RAJASTHA GAU SEWA SANGH,JAIPUR vs. ITO, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH ‘B’, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k Before : Shri Vijay Pal Rao, JM & Shri Vikram Singh Yadav, AM vk;dj vihy la-@ITA No. 748/JP/2015 fu/kZkj.k o"kZ@Assessment Year : 2009-10 (u/s 254/12AA(1)(b)of I.T. Act 1961) cuke M/s. Rajasthan Gau Seva Sangh The CIT(Exemptions) Vs. Durgapura, Tonk Road,Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@ PAN/GIR No.: AAATR 0809 E vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 113/JP/2014 fu/kZkj.k o"kZ@Assessment Year : 2009-10 cuke M/s. Rajasthan Gau Seva Sangh The ITO Vs. Durgapura, Tonk Road, Jaipur Ward- 6(2),Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@ PAN/GIR No.: AAATR 0809 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Manish Agarwal, CA and Shri O.P. Agarwal, CA jktLo dh vksj ls@ Revenue by : Shri B.K. Gupta, CIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 10/12/2019 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 07 /02/2020 vkns'k@ ORDER PER VIJAY PAL RAO, JM These two appeals by the assessee are directed against the order dated 11-09-2015 of ld. CIT(Exemptions), Jaipur passed u/s 12AA(1)(b) of the Act as well as order dated 17-12-2013 of ld. CIT(A)-II, Jaipur

2 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

arising from assessment order passed u/s 143(3) of the Act for the

Assessment Year 2009-10 respectively.

2.1 Since the issue of cancellation/ withdrawal of registration u/s

12A(1)(a) of the Act goes to the root of the matter and shall have bearing

on the assessment order and consequential impugned order of the ld.

CIT(A), therefore, we first take up the appeal of the assessee challenging

the order of the ld. CIT(E) passed u/s 12A(1)(b) of the Act. The assessee

in ITA No. 748/JP/2015 for the A.Y. 2009-10 assessee has raised the

following grounds.

‘’1. On the facts and in the circumstances of the case the ld. CIT(E),Jaipur has grossly erred in withdrawing registration u/s 12AA(3) of the I.T. Act, 1961 for A.Y. 2009-10 and onwards, without appreciating that he was not empowered under the said section to withdraw the registration granted to appellant u/s 12A(1)(a) in the year 1974, as the empowering provision i.e. section 12AA(3) was made operative w.e.f. 01-06-2010 i.e. A.Y. 2011-12 onwards only with retrospective effect as held by CBDT as well as various Courts. Thus the order of the ld. CIT(E), Jaipur cancelling the registration w.e.f. 2009-10 onwards deserves to be held bad in law.

3 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

2.1 On the facts and in the circumstances of the case the ld. CIT(E),Jaipur has grossly erred in observing that the assessee is carrying on activities in the nature of trade, commerce or business whereas the assessee is not carrying on activity in the nature of trade, commerce or business and the assessee trust is not running on commercial lines and the activities of the assessee are charitable and is carrying on its activities for a charitable purpose within the meaning of section 2(15) of the I.T. Act, 1961.

2.2 That the ld. CIT has further erred in not properly considering the case laws squarely applicable to the case of assessee and has failed to distinguish them, therefore, the order of the ld. CIT deserves to be held bad in law’’

2.2 The assessee is a society registered under the Societies Registration

Act, 1860 vide registration certificate dated 14-10-1954. The assessee

was granted registration u/s 12AA(1) of the Act on 06-12-1974.

