Bombay Andhra Maharashtra & Gymkhana , ... vs Assessee

The Bombay Andhra Mahasabha & The Director of Income tax Gymkhana (Exemptions) Plot No.10-C, Lakhamsi Nappo Road Vs. 6th Floor, Piramal Chambers, Hindu Colony, Dadar Parel Mumbai-400 014. Mumbai. GIR No./PAN : AAATT 3448 B (Respondent) (Appellant )

Appellant by : Shri K. Gopal Respondent by : Shri Surinderjit Singh

Date of hearing : 04/03/2015 Date of pronouncement : 04/03/2015

ORDER

PER CHANDRA POOJARI, A.M:

This appeal by the assessee is directed against the order of DIT(EXEMPTION) dated 03/02/2012 for the assessment year 2009-10. In this case the grievance of the assessee is with regard to cancellation of registration granted to the assessee u/s.12AA of the Income tax Act, 1961 (the Act).

2. Facts of the case are that the assessee has been granted registration u/s. 12AA of the Act. According to the DIT(Exemption), the assessee has 2 ITA No.2014/M/12 The Bombay Andhra Mahasabha & Gymkhana

been carrying out the activities in the nature of trade, commerce, business etc. during the assessment year 2009-10 and gross receipts therefrom are in excess of Rs.10.00 lacs. In the opinion of DIT(Exemption) the assessee's case is hit by the proviso to section 2(15) of the Act, with effect from assessment year 2009-10. Accordingly, after calling for explanation from the assessee the DIT(Exemption) withdrew the registration granted to the assessee u/s. 12A of the Act. Aggrieved by this, the assessee is in appeal before us.

3. The ld. AR for assessee submitted that the objects of the assessee trust are as under -

a) To preserve and promote the language, culture and history of Andhras residing in Greater Mumbai and suburbs and the realisation of traditional relationship and brotherhood with all Andhras all over India;

b) To encourage and promote literary, scientific, cultural, moral physical and artistic activities for social advancement without discriminating of any language, religion, caste, or creed and strive for cultural integration of India;

c) To advance culture, knowledge, and education by the maintenance of reading rooms, and libraries, periodicals, magazines, among the members and their families; holding of gatherings, seminars, lectures, exhibitions, enacting of dramas, and other media entertainment and education; promotion of music, other fine arts, literature, and culture in general. To encourage indoor and outdoor games and to organize sports tournaments;

d To encourage indoor and outdoor games and to organize sports tournaments.;

e) To undertake any kind of relief work and give charitable held to all 3 ITA No.2014/M/12 The Bombay Andhra Mahasabha & Gymkhana

worthy causes of Andhras and others;

f) To take part or engage in any other lawful activity or any such other activity which are conducive to the promotion of all or any of the above objects in the interest of community and nation.

3.1 It was further submitted by the ld. AR that the income from hall charges is property income and not business income. It was be pointed out that the income from the hall charges was Rs.38.52 lakhs whereas the expenses were Rs.47.46 lakhs thus leading to a loss of Rs.8.94 lakhs. Therefore, even the income generated is not sufficient for the maintenance of the property. Thus there is no clear profit motive from the activity.

3.2 The ld. AR for the assessee also submitted that the trust could not be grouped under the exclusive residuary category to deny exemption, merely because it derived income from a function hall. By mere letting out of its hall, the assessee trust had not lost its claim to exemption. The letting out of the function Hall was to earn income to fulfil and apply the same to the main objects of the assessee trust. The ld. AR has also placed reliance in the case of Maharashtra Housing & Area Development Authority vs. ADIT(EXEMPTION) ITA No.435/Mum/2012 order dated 22/02/2013 for the assessment year 2009-10. The ld. DR relied on the orders of DIT(Exemption).

