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TMI Blog2014 (9) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... eding cattle for the beneficial promotion, upkeep, maintenance and propagation of cows. Thus the dominant object is to run Panjrapole and the activities related to it. The Trust is engaged in multi series activities of diverse nature but the primary and the dominant activity is Panjrapole - The predominant object of Panjrapole activity has been held to be a charitable purpose in Commissioner Of Income-Tax, Gujarat Versus Swastik Textile Trading Company Pvt. Limited [1977 (7) TMI 30 - GUJARAT High Court] – the trust would not loose its character of charitable purpose merely because some profits arises from the activity of the sale of milk - Such activity cannot be carried on in such a manner that it does not result in any profit - It be indeed be difficult for persons in-charge of a trust or institution to carry on the activity such that the expenditure balances the income and there is no resulting profit - there was no material which may suggest that the assessee-trust was conducting its affairs solely on commercial lines with a motive to earn profit - There is also no material brought on record which could suggest that the assessee trust has deviated from its objects which it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e notice dt. 3.11.2011 proposing to withdraw the registration granted u/s. 12AA of the Act. The show-cause notice issued and served upon the assessee reads as under: A proposal has been received from ADIT(E)-ll(2), Mumbai, regarding the cancellation of registration granted u/s. 12A of the I.T.Act in your case. The following reasons have been accorded for drawing the above conclusion The details of the Object of the assessee-trust and the activities in the nature of trade, commerce or business (including 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) are as under: Details of Objects of the Assessee Trust: 1. To provide asylum for old, maimed, sick, dry, weak, disabled and stray animals and birds, more particularly cows and such other milk cattle. 2. To bring about improvement in breeding cattle in India and to set up, establish, raise, maintain, develop and utilize funds for the beneficial promotion, upkeep, maintenance and propagation of cows and other types of cattle. Details of Activities i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemption allowed to the trust in earlier years u/s. 12AA w.e.f. A.Y. 2009-10 holding the trust as non-charitable trust. 5. Aggrieved by this, the assessee is before us. The ld. Counsel for the assessee strongly contended that the action of the DIT(Exem) is ultra vires to the provisions of Sec. 12AA(3) of the Act. It is the say of the ld. Counsel that the DIT (Exem) while cancelling the registration already granted to the assessee-trust has exceeded the powers vested on him by virtue of provisions of Sec,. 12AA(3) of the Act. The ld. Counsel strongly submitted that Sec. 12AA(3) envisages two conditions which allow the Commissioner to cancel the registration. The conditions are viz (i) the Commissioner is satisfied that the activities of such trust or institution are not genuine and-(ii) the activities of such trust has not been carried out in accordance with the objects of the trust or institution. 5.1 It was explained that the assessee-trust was established in the year 1879 for the purpose of protection and preservation of infirm animals more particularly the cows. The ld. Counsel took us to the main objects of the trust and explained that the main objects of the trust are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks for the same and on consideration of these objects, the Tribunal held that the proviso to Sec. 2(15) is not applicable and the assessee-trust was entitled to exemption provided u/s. 11 of the Act. 5.6 The ld. Counsel also placed reliance on the decision of the Delhi Tribunal in the case of Aggarwal Mitra Mandal Trust v. DIT (Exemption) [2007] 106 ITD 531 ITAT Amritsar Bench in the case of Saint Kabir Educational Trust v CIT [2010] 41 DTR 267 and ITAT Chandigarh Bench in the case of H.P. Government Energy Development Agency v. CIT [2010] 46 DTR 126. 5.7 The ld. Counsel concluded that the DIT(Exemption) has grossly failed in appreciating the facts of the case vis-a-vis objects of the trust and erred in applying the proviso to Sec. 2(15) of the Act and thereby exceeded the powers vested on him by virtue of the provisions of Sec. 12AA(3) of the Act. The ld. Counsel prayed that the order of the DIT(Exemption) deserves to be set aside. 6. In his rebuttal, the ld. Departmental Representative argued that with the insertion of the proviso to Sec. 2(15) of the Act, the Legislature has made its intention very clear that in the garb of advancement of any other object of general public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Bombay. 9. The only reason for withdrawing the registration allowed earlier u/s. 12AA of the Act is that in the opinion of the DIT (Exem), since the receipts from the sale of milk during the year under consideration exceeded the threshold limit as prescribed under the proviso to Sec. 2(15) of the Act, prompted the DIT (Exem.) to come to the conclusion that the assessee-trust is doing regular activities which are in the nature of business by way of sale of milk and therefore such activity of the assessee-trust has made the trust non-genuine thereby loosing the status of being public charitable trust. 