Thereafter the assessee has been availing the benefit of Section 11 and 12

of the I.T. Act, 1961 till 29-12-2011 when the registration was withdrawn

by the CIT-II, Jaipur as well as the AO denied the benefit u/s 11 and 12

of the Act to the assessee while passing the assessment order on the same

date i.e. 29-12-2011. The assessee challenged the order of the ld. CIT

withdrawing the registration granted to the assessee u/s 12AA(1)(b) of the

Act before this Tribunal and vide order dated 28-11-2014 in ITA

No.85/JP/2012 this Tribunal set aside the order of the ld. CIT

withdrawing the registration u/s 12AA(3) of the Act and remanded the

4 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

matter to the record of the ld. CIT (Admn.) to decide the same afresh. In

pursuance to the said order of the Tribunal dated 28-11-2014, the ld. CIT

(Exemptions) has again passed the impugned order dated 11-09-2015

whereby registration granted u/s 12AA was withdrawn by invoking the

provisions of Section 12AA(3) of the Act. The ld. CIT (Exemptions)

concluded that the assessee society carried out the activities which are not

in accordance with the objects of the society and turnover from the

commercial activities exceeds the prescribed limit provided under proviso

to Section 2(15) of the I.T. Act, 1961.

2.3 Before us, the ld.AR of the assessee submitted that the order

passed by the ld. CIT (Exemptions) withdrawing the exemptions is not in

accordance with law and procedure laid down u/s 12AA(3) of the Act.

Therefore, the impugned order is bad in the eyes of law and is liable to

be struck down. The ld.AR of the assessee further submitted that Section

12AA(3) of the Act empowers the Commissioner to cancel the

registration granted u/s 12AA/12A of the Act in specified circumstances

where the Commissioner is satisfied that the activities of the

trust/institution are not genuine or are not being carried out in accordance

with the objects of the trust/intuition.

5 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

2.4 The ld.AR of the assessee has referred to the objects of the assessee

society/ trust and submitted that the objects of the assessee trust includes

the preservation of environment, Medical relief to ailing persons, Relief

to the Poor, Imparting the education. Thus the dominant functions of the

assessee trust are to provide (i) an asylum to old, maimed, sick and stray

cows and further to provide relief to cows in famine affects areas, (ii) to

educate and to hold camps to impart training for preparation of medicines

produced from cow products and (iii) to educate milkmen in order to

improve the quality of milk and thereby working for their upliftment

which are very well covered within the ambit of relief to poor and

education. The ld.AR of the assessee then submitted that apart from

providing relief to the poor and imparting education, the assessee is also

engaged in plantation activities and spreading awareness about bio-fuel in

order to preserve / protect the environment. Thus the assessee trust has set

up a Bio Gas Plant at all the centers which are specifically covered under

the head charitable activities in the nature of ‘Environment Protection’’.

The ld. CIT (Exemptions) has passed the impugned order 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. Further, ld. CIT (Exemptions)

has failed to appreciate the purpose of attainment of main objects of the

6 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

assessee trust which is authorized by memorandum of association to

carryout various functions which inter alia includes purchase and sale.

When the assessee is doing shelter/asylum to stray cows then purchase

and sale of milk is closely related to the main objects of the society and it

becomes the ancillary activity for upliftment of the main objects of the

assessee trust. The ld.AR of the assessee further contended that purchase

and sale of milk, ghee, cattle feed etc. has not been done on commercial

lines or to earn the profit but it is a part of providing financial support to

milkmen who belongs weaker and poor sections of the society. Thus the

milkmen in the absence of much knowledge and net work are forced to

sell their products at low prices. The assessee trust provides better quality

of cattle feed so as to enable the cow owners/ milkmen to get better

quality of milk products. The ld.AR of the assessee submitted that the

assessee is maintaining 11 Gaushalas and 14 Famine Relief Centres and

they are run at various places in the State of Rajasthan whereas the milk

and ghee are being sold only from 03 counters / centres i.e. Jaipur,

Bikaner and Jodhpur. The assessee trust is procuring the milk and ghee

from ‘’Jaipur Gau Samverdhan Samiti’’ which is formed for upliftment of

milkmen. Thus the activity of purchase and sale of milk is not to earn the

profit or to carry out the activities on commercial lines but to support the

7 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

milkmen through ’Jaipur Gau Samverdhan Samiti’’. The activity of

selling the cattle feed is to provide the good quality of cattle feed to the

milkmen/ cow owners at a reasonable price. Thus the assessee trust is

providing the balanced and nutritious fodder for the cows so that the

milkmen can have good quality of milk & milk products. Similarly, the

milk and ghee is purchased through ’Jaipur Gau Samverdhan Samiti’’

