Charitable purpose

The assessee is a premier golf club and is given a charitable character by the Income-tax authorities as it is registered under s 12A of the Income-tax Act because of the reason that its main activity is to promote the game of golf in India. For the AY 2006–2007, the assessee filed the return declaring income as “NIL”, claiming the benefit of s 11. During the assessment proceedings, the AO noticed that the assessee had received fees from casual members at a higher rate than its permanent members. Such casual members were also not eligible for other facilities like permanent members. Therefore, the AO was of the view that the assessee was maintaining a golf course and was exploiting the same commercially by allowing non-members to play on the same for a fee. Accordingly, he treated such activity as commercial activity, though incidental for the attainment of its object. Since the assessee had not maintained separate books of accounts for such activity, the AO invoked the provisions of s 11(4)/11(4A) of the Act and rejected the exemption under s 11, allowing only 25% of these receipts as expenses incurred for earning such an income. The CIT(A) accepted the contention of the assessee and deleted the addition made by the AO. The Tribunal also dismissed the appeal of the revenue. Being aggrieved, the revenue has filed the present appeal.

The issue is whether the income of the assessee-golf course from casual members amounts to commercial activity as required under s 11(4A) of the Act.

The department accepted that the assessee/club would be “charitable” in nature having regard to the objective for which it is established, namely the promotion of the game of golf or sport, this position remains unchallenged for over six decades. This consistency in the approach is maintained except in the assessment in question. Curiously, even thereafter, for subsequent assessment years, the department reverted to this position as is clear from the assessment for the AY 2007–2008. These facts are sufficient to hold that no question of law arises. The AO gave undue focus to the issue of casual membership when this aspect had been examined earlier by the Department and it was accepted that this was an incidental activity of the Golf Club, being part and parcel of the overall running of the trust, and accruals therefrom are utilised/applied for the same purpose as set forth by the assessee. No substantial question of law is involved in the present case and the appeal warrants to be dismissed in limine.

Income of the golf course from casual member does not amount to commercial activity as required under s 11(4A) — as held by DelHC in CIT v Delhi Golf Club Ltd. — In favour of: The Assessee ; ITA No. 1757 of 2010

Decided on: 30 March 2011