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2020 (2) TMI 787 - AT - Income TaxExemption u/s 11 - cancellation/ withdrawal of registration u/s 12A(1)(a) - Charitable activity u/s 2(15) - Exemption denied on the ground that the purchase and sale of milk, milk product, cattle feed etc. does not come under the object of the assessee trust - HELD THAT - There is no dispute about the activities being carried out by the assessee trust and it has maintained 11 Gaushalas and 14 Famine Relief Centres which is the main and pre-dominant object of the assessee trust. Hence, the impugned order passed by the ld. CIT(E) is based on the presumption of incorrect facts that the activities of the assessee trust are not in accordance with the object of the assessee trust. CIT(E) has even not taken into consideration the fact that the assessee is maintaining various Gaushalas and Famine Relief Centres and also carrying out various activities of imparting education and training. The assessee trust is also engaged in the activities of research and development of medicines by the use of cow products. Therefore, the findings of the CIT(E) is contrary to the undisputed facts regarding the objects of the assessee trust and the activities of the trust are being carried out for attainment of main objects of the trust. Hence impugned order of the CIT(E) is set aside and grant of registration u/s 12A is restored. Thus the appeal of the assessee is allowed.
Issues Involved:
1. Withdrawal of registration under Section 12AA(3) of the Income Tax Act, 1961. 2. Treatment of income declared by the appellant as income from business. 3. Addition on account of surplus on sale of land. 4. Addition on account of contributions received from various organizations. Detailed Analysis: 1. Withdrawal of Registration under Section 12AA(3) of the Income Tax Act, 1961: The primary issue was the withdrawal of registration granted to the assessee under Section 12A(1)(a) in 1974 by the CIT(Exemptions) under Section 12AA(3). The CIT(E) withdrew the registration on the grounds that the assessee's activities were in the nature of trade, commerce, or business, exceeding the prescribed limit under proviso to Section 2(15) of the Act. The Tribunal noted that the objects of the assessee trust were charitable, including preservation of the environment, medical relief, relief to the poor, and imparting education. The Tribunal observed that the activities such as purchase and sale of milk and milk products were ancillary to the main charitable objectives and were not conducted with a profit motive. The Tribunal held that the activities were in furtherance of the trust's charitable purposes and set aside the CIT(E)'s order, restoring the registration under Section 12A. 2. Treatment of Income Declared by the Appellant as Income from Business: The CIT(A) upheld the AO's treatment of the income declared by the appellant as income from business. The Tribunal noted that the CIT(A)'s decision was based on the withdrawal of the registration under Section 12A. Since the Tribunal reversed the withdrawal of registration, it held that the assessee trust is entitled to the benefits under Sections 11 and 12 of the Act. The Tribunal found that the activities were charitable and not conducted with a profit motive, thus the income should not be treated as business income. The Tribunal set aside the CIT(A)'s order. 3. Addition on Account of Surplus on Sale of Land: The AO made an addition of ?15,55,000 on account of surplus on the sale of land on a protective basis, which was upheld by the CIT(A). The Tribunal observed that the land was sold in the financial year 2007-08, relevant to the Assessment Year 2008-09, and the entire payment was received in that year. The Tribunal found that the surplus should have been reflected in the accounts of the previous year. Since the sale was not disclosed in the earlier year, the AO taxed the surplus in the current year. The Tribunal, however, set aside the CIT(A)'s order in light of the restored registration under Section 12A, thus deleting the addition. 4. Addition on Account of Contributions Received from Various Organizations: The AO added ?1,05,000 received from various organizations as revenue receipt, which was upheld by the CIT(A) on the grounds that the assessee did not provide information regarding the nature of the receipt. The Tribunal noted that with the restored registration under Section 12A, the contributions should be treated as capital receipts if they were for specific purposes related to the trust's objects. The Tribunal set aside the CIT(A)'s order, deleting the addition. Conclusion: The Tribunal allowed both appeals of the assessee, restoring the registration under Section 12A, and deleting the additions made by the AO. The Tribunal emphasized that the activities of the assessee trust were charitable and not conducted with a profit motive, thus entitling the trust to the benefits under Sections 11 and 12 of the Act. The orders of the CIT(E) and CIT(A) were set aside, and the trust's registration and exemptions were reinstated.
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