which procures the same from local milkmen at a better price and sell it

through its three counters/ centres. Thus all these activities are being

carried out by the assessee trust with the main object to protect the cows

as well as environment. In support of his contentions, the ld.AR of the

assessee relied on the following decisions. (i) DIT(Exemptions) vs Sabarmati Ashram Gaushala Trust (2014) 362 ITR 538 (Guj). (ii) DIT (Exemptions), Mumbai vs Shree Nashik Panchvati Panjrapole (2017) 81 Taxmann.com 375 (Bom) (iii) Bhartiya Govansh Rakashan Samvardhan Parishad vs CIT, (2015) 58 Taxmann.com 37 (Gauhati Trib) (iv) Shree Nashik Panchvati Panjrapole (2014) 45 Taxmann.com 220 (Mumbai – Trib) (v) CIT vs Swastik Textile Trading Company (P) Ltd, (1978), 113 ITR 853 (Guj)

Alternatively the ld.AR of the assessee submitted that impugned order

was originally passed on 29-12-2011 making it effective from 01-04-2009

8 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

whereas the amendment brought to the provisions of Section 12AA(3)

was w.e.f. Assessment Year 2011-12. Hence, the ld. CIT (E) has

withdrawn / cancelled the registration with retrospective effect which is

not permissible. Therefore, the impugned order passed by the ld. CIT (E)

withdrawing the registration was unlawful, deserves to be quashed and

registration of the assessee trust granted u/s 12AA deserves to be

restored.

2.5 On the other hand, the ld. DR has submitted that activities of the

assessee trust are not for attainment of its objects. The primary object of

the assessee trust is to provide shelter to the cows and therefore, the said

object is for social cause and would fall in the last leg of charitable

activities as provided u/s 2(15) of the I.T. Act, 1961 and consequently

when the activities of the assessee are found to be trade and commerce

then proviso to section 2(15) is attracted. In the object clause, nowhere it

is provided that the assessee will purchase and sell ghee, milk, cattle feed

etc. The said activity is nothing but a pure trading in the nature of trade

and commerce. The total turnover from the activities of sale and purchase

is Rs. 13.15 crores which is beyond the threshold limit provided in the

proviso to Section 2(15) of the Act. The decisions relied on by the ld.AR

of the assessee are distinguishable on facts and cannot be applied in the

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facts of the present case. The ld. DR relied on the decision of ITAT

Banglore Bench in the case of Sri Vidyaranya Seva Sangha vs CIT (2016)

71 Taxmann.com 152 (Banglore Trib). The ld. DR also relied on the

impugned order of the ld. CIT(A).

2.6 We have considered the rival submissions as well as relevant

materials available on record. There is no dispute that the assessee trust

was granted registration u/s 12A(1)(a) of the Act on 6-12-1974. We

further note that there is no change since the assessee trust was formed

and registered under Societies Registration Act, 1860 vide Registration

Certificate dated 14-10-1954 as a public charitable society, either in the

object of the assessee trust or in the memorandum of association of the

society. Therefore, the object of the assessee trust cannot be questioned

being charitable in nature when the same objects were considered by the

competent authority while granting registration u/s 12A(1) of the Act.

The ld. CIT(Admn) initially had withdrawn the registration vide order dated 29th Dec. 2011 on the ground that the activity of the assessee trust

and particularly the activity of purchase and sale of milk, ghee, cattle feed

etc. is in the nature of trade, commerce or business as provided in the

proviso to section 2(15) of the Act and consequently the activities are not

carried out for achieving the object of the assessee trust. The said order

10 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

was challenged by the assessee trust before this Tribunal and vide order

dated 28-11-2014 this Tribunal set aside the matter to the record of the ld.

