2018 (7) TMI 1732 - HC - Income Tax

Exemptions u/s 11 - Charitable activity - Applicability of proviso to section 2(15) - activity of breeding milk cattle; to improve the quality of cows and oxen and other related activities - AO observed that, considerable income was generated from the activity of milk production and sale - Held that - In case of Sabarmati Ashram Gaushala Trust (2014 (1) TMI 1539 - GUJARAT HIGH COURT), under somewhat similar background held that the objects of the Trust clearly establish that the same was for general public utility and for charitable purposes - Profit making was neither the aim nor object of the Trust - Merely because while carrying out the activities for the purpose of achieving the objects of the Trust, certain incidental surpluses were generated, would not render the activity in the nature of trade, commerce or business - As clarified by the CBDT in its Circular No. 11/2008 dated 19th December 2008 the proviso aims to attract those activities which are truly in the nature of trade, commerce or business but are carried out under the guise of activities in the nature of public utility - The facts and circumstances of each case are different - Decided against Revenue.

Summary

Issues:
1. Whether the Tribunal was justified in allowing exemptions u/s 11 of the Act without considering the commercial nature of the assessee's activities?
2. Whether the assessee's activity of sale of semen falls within the definition of 'charitable purpose' under section 2(15) of the Income Tax Act, 1961?

Analysis:
Issue 1: The Revenue appealed against the Tribunal's judgment, questioning the justification of allowing exemptions u/s 11 of the Act without considering the commercial nature of the assessee's activities. The assessee, a registered Trust, was involved in activities related to the development of cattle and buffaloes, including breeding and genetic improvement. The Assessing Officer argued that the significant income from the sale of semen indicated a commercial business motive, making it ineligible for charitable purpose status under section 2(15) of the Act.

Issue 2: The Tribunal's decision was influenced by a previous judgment involving a similar trust, where the Court had emphasized the charitable nature of the trust's objectives related to cattle breeding, agricultural development, and educational initiatives. The Tribunal, citing this precedent and the judgment of the Division Bench in another case, rejected the Revenue's appeal. The Court highlighted the trust's activities aimed at public utility and charitable purposes, including breeding cattle, improving cattle quality, agricultural initiatives, and educational programs related to cattle keeping and agriculture.

In conclusion, the High Court dismissed the Tax Appeal, affirming the Tribunal's decision to grant exemptions u/s 11 of the Act to the assessee Trust. The judgment emphasized the charitable nature of the trust's objectives and activities, aligning with the definition of charitable purpose under the Income Tax Act.