MEHLI MEHTA MUSIC FOUNDATION,MUMBAI vs. ITO, EXEMPTION WARD-2(4), MUMBAI

5. The learned Commissioner (Appeals) erred in not granting an opportunity of hearing through videoconference though a request had been made by the appellant, and in stating that a notice had been issued for videoconferencing on 19.9.2023 but the appellant did not respond to the same As regards denial of exemption under section 11

6. The learned Commissioner (Appeals) erred in upholding the denial of exemption under section 11 to your appellant, on account of the applicability of the proviso to section 2(15).

7. The learned Commissioner (Appeals) was not justified in holding that the appellant's activities fell under the category of "advancement of any other objects of general public utility and not under "education".

8. The learned Commissioner (Appeals) was wrong in not following the decision of the Tribunal in the appellant's own case for Assessment Year 2012-13.

9. The learned Commissioner (Appeals) failed to appreciate that sponsorship fees of Rs 2,45,63,861 should not be considered for computing surplus from activity of concerts, and that all the concerts , 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation resulted in a deficit, which was made good only on account of such sponsorship fees received for one concert As regards Taxation of Corpus Donations 10. The learned Commissioner (Appeals) erred in upholding the taxing of corpus donations of Rs 3,64,60,524.

, 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation  Nishith Madanlal Desai V/s CIT-11, Mumbai(2014) 49 taxmann.com 336 (Bom HC)- In course of assessment proceedings for subsequent assessment year, Assessing Officer obtained fresh material from which it was found that during earlier assessment year assessee had claimed deduction under section 57 in respect of interest on loan obtained from bank (HDFC), however, purpose of said loan was purchase of residential house property Assessing Officer, thus, taking a view that assessee wrongly claimed deduction of interest under section 57, initiated reassessment proceedings. Thus, the initiation of reassessment proceedings even after expiry of four years from end of relevant assessment year was justified.  Sohar Siraj Lokhandwala V/s ACIT (1994) 77 Taxman 302 (Bombay HC)- Mere production of evidence before Assessing Officer is not enough and there may be an omission or failure on part of assessee to make a 'full' and 'true' disclosure if some material for assessment lies embedded in that evidence which assessee could uncover but did not. The production of trust deed or assignment deed by itself did amount to full disclosure of material facts within meaning of section 147(a).  Raymond Woollen Mills Ltd. V/s Income Tax Officer and Others (1999) 236 ITR 34 (S.C.)- In determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. In view of the above facts& case laws, I am of the considered view that the AO didn't form any opinion in his/her mind in the original assessment on the contentious issue and a detailed reason for reopening of the assessment have been recorded on the basis of new tangible materials in hand. Thus, the contention of the appellant that it is a case of change of opinion is herby rejected and the validity of order u/s 147 of the Act is upheld. Thus, this ground of appeal is dismissed.” 4.1. On the issue of denial of exemption under section 11,, the Ld.CIT(A) observed as under: “On perusal of the above decision of the ITAT reveals that the appellant didn't had any positive income from concerts in the A.Y. 2012-13 but it incurred huge loss in organising concerts/shows during FY 2011-12. Further, the decision of Hon'ble Madras High court in the case of CIT vs. Sri Thyaga Brahma Gana Sabha (Regd.) (1991) 188 ITR 160 (Madras) relied by the ITAT pertains to prior period of insertion of proviso below to section 2(15) of the Act. Also, the decision of Hon'ble Delhi High Court in , 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation the case of Delhi Music Society Vs DGIT (357 ITR 265) doesn't deal with section 2(15) and proviso below to section 2(15) of the Act and the issue before this court was "whether an educational institution is eligible for exemption under section 10(23C)(vi), if it is not recognised by any university or Board and has not been awarding its own degrees or certificates". In view of the above reasons, the decision of the Hon'ble ITAT in appellant's own case for AY 2012-13 is not applicable in the present assessment year.” 4.2.On the issue of taxability of corpus donation,Ld.CIT(A) took the view that, since the assessee could not fall under the category of charitable purposeand the denial of exemption u/s.11 is upheld, therefore all receipts including corpus donations were assessable as business receipts in the hands of the assessee. Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal.