4. We have heard both the parties, perused the material available on record. Similar issue came up for consideration before the co-ordinate Bench in the case of M/s. Vanita Samaj in ITA No.1034/Mum/2012 order 4 ITA No.2014/M/12 The Bombay Andhra Mahasabha & Gymkhana

dated 26/2/2014 for the assessment year 2009-10. The Tribunal held as follows :-

"7. We have carefully considered the rival submissions and perused the record. It is not in dispute that the Trust had com e into existence in 1953 and it was granted registration under section 12A o f the Act and there is no change in the nature of activities of the Trust since then. It is not the case of the DIT (Exemption) that the activities of the Trust are not genuine; in fact the DIT (Exemption) assumed that by virtue of the first proviso to section 2(15) of the act the activity of the Trust should be treated as not genuine overlooking the fact that there is no change in the activity so as to invoke provisions of sub-section (3) of section 12AA of the Act. In our considered opinion, on a conjoint reading of the first proviso with second proviso to section 2(15) of the Act, a Trust can be denied exemption in the year where the gross receipts exceed the limit prescribed in t he second proviso to section 2(15) and in all other years income from such activities should be considered for the benefits under section 2(15) if it is within the limit provided therein. If it was to be interpreted that once the income of the trust in one year crosses the limit provided in the second proviso, the registration originally granted has to be cancelled, it makes the second proviso redundant for the years where the receipts are less than the specified limit; this could not be the intention of the Legislature. In fact, the Act does not provide for claiming of exemption on year to year basis.

8. On a conspectus of the matter we, therefore, hold that denial/ cancellation of registration in the instant case is not in accordance with law. To clarify further the gross receipts having exceeded the stipulated monitory limit provided in the second proviso to section 2(1 5) of the Act, the assessee is not entitled to claim exemption in this year but that fact alone cannot make the Trust non-genuine for the purpose of invoking section 12AA(3) of the Act. We, therefore, set aside the order passed by the DIT (Exemption) and allow the appeal filed by the assessee. Needles s to observe that the AO is duty bound to independently verify as to whether the assessee fulfilled the other conditions such as application of income, etc . so as to claim exemption under section 12(15)."

4.1 Further, the Tribunal in the case of Madras Motor Sports Club vs. DIT(Exemption) 141 ITD 1 (Chennai) held that where objects and activities of the assessee's charitable trust were covered under the category of "advancement of general public utility", if the receipt exceeded Rs.10.00 5 ITA No.2014/M/12 The Bombay Andhra Mahasabha & Gymkhana

lacs, same could not be sufficient reason for cancelling the registration granted to the assessee u/s.12AA of the Act. In view of the above order of the Tribunal, we are inclined to hold that DIT(Exemption) is not justified in cancelling the registration granted u/s. 12AA of the Income tax Act and accordingly we annul the order of the DIT(Exemption) on this issue and restore the registration granted to the assessee u/s. 12AA of the Act.

5. In the result, appeal of the assessee in ITA No.2014/Mum/12 is allowed.

Order pronounced in the open court on 04/03/2015 आदे श क घोषणा खुले "यायालय म# $दनांकः 04/03/2015 को क गई ।

Sd/- Sd/- (डी. म मोहन / D. MANMOHAN) (चं पुजारी /CHANDRA POOJARI ) उपा य / VICE PRESIDENT लेखा सदःय / ACCOUNTANT MEMBER

मुंबई Mumbai; $दनांक Dated 04/03/2015 व.िन.स./Jv, Sr. PS 6 ITA No.2014/M/12 The Bombay Andhra Mahasabha & Gymkhana

आदे श क ूितिल*प अमे*षत/Copy षत of the Order forwarded to : 1. अपीलाथ- / The Appellant 2. ू.यथ- / The Respondent. 3. आयकर आयु/(अपील) / The CIT(A)- 4. आयकर आयु/ / CIT

5. *वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड2 फाईल / Guard file.

आदे शानुसार/ ार BY ORDER, स.या*पत ूित //True Copy//

उप/सहायक उप सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अिधकरण मुंबई / ITAT, Mumbai