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05-11-2019, National Association of Software, Section 11, 12, Tribunal Delhi

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6 days 6 hours ago #11326 by amit
Section - 11, 12, 2(15)
Order Date - 05-11.2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - DCIT
Respondent - National Association of Software and Service Companies
Justice - BHAVNESH SAINI, J.M. & O.P. KANT, A.M.
Citation - 1119Taxpundit62
Appeal No. - ITA.No.5738/Del./2016
Asstt. Year - 2012-2013



This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-36, New Delhi, Dated 12.08.2016, for the A.Y. 2012-2013, on the following grounds :

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law in allowing the appeal of the assessee ignoring the fact that the activities of the assessee is in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activities. The assessee falls in the last category of general public utility as per the definition of Sec. 2(15) of I.T. Act 1961 and not entitled to carry on any business or commercial activity.

2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law in allowing the appeal of the assessee ignoring the fact that assessee charges subscription fee on the basis of turnover and voting right is as per subscription of fees, hence on the basis of differentiated treatment to members ,the assessee has violated the essence of principle of mutuality.”

2. It is noted in the appellate order that assessee challenged the Order of the A.O. in denying exemption claimed by the assessee, for an amount of Rs.10.86 crores in respect of receipts from members on account of membership subscription, on the principle of mutuality and in holding that the principle of mutuality shall not be applicable to membership subscription, since (a) the assessee was charging varying membership fees from different members which carried differential voting rights; (b) the assessee had dealings with both members and non-members. The A.O. however, did not accept the contention of assessee and denied the exemption under section 11 and 12 of the I.T. Act to the assessee and observed that the assessee society will be assessed as normal AOP.

3. The assessee challenged the addition before the Ld. CIT(A) and it was submitted that that as a consequence of amendment, the assessee ceased to be charitable society in terms of section 2(15) and consequently did not claim exemption under Section 11 of the Act from the AY 2009-10 and onwards. Accordingly, the assessee offered to tax income earned from various activities as business income. Being so, the question of denial of exemption, under section 11/12 of the Act, as raised by the AO does not come into the picture. The differential membership subscription is only fixed to recover higher subscription from those having larger turnover, while seeking to support fledglings/new entrants. The membership based on the turnover, carry differential voting rights. However, uniform service is provided by the assessee to all categories of members, irrespective of the membership fee paid. No specific services are being provided to members in lieu of payment of higher membership subscription charges. During the relevant previous year, the assessee received gross amount of Rs.20.84 crores on account of annual membership subscription from members.In the return of income, the assessee, claimed exemption in respect of an amount of Rs.10.86 crores on the principle of mutuality, arrived at, after reducing/allocating expenses incurred during the year out of gross membership subscription receipts. It was submitted that on the issue of exemption claimed by the assessee on the basis of principles of mutuality have been decided by the CIT(A) in favour of the assessee for the A.Y 2009-10. The Ld. CIT(A) reproduced the submissions of the assessee and order of Ld. CIT(A) dated 13.09.2013 for AY. 2009-10 in the order and following the same, deleted the entire addition. His findings in paras 8 and 9 are reproduced as under :

“8. It is observed that after amendment in proviso to section 2(15), the assessee has itself not claimed exemption u/s. 11 & offered its income for tax from A.Y. 2009-10 onwards. The reference by the AO to the assessee not being covered by proviso to Section 2(15) is therefore not relevant or correct. Further, the assessee has also shown the amount received from non-members as income. The exemption has been claimed on income of ? 10.86 crores which is received from the

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