Body may be a member, or any other company in which such member shall not hold more than one hundredth part of the capital, and such member shall not be bound to account for any share of profits he may receive in respect of any such payment.
5 (a) One half of the members for the time being of the Council of Management of the Association (hereinafter called the Council") shall consist of proprietors or publishers of newspapers or other periodicals which carry advertising and who are members of the Association or their representatives.
(b) The other half of the members for the time being of the Council, shall consist of and include both (i) members of the Association who advertise commodities or services in any newspaper or periodical, or their representatives and (ii) members of the Association who are advertising agents or their representatives.
The liability of the members is limited.
Every member of the Association undertakes to contribute to the assets of the Association, in the event of the same being wound up during the time that he is a member, or within one year afterwards, for payment of the debts and liabilities of the Association contracted before the time at which he ceases to be a member, and of the costs, charges and expenses of up the same, and for the adjustment of the rights of the contributories amongst themselves, such amount as may be required not exceeding Rupees Fifteens
If upon the winding up or dissolution of the Association there remains after the satisfaction of all As debts and liabilities any property whatsoever, the same shall not be paid to or distributed among the members of the Association, but shall be given or transferred to some other institution or institutions having objects similar to the objects of the Association, and which shall prohibit the distribution of its or their income and property among its or their members to an extent at least as great as is imposed on the Association under or by virtue of Clause 4 hereof, such institution or institutions to be deter-mined by the memorandum of the Association at or before the time of dissolution, or in
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default thereof by the High Court of Bombay and if and so far as effect cannot be given to such provision then to some charitable object.”
The objects of the assessee nowhere changed however after the amendment the provision us/ 2(15) of the Act the claim of the assessee u/s 11 of the Act was declined. The amended provision u/s 2(15) is hereby reproduced below:-
“Charitable purpose” includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, 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: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein in (twenty five lakh rupees) or less in the previous year.” 8. No doubt, it is required to be seen whether the object of the assessee falls within the purview of Section 2(15) of the Act or not. There is no change of the object of the assessee. The main object of the assessee is that the assessee has to secure accurate circulation figure and data relating to all periodicals and media that sell advertising space and in regard to such publication to obtain information as to area of distribution and fix standard forms and method of ascertaining the circulation figures. Bureau also records information and circulate it to the members which consist of publisher of newspaper/ magazines advertising and media agencies advertisers and Government publicity Department. It also distribute information relating to aforesaid matters to the Government and other association having objects and similar to those of this associations. The bureau certifies circulation figures of members publication based and on comprehensive audit by the auditor from a panel of approved auditors. This is one of the main activity of the assessee company. How the objects became commercial in nature is not understandable. The objects of the company are for the ultimate benefit of the public, but in what circumstances the objects of the assessee become commercial in nature, is not substantiated by the revenue in fact, even a single transaction of trade or commercial or business has not been referred to by the revenue. There was no change in the activity of the assessee since past years, and therefore, the amendment by insertion of the proviso u/s 2(15) of the Act would not make the activity of the assessee as trade, business and commerce in nature specifically in the circumstances when there is not a single instance of any business on record. The dominant purpose if any is charitable and incidental activities are not required to be treated as business in nature. In this regard, we also find in support of law settled in Bombay Presidency Golf Club Ltd. Vs. DIT (Ex.) (23 taxmann.com 319) (Mum ITAT), Indian Chamber of Commerce Vs. ITO (ITA No. 1491 & 1284/Kol/2012 (Kol. ITAT), Bar Council of Maharashtra Vs. CIT (126 ITR 27) (1980) (Bom.HC) and Hiralal Bhagwati Vs. CIT (246 ITR 188) (2000). So
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far as the claim in connection with member’s contribution and entrance fees are concerned, the same is not liable to be chargeable to tax in view of the law settled in CIT Vs. Wellington Sports Club etc. Further, we noticed that the claim of the assessee u/s 11 of the I.T. Act, 1961 was declined in the year of 1989- 90 & 1990-91 by revenue which was allowed by the ITAT in the assessee’s own case. Since then there was no change in the objects of the assessee till date. Merely came into existence of provision of Section 2(25) of the Act nowhere makes the object of the Assessee commercial in nature. Instances of business and profession are also not on record. Taking into account all the facts and circumstances of the case, we are of the view that the CIT(A) has wrongly denied the claim of the assessee u/s 11 of the Act which is liable to be allowed in the interest of justice. Accordingly, we order, The issue no. 1 and 4 are decided in favour of the assessee against the revenue.” 6.4 Respectfully following the decision of the ITAT as supra we find decision of ld. CIT(A) is not justified, therefore, grounds Nos. 1(a) to 1(d) and 2(a) & 2(b) are allowed.
6.5 All the grounds of appeal of the assessee except ground of No. 1(e) are covered in favour of the assessee by the aforesaid decision of the ITAT bench in the case of the assessee itself as supra.
