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TMI Blog2014 (1) TMI 1539X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 of 2013 - - - Dated:- 15-1-2014 - Mr. AKIL KURESHI AND Ms. SONIA GOKANI, JJ. For the Appellant : Mr Bhatt Sr Advocate with Mrs. Mauna M Bhatt, Advocate For the Respondent : Mr. S.N. Soparkar Sr Advocate with Mr. B S Soparkar, Advocate JUDGMENT (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal, Ahmedabad { Tribunal for short} dated 7th June 2013, raising following questions for our consideration : [A] Whether the Appellate Tribunal has substantially erred in directing the Assessing Officer to provide exemption u/s. 11 of the I.T Act to the assessee ? [B] Whether the Appellate Tribunal has substantially erred in holding that the proviso to Section 2 (15) of the I.T Act was not applicable to the facts and circumstances of the case ? The controversy centers around activities of the respondent assessee Sabarmati Ashram Gaushala Trust. The said Trust is engaged in the activity of breeding milk cattle; to improve the quality of cows and oxen and other related activities. The question raised by the Assessing Officer was with respect to granting exemption to the Trust under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... environment; including watersheds, forests and wildlife and preservation of monuments or places or objections of artistic or historic interest and advancement of any other object of general public utility. Proviso to Section 2 (15) and further proviso whereof inserted by Finance Act 2010 w.e.f 1st April 2009 read, thus Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or less in the previous year. The legal controversy in the present Tax Appeal centers around the first proviso. In the plain terms, the proviso provides for exclusion from the main object of the definition of the term Charitable purposes and applies only to cases of advancem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 11 or under section 10 (23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on any activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 3.1 There are industry and trade associations who claim exemption from tax under section 11 on the ground that their objects are for charitable purpose as these are covered under any other object of general public utility . Under the principle of mutuality, if trading takes place between persons who are associated together and contribute to a common fund for the financing of some venture or object and in this respect have no dealings or relations with any outside body, then any surplus returned to the persons forming such association is not chargeable to tax. In such cases, there must be complete identity between the contributors and the participants. Therefore, where industry or trade associations claim both to be charitable institutions as well as mutual organizations and their activities are restricted to contributions from and participation of only their members, these would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for judging whether any activity is trade, commerce or business particularly if generating surplus is wholly incidental to the principal activities of the trust; which is otherwise for general public utility, and therefore, of charitable nature. The Tribunal took into account the objects of the Trust, which are as under : 1. To breed the cattle and endeavour to improve the quality of the cows and oxen in view of the need of good oxen as India is prominent agricultural country and the cow milk as food is both conducive to and requisite for good health and longevity of human life. In order to improve the quality of the cattle, it is very essential to use a high quality bulls. Hence to produce and to get produced the best pedigreed bulls and to castrate the scrub bulls and propagate the work to prepare bullocks by castrating the bulls which do not become good bulls. 2. To produce and to sell the cow milk and its various preparations so as to popularize the use of cow milk and do all other works for the same. 3. To hold and cultivate or get cultivated agricultural lands, to keep grazing lands etc necessary or desirable for cattle keeping and breeding or to rehabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding; to rehabilitate and assist Rabaris and Bharwads; to make necessary arrangements for getting informatics and scientific knowledge and to do scientific research with regard to keeping and breeding of the cattle, agriculture, use of milk and its various preparations, etc.; to establish other allied institutions like leather work and to recognize and help them in order to make the cow keeping economically viable; to publish study materials, books, periodicals, monthlies etc., in order to publicize the objects of the trust as also to open schools and hostels for imparting eduction in cow keeping and agriculture having regard to the trust objects. All these were the objects of the general public utility and would squarely fall under section 2 (15) of the Act. Profit making was neither the aim nor object of the Trust. It was not the principal activity. 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 tho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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