DIRECTOR OF INCOME TAX Vs. CHEMBUR GYMKHANA

JUDGEMENT

(1.) THIS appeal by the Revenue arises out of an order of the Income Tax Appellate Tribunal dated 24 August 2009 for Assessment Year 1996-97. Though three questions of law have been framed in the appeal by the Revenue, the following substantial questions of law arise in this appeal:

(2.) THE appeal is admitted on the aforesaid questions of law, and is by consent taken up for hearing and final disposal.

(3.) IN the light of these objects, the Assessing Officer held that the dominant object of the assessee is to provide amenities and facilities to the members of the Club. Consequently, the assessee was held to be a mutual organization. The income of the assessee was computed at Rs.13.64 lakhs. In appeal, the Commissioner (Appeals) held that the promotion of sports is a charitable activity, but in order to avail of the exemption under Section 11, the promotion of such a charitable object should be directed by an association or trust towards the general public and not towards itself. The Commissioner (Appeals) held that all the activities of the assessee are controlled by its members through a Managing Committee and the majority of its activities are carried out only for the purposes of the members. Moreover, the Commissioner (Appeals) held that a major part of the expenditure is incurred on salaries and wages, security charges and telephone expenses. The Commissioner (Appeals) further noted that the assessee provided for the sale of alcohol in its restaurant. This activity, it was held, is not of a charitable nature nor is it incidental to any other main activity. Since the true nature and character of the assessee was held to be that of a mutual concern, the Commissioner (Appeals) held that the Assessing Officer was justified in taxing interest receipts in the hands of the assessee. Similarly, receipts which had resulted from the Canteen facilities which were provided on rent to an outsider, were held to be taxable in the hands of the assessee.