Ground No. 1(e): Invoking the provision of Sec. 13(1)(c) (ii) & Sec. 13(2)(g) r.w.s 13(3)(CC) of the I.T. Act. 1961:
During the course of assessment the Assessing Officer observed that assessee had given unreasonable salary payment to Secretary General of Rs.30,08,400/- and he was of the view that Secretary General fall within the category of person enumerated in sub-section (3) of Section 13 of the Act, therefore, held that assessee was not eligible to claim exemption u/s 11 of the Act. In this regard after perusal of the material on record it is noticed that assessee has specifically brought to the notice of the Assessing Officer that Secretary General is a qualified chartered accountant and is an employee of the company with experience of over 25 years in accountancy and audit. The Secretary General does not have any direct or indirect interest in the company. He does not hold
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any shares in the company. Secretary General is not paid anything over and above the remuneration which is based on his qualification and professional expertise in the field. Salary paid to Secretary General and to other staff cannot be compared because functions performed by other staff were more of clerical nature whereas the functions of Secretary General were more of executive and professional in nature. The clause 42 of Article of Association gives power to the counsel of management to manage activities of the assessee and further clause 43 of the Article of Association gives power to the counsel of management to appoint or dismissed a secretary and other officers and servant and also to determine their wages or remuneration/powers and duties. The Secretary General has to report to the counsel of management and takes their guidance and orders. It is noticed that counsel of management of the assessee comprises of 8 elected representatives of publisher members, 4 elected representatives of advertising agency members and 4 elected representatives of advertisers members. These facts demonstrate that the power to manage activities and affaires of the assessee was with the counsel of management. We have also perused the detail related to the salary paid to the Secretary General and observed that increased in the salary was made in gradual stages as under:
Relevant Salary Increase in % Increase Assessment Payment salary Year 2007-08 12,08,592 - - 2008-09 15,69,600 3,61,008 29.87 2009-10 20,92,800 5,23,200 33.33 2010-11 23,54,400 2,61,600 12.50 2011-12 25,28,796 4,35,996 18.52 2012-13 30,08,400 4,79,604 18.97
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We have also gone through the provision of Sec. 164(2) of the Act which referred to the relevant income which is derived from property held under trust wholly for charitable or religious purposes. Section 164(2) provide for forfeiting of exemption for breach of Sec. 13(1)(d), resulting in levy of maximum marginal rates of tax only to that part of the income which has forfeited exemption. From the plain reading of this proviso it is evident that where the whole or any part of the relevant income is not exempt u/s 11 or 12 because of the provisions of Sec. 13(1)(c) or 13 (1)(d) then tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate. However, in the case of the assessee the assessee by filing of evidences/detail regarding qualification of the Secretary General and his working experience and valuable contribution towards attaining the purpose and object of the trustee, the assessee has satisfactorily proved that salary paid to the Secretary General was not excessive or not in violation of the provisions of Sec. 13(3) of the Act. Therefore, we consider that denial of exemption to the assessee u/s 11 without disproving the contrary evidence furnished by the assessee is not justified. Accordingly, the appeal of the assessee is allowed.
ITA No. 2040/Mum/2019
1st Ground: Reopening the assessment u/s 147 of the I.T. Act, 1961:
The assessee has filed return of income on 25.09.2009. The return was processed u/s 143(1) of the Act and no scrutiny has been done in this case. The assessment was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued on 30.03.2016. In the reason recorded for reopening the Assessing Officer has specifically mentioned that ld. CIT(Exemption), Mumbai, has cancelled the registration u/s 12A vide
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order dated 29.02.2016 w.e.f 11.11.1982 holding that the assessee is not more charitable institution. The ld. CIT(A) has dismissed the appeal of the assessee holding that there was tangible material in the case of the assessee on the basis of which it was reopened. During the course of appellate proceedings before us the ld. Counsel has contended that reopening was not made on the basis of tangible material and has placed reliance on number of judicial pronouncements. However, the ld. D.R has referred and submitted that there was tangible material in the form of order of CIT(exemption) of cancelling the registration granted to the assessee with retrospective w.e.f 11.11.1982
Heard both the side and perused the material on record. It is evident from the material placed in the record that reopening u/s 147 in the case of the assessee was based on the tangible material i.e order of CIT(Exemption) dated 19.03.2016 by which the registration granted was cancelled. During the course of appellate proceedings before us the assessee failed to prove contrary that there was no tangible material. Therefore, the judicial pronouncement cited by the assessee are distinguishable from the facts of the case of the assessee. Accordingly, this ground of appeal of the assessee is dismissed.
The Ground No. 1 of the assessee vide ITA No. 2041/Mum/2019 is identical and similar to the ground No. 1 of ITA No.2040/Mum/2019 as adjudicated supra therefore applying the findings of ITA No.2040/Mum/2019 as mutatis mutandis, the same stand dismissed.
The remaining Grounds of the appeal of the assessee vide ITA Nos.2040 & 2043/Mum/2019 are based on identical facts and similar issue as adjudicated supra in ITA No.6393/Mum/2016 therefore,
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applying the finding of ITA No. 6393/Mum/2016 as mutatis mutandis these grounds of appeal are covered in favour of the assessee.
In the result, the appeal of the assessee vide ITA No. 6393/Mum/2016 is allowed. The appeals vide ITA Nos. 2040 to 2041/Mum/2019 are partly allowed, the appeals vide ITA Nos. 2042 to 2043/Mum/2019 are allowed.
Order pronounced in the open court on 06.04.2022
Sd/- Sd/- (KAVITHA RAJAGOPAL) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 06.04.2022 PS: Rohit
आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent. 2. संबंिधत आयकर आयु� / The CIT(A) 3. आयकर आयु�(अपील) / Concerned CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Mumbai 5. गाड� फाईल / Guard file. 6. आदेशानुसार/BY ORDER, स�ािपत �ित //True Copy//
(Asst. Registrar) ITAT, Mumbai