IN INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. No.6521/DEL/2013 Assessment Year: 2009-10 DDIT(E), Inv. Circle - 11, vs National Association of Software New Delhi. and Services Company, 2nd Floor, International Youth Centre, Teen Murti Marg, Chankyapuri, New Delhi. PAN: AAATN2595F (Appellant) (Respondent) Assessee by: Shri Aajy Vohra, Sr. Advocate Shri Gaurav Jain, Advocate Department by: Ms Naina Soin Kapil, Sr.DR Date of Hearing: 28.8.2019 Date of Pronouncement: .9.2019 ORDER PER NARASIMHA K. CHARY, JM Challenging order dated 13.9.2013 of learned Commissioner of Income-tax (Appeals)-XXI, New Delhi {for short Learned CIT(A) } passed in Appeal No.241/2011-12, revenue preferred this appeal. 2. Briefly stated facts are that assesse, National Association of Software and Service Companies (NASSCOM), is premier trade body and chamber of commerce of IT-BPO industries in India; that 2 assessee was set up in 1988 is non profit organisation registered under Societies Registration Act, 1860 and also u/s 12A of Income-tax Act, 1961 ( Act ); that it aims to drive overall growth of technology and service market and maintain India s leadership position by taking up role of strategic advisor to industry. 3. For Asstt. Year 2009-10, they have filed their return of income on 25.9.2009 declaring nil income. Learned AO, however, during course of assessment proceedings, observed that there is variance in fee received from members. Assessee had received fee from non- members also and has been dealing with both members and non- members. He, therefore, denied exemption u/s 11 of Act and assessed their income at Rs.9,04,40,180/-. 4. Aggrieved by said addition and denial of deduction u/s 11 of Act, assessee preferred appeal. Learned CIT(A) by way of impugned order uphold contentions of assessee that assessee is governed by principle of mutuality and, therefore, any variance in subscription fee or voting rights are relevant while claiming exemption under principle of mutuality. They have placed reliance on decisions reported in (i) CIT vs Merchant Navy Club, 96 ITR 261 (AP); (ii) CIT vs Bankipur Club Ltd., 226 ITR 97 (SC); (iii) Chelmsford Club vs CIT, 243 ITR 89 (SC); (iv) Sports Club of Gujarat Ltd. vs CIT, 171 ITR 504 (Guj); (v) CIT vs Delhi Race Club, 196 ITR 777 (Del); (vi) Ranchi Club Ltd. vs CIT, 196 ITR 137 (Patna); and (vii) CIT vs National Sports Club of India, 230 ITR 777 (Del). 3 5. Learned CIT(A) considered submissions of assessee in light of law settled in decisions relied upon by assessee and reached conclusion that membership fee received by assessee comes within principle of mutuality and as such net income of assessee from its own members is exempt from tax. Learned CIT(A) held his conclusions are justified by case laws. 6. Revenue, therefore, filed this appeal stating that assessee has been rendering services in relation to trade, commerce or business in lieu of some fees from members as well as non members and has been involved in business and commercial activity to which provisions of Section 28(iii) of Act are applicable. 7. It is submission of learned DR that during year under consideration, assessee received fee from both its members and non members, offered income for taxation on fee received from non members but claimed exemption on income from receipts received from members based on principle of mutuality but ld. AO is justified in denying exemption on basis of violation of principle of mutuality since ld. AP on facts held that case falls under purview of Section 2(15) of Act, which was brought through Finance Act, 2008. It is further submitted by her that factual finding of ld. AO is that surplus was generated through all activities which was invested in FDRs and saving accounts and, therefore, no charity was being done by assessee. According to her, membership fee and admission fee charged from members clearly fall under provisions of Section 2(15) of Act. Lastly, ld. DR contended that difference in annual subscription fee, different types of members with different fee, 4 differential voting rights depending on turnover etc. Takes away case from nature of charitable purpose and ld. AO is justified in denying benefit of Section 11 to assessee. Learned DR placed reliance on decision reported in case of CIT vs Secunderabad Club Picket, (2012) 340 ITR 121(AP) wherein it was held that principle of mutuality ended moment club deposited amount with sole purpose of earning interest on deposits. 