CIT(Admm) in para 3.10 and 3.11 as under:-

‘’3.10 We have heard the rival contentions and perused the material available on record. The arguments of the ld counsel about the legislative scheme of provisions with regard to registration of trust u/s 12AA, wider meaning of Charitable Object; power of withdrawal of registration u/s 12AA(3) have some merit. The conclusion of order of ld. CIT in withdrawing the registration does not appear to conform to the specific conditions laid down in sec 12AA(3). An order withdrawing the registration of trust is a drastic action and the law provided a statutory mechanism of assessment, verification of trust activities, and apportionment of income and expenditure of various activities of the trust. Benefits of sec 11 and 12 can be extended on the basis of scrutiny and verification by the AO. Ld. CIT has not pointed out any specific instance of any activity, income or expenditure being nongenuine. Sec. 293C is not applicable to approvals which specifically provide manner of withdrawal of approval as held by this bench of ITAT in the case of Jaipur Development Authority vs. CIT in ITA No.182/JP/2012 vide order dated 30- 09-2014 as under:- The learned CIT also erred in applying the provisions of Section 293(c) of the Act, in this case, which applied withdrawal of approval granted under any provision of this Act, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision. For cancellation of registration, the specific provision U/s 12AA is provided. 3.11 In view of entirety of facts, circumstances and case laws, we are of considered opinion that the impugned order of ld. CIT (Admn.) withdrawing the registration u/s 12AA(3) is not in conformity with the language of this section. We are of the view that ld. CIT(Admn) should revisit the issue of withdrawal of registration afresh after taking into consideration the legislative scheme of powers, incorporation of proviso, inclusive definition of the Charitable Objet as interpreted by plethora of judicial decisions and decide the issue of registration after giving the assessee an opportunity of being heard. Since we have set aside the issue, the additional ground as admitted by us with other pleadings for proper disposal of the same shall be considered by ld. CIT.’’

11 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

The Tribunal has observed in that set aside order that order dated 29-12-

2011 passed by the ld. CIT (Admn.) withdrawing the registration does not

appear in conformity with the specific conditions laid down u/s 12AA(3)

of the Act. Accordingly, earlier order was set aside and the matter was

remanded to the record of the ld. CIT(Admn) for reconsideration of the

matter as per the scheme of the provisions of section 12AA(3) of the Act

as well as in accordance with the judicial precedents on the issue after

giving opportunity of hearing to the assessee. In the set aside proceedings,

the ld. CIT(E) has again reiterated its stand and held that the activity of

the assessee trust is not as per the object clause of the assessee trust and

further the activities are in the nature of trade and commerce and turnover

from these activities is more than the prescribed limit as per proviso to

section 2(15) of the Act and consequently the same are not charitable in

nature. The ld. CIT(E) has given more emphasis on the powers for

cancellation/ withdrawal of the registration granted u/s 12A of the Act by

virtue of the amendment brought in Section 12AA(3) w.e.f. 01-06-2010.

For ready reference, we reproduce section 12AA(3) of the Act as under:-

‘’Sub-Section (3) of Section 12AA :-[(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996) and subsequently the [Principal Commissioner or ] Commissioner is satisfied that the activities

12 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.]’’

