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Income Tax Appellate Tribunal, DELHI BENCH “D” NEW DELHI
Before: SHRI G.D. AGRAWAL & SHRI AMIT SHUKLA
The aforesaid appeal has been filed by the Revenue against the impugned order dated 28.04.2015, passed by ld. CIT(A)-XL, New Delhi for the quantum of assessment passed u/s. 143(3) for the Assessment Year 2011-12. In the grounds of the appeal the Revenue has raised the following grounds . “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the assessee society is a charitable organization despite the fact that the assessee society was doing business within the meaning of amended provisions of section 2(15) of the Income Tax Act, 1961.”
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 72,78,575/- made on account of bank interest being not covered under principle of mutuality in view of the Judgment of Hon’ble Supreme Court in the case of Bangalore Club Vs CIT 350 ITR 509 (SC).”
The facts in brief and the background of the case are that the assessee society was registered under the Societies Registration Act, 1860 on 21.10.1987 and was also registered u/s. 12AA(1) on 13.01.1989. The assessee society was promoted for the purpose of protection of the natural habitat and environment and was promoted by HUDCO under the Ministry of Urban Development and the land was allotted by the Government and the assessee is the lessee and Land and Development Officer of the Government is the lessor. There are 37 institutions in the premises of the assessee which had contributed for the construction and development of the building and the land as per the norms of the HUDCO to protect the habitat and environment. The assessee has the mandate from the government for the maintenance of the land and buildings and the common facilities for the members of the society. The common facilities for the members include a library, swimming pool, visual art gallery, auditorium, gymnasium (health club) and restaurants (Delhi 0 Delhi, Oriental Octopus, The Deck, All American Diners and Utopia) etc. The assessee has a tripartite agreement with Old World Hospitality Pvt. Ltd. for providing the services through operation and maintenance and the assessee also gets the revenue out of it. The main income of the assessee is from the annual subscriptions from the members, revenue sharing, bank interests and recovery of maintenance charges from institutional members etc. The assessee has been enjoying the exemption u/s 11(1) up to A.Y 2007-08 and the assessee in various stages of appeal, finally assessee was treated as charitable institution by the Hon'ble Delhi High Court after vide the common order dated 12/10/2011 for various assessment years. The Assessing Officer had denied exemption u/s. 11(1) in the Assessment year 2008-09 & 2009-10. However, the same was allowed by learned CIT(A) and later on by the Tribunal vide order dated 17.02.2012 in the Assessment Year 2008-09 and Departmental Appeal for the Assessment Year 2009-10 still pending before the ITAT. Later on, learned CIT(E) had cancelled the exemption for Assessment Year 2009-10 but again the order of the learned CIT(E) has been set aside by the Tribunal vide order dated 12.02.2015 in ITA No.3017/Del/2014.
Assessing Officer in the impugned assessment order has noted the primary aims and objects of the assessee and noted that some of the activities cannot be held for general public utility in view of the newly inserted proviso to Section 2(15). He has analysed assessee’s submission in detail with regard to each and every clause of Section 2(15) which has been discussed from pages 5 to 15 of his order. Thus, after detailed discussion, he held that assessee is not engaged in the charitable activities and accordingly, denied the exemption of Section 11 to the assessee. However, he held that the assessee’s income would be exempted in view of ‘principle of mutuality’. Since assessee had bank interest amounting to Rs.72,76,725/-, the same has been added by him on the ground that it is not covered under the ‘principle of mutuality’.
Learned CIT (A) following the judgment of Hon'ble Delhi High Court in the case of India Trade Promotion Organization vs. DGIT (E), 371 ITR 333 (Del.) held that assessee’s activities does not involve in the nature of trade, commerce and business, and therefore, it is outside the mischief of proviso to Section 2(15) and directed the Assessing Officer to allow exemption u/s. 11(1).
Before us the learned counsel for the assessee, Mr. M.P. Rastogi submitted that in the Assessment Year 2009-10 Tribunal has discussed in detail not only the applicability of first proviso to Section 2(15) but also has upheld the exemption u/s. 11(1) on the ground that assessee is a charitable institution and its income is subject to computation u/s.11. He further submitted that the assessee has given the entire details of receipts and also the application of income and the surplus of receipts over expenses were Rs.1.1 crore including that of interest and since such a surplus was within the limit of section 11 and that is why assessee had filed return of income at ‘Nil’. He further submitted that now there are catena of decisions wherein the scope of proviso to Section 2(15) has been discussed in detail which has been followed by the Tribunal in assessee’s own case in the earlier year. Thus following the earlier year precedence, order of the learned CIT(A) should be confirmed.
On the other hand, learned DR had tried to distinguish the judgment of Hon'ble Delhi High Court in the case of India Trade Promotion (supra) and submitted that Assessing Officer has discussed threadbare as to why the receipts of the assessee falls within the category and ambit of trade, commerce or business. He has also filed a detailed written submission citing the various decisions like Andhra Chambers of Commerce, 1965 AIR 1281 & Surat Art Silk Cloth, 1980 AIR 387. He strongly relied upon the order of the learned Assessing Officer.
After considering the aforesaid submissions and on perusal of the impugned order, we find that so far as the status of registration u/s.12AA is concerned, the same still stands as on date, because registration cancelled by the learned CIT(E) has been set aside and reversed by the Tribunal. Once, the assessee is registered u/s.12AA, then it is sine-qua-non that benefit of Section 11 has to be given. The Assessing Officer has granted exemption to the assessee on its entire income following the ‘principle of mutuality’. However, has only taxed the interest income of Rs.72,78,575/-. If income is to be computed u/s.11, then ostensibly interest income would also form part of the income and expenditure account. Accordingly, the same has to be computed in the same manner and the benefit of Section 11 has to be given. We find that this precise issue had come up for consideration before this Tribunal in assessee’s own case in the Assessment Year 2009-10, wherein the Tribunal has allowed the benefit of Section 11 after following the Tribunal’s order for the Assessment Year 2008-09. Once in the earlier assessment years the assessee has been granted exemption u/s.11 and registration u/s.12AA is still continuing, then we do not find any reason as to why benefit of section 11 should be denied. Accordingly, the order of the learned CIT (A) is confirmed and Revenue’s appeal is dismissed.