8. Per contra by placing reliance on decisions reported (i) CIT vs Merchant Navy Club, 96 ITR 261 (AP); (ii) CIT vs Bankipur Club Ltd., 226 ITR 97 (SC); (iii) Chelmsford Club vs CIT, 243 ITR 89 (SC); (iv) Sports Club of Gujarat Ltd. vs CIT, 171 ITR 504 (Guj); (v) CIT vs Delhi Race Club, 196 ITR 777 (Del); (vi) Ranchi Club Ltd. vs CIT, 196 ITR 137 (Patna); and (vii) CIT vs National Sports Club of India, 230 ITR 777 (Del),learned AR submitted that variance in types of membership, variance in subscription fee and variance in voting rights is irrelevant consideration while deciding issue relating to exemption under principle of mutuality despite entity dealing with members and non members, it would not lose its character u/s 2(15) of Act and assessee is governed by principle of mutuality. He supported conclusion reached by ld. CIT(A) basing on above case law, which was also submitted before ld. CIT(A). 9. It is not in dispute that income of assessee is received from members as well as non members. income from non members has been offered to tax by assessee whereas membership fee from its own members is claimed as exempt on principle of mutuality. Ld. CIT(A) held that assessee being trade association of software 5 industries, it s main object being to promote and protect interest of its members, membership received from its own members comes within principle of mutuality. To this extent, it does not admit any doubt and catena of decisions relied upon by assessee hold so. 10. In so far as objection of ld. AO based on variance in subscription fee and variance in voting rights is concerned, in ITO vs Venkatesh Premises Cooperative Society Ltd., 402 ITR 670 (SC), Hon ble Apex court held that so long as membership forms class, identity of individual member is irrelevant and any difference in contributions payable by members cannot fall foul of law as sufficient classification exists. In CIT vs Hindustan Sports Club (supra), Hon ble Bombay High Court held that once assessee is governed by principle of mutuality, even if there are difference class of members, some of whom are not entitled to vote, club would not be cease to be governed by principle of mutuality. In Ranchi Club (supra) and Standing Conferecne of Public Enterprises (supra), it is held that merely because assessee had entered into transactions with non members and earned profits out of transactions held with them, it is right to claim exemption on principle of mutuality in respect of transactions held by it with its members is not lost. principle of establishing identity between contributors and participators would apply only in respect of contributions made by members. Hon ble court concluded that assessee being mutual concern, income derived from property let out to its members and their guests and sale of liquor etc. to its members would not be taxable. 6 11. In this case, as already stated, assessee had offered to tax income derived from receipts from non members. In so far as members are concerned, there is no dispute as to identity between contributors and participators. 12. During course of arguments, question as to way of disposal of funds, if any, had arisen and by placing reliance on decision in case of Bankipur Club Ltd. (supra), ld. AR submitted that in that case also vide clause 7 of Memorandum of Association, it was provided that upon winding up and dissolution of association, remaining property after satisfaction of its debts and liabilities, shall not be paid or distributed amongst members but shall be given or transferred to such other institution or institutions having similar objects to be determined by members at or before time on dissolution. On this aspect, Hon ble Apex court referred to decision of Hon ble P&H High Court in case of CIT vs Northern India Motion Pictures Association (1989) 180 ITR 160 to effect that it is for contributors to deprive themselves of control on disposal of surplus and they could agree to divide surplus amongst themselves and contribute amount to similar association or to charitable trust, still assessee will be mutual benefit association and its income is not taxable. This aspect also, therefore, stands covered by judicial precedent and does not admit of any fresh discussion. 13. For above reasons, we concur with findings of ld. CIT(A) that case law relied upon by ld. AR supports view taken by ld. CIT(A) on aspect of principle of mutuality and entitlement of assessee to claim benefit of Section 11 of Act. 7 We, therefore, uphold same and find grounds of appeal as devoid of merits. 14. In result, appeal of revenue is dismissed. Order Pronounced in open court on 20th September, 2019. Sd/- sd/- (PRASHANT MAHARISHI) (K.NARASIMHACHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20th September, 2019 VJ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Draft dictated on 2.9.2019 Draft placed before author 11.9.2019 Draft proposed & placed before second member Draft discussed/approved by Second Member. Approved Draft comes to Sr.PS/PS Kept for pronouncement on Date of uploading order on website File sent to Bench Clerk Date on which file goes to AR Date on which file goes to Head Clerk. Date of dispatch of Order. 8 DDIT(E), Inv. Circle - 11, New Delhi v. National Association of Software and Services Company