, 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation The Ld.Sr.Counsel submitted that, these are to be considered as the part of the education process. He submitted that, the assessee organizes concerts, where its students get opportunity to perform on stage or, witness performance by masters and experts in the field. 5.3. The Ld.Sr.Counsel submitted that, the assessee conducts various music classes for students on regular basis for the past several years in a structural manner. He submitted that, the training is in the nature of normal schooling or classroom education which is within the object of imparting education of music and activity of the assessee. Ld.Sr.Counsel thus submitted that, these activities carried on by the assessee falls within the term of “education”, as specified in section 2(15) of the act. The Ld.Sr.Counsel emphasized that, the assessee conducts music classes like cello, choir classes, discover music class, group theory class, guitar classes, piano classes for toddlers, violin classes, etc. on regular basis in a structured manner, and these classes are being taken by experienced faculty on predetermined days for fixed hours in a classroom. 5.4. Ld. Sr. Counsel submitted that, the assessee also conducts various music concerts for promoting western classical music with a motive to promote musical knowledge and with an appreciation among the student as well as among the interested public with all forms of music. He submitted that the concerts/recitals are , 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation performed by local artists as well as visiting artists which in turn brings awareness of outside talent. He submitted in brief, the activities of the assessee and that relating to concerts as under:  On a monthly basis in-house performances are organized where the performances are given by the students and the audience is primarily their parents.  It also organizes an annual chamber music festival being 'Sangat', wherein its students get an opportunity to perform along with various participating national artists and musicians. This also allows an opportunity to the students to practice and rehearse with them for the performance.  Concerts featuring an international orchestra are held once every few years. Here, though very few of its students get to perform, but they primarily form part of the audience along with other music lovers. For the year under consideration, these concerts featuring an international orchestra was performed by the Israel Philharmonic Orchestra in October 2008 wherein various artists including world renowned conductor Mr. Zubin Mehta and Daniel Barenboim including other performers like Placido Domingo, Pinchas Zukerman, Ms. Barbara Frittoli, Amanda Forsyth and Tatiana Goncharova performed. They performed/held five concerts during their visit to India. It also organized a performance of the Vienna Philharmonic Orchestra held on 11 and 12 March, 2009 at the Homi Bhabha Auditorium, wherein, Mr. Zubin Mehta conducted and Mr. Lang Lang performed along with the Philharmonic for two concerts during their visit.  In respect of the annual festival being 'Sangat' and the International Orchestra, the Appellant generates receipt by way of sale of tickets and sponsorship. It is submitted that, its activities have to be looked at from an overall manner and cannot be restricted only to the holding of the international orchestras has been done by the AO as well as the CIT(A). The whole concept of organizing concerts is primarily with a view to expose the students to actual performances, which is an essential part of music education. 5.5.Ld.Sr.Counsel submitted that, the assessee charges fees for the said concerts that helps assessee to meet its administrative expenses and not with an intention to run it as a business. He submitted that during A.Y.2009-10 the assessee earned gross , 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation receipts of Rs.6,21,61,026/- including interest of Rs.45,19,954/- and donation of Rs.64,25,770/-. He submitted that the authorities below did not apply the proviso to section 2(15) to these receipts. However, after reducing total expenses of Rs.4,08,15,858/- the assessee had surplus at the end of the year amounting to Rs.2,13,45,167/-. In support the Ld.Sr.Counsel referred to page 4 of the paper book wherein the income and expenditure account of the assessee is placed. 5.6. The Ld.Sr.Counsel emphasized that, in the event the receipts from students towards fee for classes and the receipt on sale of tickets for concerts are excluded, the net result would be a deficit. He submitted that, the surplus arose only on account of donations received by the assessee, receipts from sale of tickets of concert, and fee from students towards music classes. In support, he drew attention to table reproduced by Ld.CIT(A) at page 21 of the impugned order. For the sake of consideration it is reproduced as under: Fees from Sale of ticket Students from Concerts classes INCOME Fees/ Receipts 2,621.337 22.228.900 Total (A) 2,621,337 2.228,900 EXPENSES Direct 2.007,725 30.485.094 , 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation Depreciation & Other Exp 4,933,004 related to property Establishment 2,542,527 847,509 Expenses/Depreciation/ Other Expenses (75:25) (B) 9,483,256 31,332,603 Surplus/(Deficit (A-B) (6,861,919) (9,103,703)