10. The objects of the Trust can be summarized into the following categories:-- (i) Panjrapole and Gaushalas (ii) Agriculture, rural development and preservation of natural resources. (iii) Scientific Research (iv) Education (v) Medical relief (vi) Relief of poor (vii) General Public Utility 11. It is not in dispute that the trust is pursuing these objects since its inception. The bone of contention is the 7th object under the head "General Public Utility" which inter alia provides (a) to give milk free of charge or on payment to children charitable institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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].' This proviso was added only in respect of the last limb of the provisions of Sec. 2(15) which relates to the advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on of an activity in the nature of trade, commerce or business for a cess or fee. The second limb is not relevant to the fact under consideration. A close perusal of the aforementioned proviso show that the spirit of the section is same as per the section 2(15) as it stood prior to the amendment brought by Finance Act, 1983 as mentioned hereinabove. 15. All that has to be decided now is whether the activity of the sale of milk constitutes carrying on of any activity in the nature of trade, commerce or business, which activities the trust is carrying on prior to the amendment brought by Finance Act, 1983. '"General" means pertaining to whole class, "Public" means the body of people at large including any class of the public, "Public" means the body of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incidentally involves the carrying on of commercial activity. The Board further clarified that" the newly inserted proviso to Sec. 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e. 4th limb of the definition of the charitable purpose contained in Sec. 2(15). The Circular further clarified "in the final analysis, whether the assessee has for its objects the advancement of any other object or general public utility is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. In such a case, the object of general public utility will be only a mask or device to hide the true purpose which is trade commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would therefore be decided on its own facts and no generalization is possible. 19. Thus, even the CBDT does not lay down any guidelines for determining whether the entity is carrying on any commercial activity. Each case woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity". 24. The test for carrying on of any activity in the nature of trade, commerce or business as mentioned in the first proviso to Sec. 2(15) would be satisfied if profit making is not the real object. The Hon'ble Delhi High Court in the case of Institute of Chartered Accountant of India (supra) had the occasion to consider the grievance of the ICAI which was denied exemption u/s. 10(23C)(iv) of the Act because in the opinion of the DGIT (Exem.) the institute was holding coaching classes and therefore was not an educational institution, consequently the institute was covered under the last limb of charitable purpose i.e. advance of any other object of general public utility in the light of the amendment brought o Sec.-2(15) of the Act as the institute was charging fees for conducting coaching clauses and making huge money in a systematic and organized manner. Considering the facts in the light of the amended provisions of Sec. 2(15), the Hon'ble Delhi High Court held that the order denying the exemption was not valid. 25. The Tribunal in the case of Saba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast 130 years, in our humble opinion and understanding of law, the proviso to Sec. 2(15) of the Act is not applicable on the facts of the case and the assessee deserves continuance of registration u/s. 12AA of the Act. We, accordingly set aside ther order of the DIT(Exem.) and direct the DIT(Exem) for the continuance of the registration. 29. As we have directed the DIT(Exem) for the continuance of the registration u/s. 12AA, we do not find it necessary to deliberate on the grievance raised vide ground III. 30. In the result, the appeal filed by the assessee is allowed. ITA No. 4018/Mum/2013 - A.Y. 2009-10 31. This appeal by the assessee is directed against the order of the Ld. CIT(A)-1, Mumbai dt. 1.3.2013 pertaining to A.Y. 2009-10. The grievance of the assessee reads as under: "1. On the facts and in the circumstances of the case the ADIT(E) 11(2) an'd the CIT(A) erred in denying the benefit of Section 11 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') to the Appellant. 2. On the facts and in the circumstances of the case the ADIT(E) 11(2) and the CIT(A) erred in holding that the 1st proviso to Section 215 of the Act applied to the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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