Sub-Section 3 of Section 12AA confers the powers to competent

authority being a Principal Commissioner/ Commissioner to cancel the

registration of the trust or an institution granted u/s 12AA(1)(b) or 12A of

the Act, on his satisfaction that the activity of such trust/institution are not

genuine or being carried out in accordance with the objects of the trust or

institution as the case may be. Thus there are two situations under which

registration granted u/s 12AA/12A can be cancelled either the activities

of the trust/ institutions are not genuine or the activities are not being

carried out in accordance with the objects of the trust/institution. In the

case in hand, there is no allegation that the activities of the assessee trust

are not genuine but the ld. CIT(E) has observed that the activities of the

assessee trust are not being carried out in accordance with the objects of

the trust. It is pertinent to note that once the objects of the assessee trust

are found to be charitable in nature then in order to hold that the

activities are not being carried out in accordance with the object the same

must not be in the nature of achieving or attainment of the purpose and

13 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

objects of the trust. There is no dispute that the main dominant functions

of the assessee trust is to provide an asylum/shelter to old sick, ,maimed,

and stray cows. The assessee is maintaining 11 Gaushalas and14 Famine

Relief Centres particularly for providing the shelter to the cows. It is also

not in dispute that for last more than 45 years the assessee has been

providing asylum/ shelter to the cows and maintaining these Gaushalas as

well as Famine Relief Centres with the object to provide proper treatment

and fodder to the needy stray cows. Apart from maintaining Gaushalas

and Famine Relief Centres, the assessee trust is also carrying out various

activities of providing research and training centres for development of

medical treatment and use of cow products in the medicine. The assessee

is also imparting education and other training necessary for animal

husbandry and particular rearing the cows by milkmen. The department

has not disputed the fact that entire receipt/ income earned by the assessee

from various activities are applied in the attainment of its main and

dominant objects of maintaining the Gaushalas and Famine Relief

Centres. Even the activities of purchase and sale of milk, ghee and cattle

feed is done through another society namely Jaipur Gau Samvardhan

Samiti. The sole object & purpose of purchase and sell of the milk, milk

products and cattle feed is to provide the financial help to the persons in

14 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

occupation of animal husbandry and particularly selling of milk. There is

no allegation that the assessee is carrying out these activities with sole

motive of earning profit rather the assessee has brought on record the

details to show that the assessee is not earning any profit but only

charging some commission to facilitate the better service, price and good

products to the needy persons and particularly in the field of rearing the

cows and production of milk. The income so earned by the assessee trust

from these activities is applied for the main objects of the assessee trust

and therefore, it cannot be said that all these activities are not being

carried out in accordance with the object of the assessee trust rather these

activities are being carried out to attain the main objects of the assessee

trust. In the case of DIT (Exemptions), Mumbai vs Shree Nasik Panchvati

Panjrapole (supra), the Hon'ble Mumbai High Court has upheld the order

of the Tribunal whereby the order of DIT(E), withdrawing the registration

u/s 12A of the Act was set aside. The observation of the Hon'ble Bombay

High Court held in para 16 to 19 is as under:-

‘’16. In fact, the decision relied upon by the impugned order of the Tribunal in the case of Sabarmati Ashram Gaushala Trust (supra) was appealed to before the Hon'ble Gujarat High Court being Tax Appeal No.1162 of 2013. The question posed for consideration was whether the proviso to Section 2(15) of the Act would be applicable in case of the Sabarmati Ashram

15 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

Gaushala Trust (supra) as it was selling milk which generated considerable revenue. This in the context of exemption under Section 11 of the Act. The Gujarat High Court disposed/dismissed on 15th January, 2014 after considering the statutory provisions, the speech of Finance Minister while introducing the proviso and the CBDT Circular issued in the context of newly added proviso to Section 2(15) of the Act, observing as under :— 'It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are marked as "charitable purpose". Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect the Trust to dispose of its produce at any consideration less than the market value. If there is any surplus generated at the end of the year, that by itself would not be the sole consideration 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." ….... ……….. "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'. Delhi High Court in case of Institute of Chartered Accountants of India & Anr. Vs. Director General of Income-Tax (Exemption) and Ors. reported in (2012) 347 ITR 99 (Delhi) considered these very provisions in the context of activities of the Institute of Chartered Accountants holding that the fundamental or dominant function of the Institute was to exercise overall control and regulate the activities of the members / enrolled chartered accountants and merely because the Institute was holding coaching classes which also generate income, the Court held that proviso to Section 2(15) of the Act would not be applicable. It thus held and observed as under :- "Section 2(15) defines the term "Charitable purpose". Therefore, while construing the term "business" for the said section, the object and purpose of the section has to be kept in mind. We do not think that a very broad and extended definition of the term "business' is intended for the purpose of interpreting and applying the first proviso to Section 2(15)of the Act to include any transaction for a fee or money. An activity would be considered "business" if it is undertaken with a profit motive, but in some cases this may not be