5.7. Ld. Sr.Counsel emphasized that, the activities undertaken by the assessee are with the primary object of dissemination of music education, to train and prepare those interested in music without having any profit motive that falls under the limb “education”, as specified in section 2(15) of the act. He took support from the decision of coordinate bench of this Tribunal in assessee’s own case for A.Y. 2012-13 in vide order dated 12.06.2019. Ld.Sr.Counsel submitted that this Tribunal on identical issue and similar fact, held that the activity of assessee was within the purview of section 11 of r.w.s. 2(15) of the Act, and that, the assessee was entitled for the exemption under section 11. The said order of this Tribunal is placed at page 131-146 of the paper book. The Ld.Sr.Counsel also relied on the circular issued by CBDT No.14/2015 dated 17.08.2015 wherein, it is clarified that, collection of reasonable amounts under different heads of fee, which are essentially in the nature of fee connected with imparting education , 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation that do not violate any central or state regulation, doesn’t in general represent a profit making activity. For the sake of convenience the relevant extract from the CBDT circular is reproduced as under:

“Section 2(15) of the Income Tax Act, 1961 ("Act') defines "charitable purpose" to include the following:- (i) Relief of the poor (ii) Education (iii) Medical relief, and (iv) the advancement of any other object of general public utility. An entity with a charitable object of the above nature was eligible for exemption from tax under section 11 or alternatively under section 10(23C) of the Act. However, it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of "charitable purpose". Therefore, section 2(15) was amended vide Finance Act, 2008 by adding a proviso which states 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 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.

5.8 Ld.Sr.Counsel thus placed reliance on the decision of Hon’ble Supreme Court in case of New Noble Educational Society vs. Chief Commissioner of Income Tax reported in [2022] 143 taxmann.com 276, decision of High Court of Andhra Pradesh in case of New Noble Educational Society vs. Chief CIT [2011] 12 taxmann.com 267, decision of Hon’ble Supreme Court in case of Queen’s Educational Society vs. CIT [2015] 55 taxmann.com, decision of Hon’ble Supreme Court in case of Aditanar Educational Institution vs. Addl. CIT [1997] 90 taxmann 528, decision of Hon’ble Supreme Court in case of Addl. CIT VS. Surat Art Silk Cloth Manufacturers Association [1979] 2 taxman 501, decision of Hon’ble Supreme Court in case of Sole Trustee Loka Shikshana Trust vs. CIT [1975] 101 ITR 234. 5.9. On the contrary the Ld.DR relied on the orders passed by the authorities below and submitted that the activities carried on by the assessee in the form of sale of tickets for the concerts and concert receipt were in the nature of trade and therefore the assessee falls outside the purview of charitable nature to that extent, and the deduction cannot be granted to such receipts which are commercial in nature with a profit motive embedded in it.

, 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation We have perused the submissions advanced by both sides in the light of the records placed before us.

6.2. In the present facts of the case, we note that, the reopening of the assessment for A.Y. 2009-10 was based on the additions made by the Ld.AO for A.Y.2012-13. This Tribunal for A.Y.2012-13 on , 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation merits, deleted the addition made by the Ld.AO, as is clear from the reproduction herein above. 6.3. Be that as it may,there isno denial by the Ld.AO regarding the training of children in the field of music does not falls within the term education, as specified in section 2(15) of the act. This is clear from the fac that the Ld.AO granted deduction in respect of the interest earned and donation received by the assessee. This is further fortifiedby the fact that, the exemption u/s.12A has not been denied in any of the years under consideration or in any of the past assessment years. We refer tothe decision of Hon’ble Supreme Court in case of New Noble Education society vs. CCIT reported in [2022] 448 ITR 549. Hon’ble Supreme Court while deliberating on what constitutes the term “education”, observed as under: “33. The subject of education is vast, even sublime. Yet, it is not the broad meaning of the expression which is involved in this case. As was held in T.MA Pai Foundation (supra), education in the narrower meaning of the term as scholastic structured learning is what is meant in Article 21-A, Articles 29-30 and Articles 45-46 of the Constitution. As to what is 'education' in the context of the IT Act, was explained in Sole Trustee, Loka Shikshana Trust v. CIT (1975) 101 ITR 234 (SC)/[1976] 1 SCC 254 in the following terms: "5. The sense in which the word "education" has been used in section 2(15) is the instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word "education" has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge.... All this in a way is education in the great school of life. But that is not the sense in which the word "education" is used in clause (15) of section 2. What education connotes in that clause , 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation is the process of training and developing the knowledge, skill, mind and character of students by formal schooling." Thus, education i.e., imparting formal scholastic leaning, is what the IT Act provides for under the head of "charitable" purposes, under section 2(15)."