16 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

determinative. Normally, the profit motive test should be satisfied but in a give case activity may be regarded as business even when profit motive cannot be established / proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles, and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. The test as prescribed in Raipur Manufacturing Company (1967) 19 STC 1 (SC) and Sai Publication Fund (2002) 258 ITR 70 (SC); (2002) 126 STC 288 (SC) can be applied. The six indicia stipulated in Lord Fisher (1981) STC 238 (sic) are also relevant. Each case, therefore, has to be examined on its own facts.' (Emphasis supplied) 17. We find ourselves in complete agreement with the reasoning set out by the Gujarat High Court in its order dated 15th January, 2014 in DIT (Exemption) v. Sabarmati Ashram Gaushala Trsut [2011] 362 ITR 539/223 Taxman 43/44 taxmann.com 141. Although the same was rendered in the context of exemption being denied under Section 11 of the Act and it was not a case of withdrawal of registration. Nevertheless, the reasoning therein would be equally applicable to the present facts as it considered the applicability of the proviso to Section 2(15) of the Act as arising in this case. One more fact that may be noted is that Mr. Malhotra sought to rely upon the order passed by the CIT(A) in Section 11 proceedings to establish that the milk is sold at market price. However, it would make no difference as there is no bar in law to a Trust selling its produce at market price as observed above by the Gujarat High Court. In fact, the above factor alone will not make it an activity of trade, commerce or business or even in its nature. 18. We may also refer to another decision of the Delhi High Court in ICAI v. DGIT (Exemption) [2013] 358 ITR 91/217 Taxman 152/35 taxmann.com 140, where the Court observed at para 67 thereof as under :— 'The expressions "trade", "commerce" and "business", as occurring in the first proviso to section 2(15) of the Act, must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an organised manner. The purpose and the dominant object for which an institution carries on its activities is material to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of "charitable purpose". The purpose of introducing the proviso to section 2(15) of the Act can be understood from the Budge Speech of the Finance Minister while introducing the Finance Bill, 2008. … …. The expression "business", "trade" or "commerce" as used in the first proviso must, thus, be interpreted restrictively and where the dominant object

17 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

of an organisation is charitable any incidental activity for furtherance of the object would not fall within the expressions "business", "trade" or "commerce".' (Emphasis supplied) 19. In fact the Revenue has not been able to show that the view taken by the Apex Court in Surat Art Silk Cloth Mfg Association (supra), Gujarat High Court in Sabarmati Ashram Gaushala Trust (supra) and the Delhi High Court in ICAI 347 ITR 99 (supra) and ICAI 358 ITR 91 (supra) laying down the dominant activity test should not commend to us. Therefore, the view taken by the Tribunal in the present facts cannot be found fault with.’’

Thus the proviso inserted in Section 2(15) was considered by the Hon'ble

Bombay High Court and held the expression Trade, Commerce and

Business as provided in first proviso to Section 2(15) must be read in the

context of intent and purport of Section 2(15) of the Act and cannot be

interpreted to mean any activity which is carried on in an organized

manner, even as per intent of the legislature and as per Finance Bill, 2008

whereby the said proviso to section 2(15) was inserted, is found to be not

to bring the incidental activity for furtherance of the object within the

expression business, trade or commerce. It is pertinent to note that when

the assessee is maintaining various Gaushalas then production of milk is

bound to happen and dealing in purchase and sale of milk & milk

products as well as cattle feed is nothing but the activity in furtherance of

the objects of the assessee trust. The ld.DR of the assessee relied on the

decision of ITAT Bangalore Bench in the case of Sri Vidyaranya Seva

Samiti vs CIT (supra) wherein the Tribunal has specifically noted that

18 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

the assessee society is not carrying out any activity since 2001. Therefore,

the genuineness of the activity itself was not even in existence. Hence, the

said decision cannot be applied in the present case where 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. The ld. 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 ld. 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 in view of the above facts and circumstances of the

case, the impugned order of the ld. CIT(E) is set aside and grant of

registration u/s 12A is restored. Thus the appeal of the assessee is

allowed.

19 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

3.1 The assessee in ITA No.113/JP/2014 for the Assessment Year

2009-10 has raised the following grounds:-

‘’1. On the facts and in the circumstances of the case the ld. CIT(E),Jaipur has grossly erred in upholding the action of the AO in treating the income declared by the appellant as income from business, arbitrarily on mere assumptions and presumptions, thus the action of the AO deserves to be held bad in law.

3.2 We have heard the ld.AR and ld. DR as well as considered the

relevant materials available on record. The ld. CIT(A) while passing the

impugned order has held in para 3.3 as under:-

‘’3.3 I have considered the facts of the case, assessment order and appellant’s written submission. Assessing Officer made addition on account of surplus on sale of land and contribution received from various organizations since appellant’s registration u/s 12A is withdrawn by CIT. Appellant argued that the withdrawal of registration is not sustainable however it is not in dispute that order of CIT withdrawing registration u/s 12A is appealable only before ITAT. Till such time, ITAT decide the issue, appellant is not a charitable trust registered u/s 12A and is not entitled for exemption u/s 11,12

20 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

and 13. Accordingly appellant’s arguments against withdrawal of registration are not required to be discussed here. Assessing Officer made the addition of surplus of land which was sold last year on protective basis. Appellant submitted that property was sold and registered last year and entire payment was also received in that year therefore, there is no question of taxing the surplus during the current year. However, it is not in dispute that appellant reflected surplus on sale of land only during the year and not in earlier year therefore, as far as AO is concerned, he has taxed the surplus on the basis of sale disclosed by the appellant. Appellant did not explain as to why sale of property which was complete last year, was not reflected in the accounts last year but the same is disclosed during the year. In absence of any reason for not disclosing the sale and surplus arising from therefrom last year, assessing officer is justified in taxing the surplus in the current year when such surplus is reflected in the accounts at least on protective basis. Accordingly, the addition of surplus on sale of land made on protective basis is confirmed. Assessing Officer made another addition of Rs. 1,05,000/- on account of contributions received from other organizations as revenue. Since income of the appellant trust is to be computed under normal provisions, any receipt is to be treated as taxable unless it is exempt. Since appellant did not submit any information with regard to the nature of this receipt, assessing officer justified in taxing this receipt as revenue. In the final result, appeal is dismissed.’’ The ld. CIT(A) has confirmed the order of the AO on the ground that the

registration was withdrawn by the ld. CIT(E) and consequently the

assessee is not eligible for exemption u/s 11 and 12 of the Act. Since the

said order of the ld. CIT(E) withdrawing the exemption has been reversed

by us, therefore, the impugned order of the ld. CIT(A) is not sustainable

and liable to be set aside in view of our findings on the appeal filed

against withdrawal of the exemptions. Hence, the addition made by the

AO is liable to be deleted and the assessee trust is entitled for the benefit

21 ITA No.748/JP/2015 M/s. Rajasthan Gau Sewa Sangh vs CIT(E), Jaipur

u/s 11 and 12 of the Act to the extent the income is applied for charitable

purposes. The AO has nowhere alleged that the assessee has not applied

the income for charitable purposes. Accordingly, the orders of the

authorities below are set aside.

4.0 In the result, both the appeals of the assessee are allowed.

Order pronounced in the open court on 07 /02/2020.

Sd/- Sd/- ¼ foØe flag ;kno ½ ¼fot; iky jko½ (Vikram Singh Yadav) (Vijay Pal Rao) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 07/02/ 2020 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- M/s. Rajasthan Gau Sewa Sangh, Jaipur izR;FkhZ@ The Respondent- The CIT(E), Jaipur 2. vk;dj vk;qDr¼vihy ) @ CIT(A), 3. 4. vk;dj vk;qDr@ CIT, 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No.748/JP/2015) vkns'kkuqlkj@ By order,

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