Hon’ble Supreme Court thus enunciates that, once the object of the assessee falls within the category of education, the first proviso to section 2(15) does not apply as it does not fall within the residual category of “general public utility”. 6.4. Hon’ble Supreme Court in the case of ACIT(E) vs. Ahmedabad Urban Development Authority reported in [2022] 143 taxmann.com 278 observed as under: “126. As observed at the beginning of this judgment, GPU charities have been recognized as distinct from the 'per se categories' of charity (education, medical relief, relief to the poor; and later - preservation of water sheds, monuments, environment, and yoga). The judgment of this court in Dharmadeepti (supra) has clarified that the per se categories- are not subjected to the restrictive condition of eschewing activities of profit. This enunciation of the principle has been endorsed in all later decisions starting with Surat Art Silk (supra). Therefore, the restriction imposed by Parliament against charities - prohibiting them from carrying on activities of profit do not apply to the first six categories..." From the above ratios there is no doubt that the assessee falls within the specific category being education and does not fall within “general public utility” category, the first proviso section 2(15) does not apply. 6.5. Hon’ble Supreme Courtin the case of Ahmedabad Urban Development Authority(supra)has also considered as to what would constitute an activityin the nature of trade, commerce or business for the purposes of proviso section 2(15) as under:

, 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation 131. The term "in the nature of occurring in Section 2(15) has frequently been interpreted by this court. In G. Venkataswami Naidu v. CIT 1959 (Supp.) SCR 646 the isolated transaction of sale of land was held not to be activity in the nature of trade or business. In State of Tamil Nadu v. Burmah Shell Oil Storage Distribution Co. of India Ltd. (1973) 2 SCR 636 the test indicated was whether the "frequency, volume, continuity and regularity of transactions carried on with a profit-motive". In State of Tamil Nadu v. Shakti Estates [1989] 1 SCR 408, the assessee's activities in leasing forest lands, clearing them, and creation of wooden sleepers, which were sold, as well as charcoal, which was sold, in a series of "sustained, systematic and organised activities" was held to be in the nature of business. In Director of Civil Supplies v. Member Board of Revenue [1967] 3 SCR 778 this court outlined, what would be activity in the nature of business: "To regard an activity as business, there must be a course of dealings, either actually continued or contemplated to be continued with a profit- motive; there must be some real and systematic or organized course of activity or conduct with a set purpose of making profit. To infer from a course of transactions that it is intended thereby to carry on business ordinarily there must exist the characteristics of volume, frequency, continuity and system indicating an intention to continue the activity of carrying on the transactions for a profit. But no single test or group of tests is decisive of the intention to carry on the business." ……… 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 Indian 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". The GPU category referred to in the above decision refers to 'General Public Utility'. Therefore, the Supreme Court held that one of the essential elements for an activity to be construed as a business activity is yielding of profit from such activity.

6.6. Hon’ble Supreme Court further held as under: "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.

, 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation "The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities." 6.8. It cannot be lost out of sight that this Tribunal for assessment year 2012-13 upheld the object of the trust was for 'advancement of education', and that by conducting concerts and selling tickets of such concerts and charging fees rom students, would not change the dominant object of the trust which was 'advancement of education' in the field of music. We refer to the decision of Hon’ble Bombay High Court in DIT(E) vs. M/s Shri Vile Parle Kelavani Mandal reported in (2015) 232 ITR 459 andCircular no.11 of 2008 dated 19th December 2008in support of this observation. 6.9. The activity of conducting concerts and selling tickets of such concerts and charging fee from students, in our view are incidental to the principal activity of the assessee of imparting education in the field of music. The allegations by the revenue that, these are business income is not accepted, as assessee could have exploited the sources to earn huge profit.Further, it is noted that the receipts for sale of tickets from concert and sponsorship fees is less than 20% of the total receipts of the assessee. It is also noted that the assessee never had any intention to earn profits from these activities is clear from the admitted fact that, the assessee would be in a deficit if the receipts from sale of concert ticket and the sponsorship fees is not considered.

, 4261, 4306, 4307 & 4545/MUM/2023 Mehli Mehta Music Foundation Accordingly, the grounds 6- 9 raised by the assessee for assessment year 2009-10 stands allowed.