SHRI GAU SEWA TRUST,DELHI vs. INCOME TAX OFFICER WARD EXEMPTION 2(1), DELHI, DELHI

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ITA 5988/DEL/2026Status: DisposedITAT Delhi16 July 2026AY 2026-275 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the sale of milk by the assessee trust is not commercial in nature and is an inseparable and natural consequence of maintaining cows, which is the primary charitable object. The Tribunal noted that the production of milk is incidental to the charitable activity of running a gaushala, and the sale proceeds are utilized for maintaining the gaushala and carrying out its charitable objects. The Tribunal respectfully followed the judgment in Sabarmati Ashram Gaushala Trust, wherein it was held that the sale of milk was merely incidental to carrying out charitable objects and there was no element of profit motive to attract the proviso to Section 2(15). The Tribunal found that the CIT(E) had misunderstood and misapplied the ratio of the Supreme Court judgment in ACIT(Exemptions) Vs. Ahmedabad Urban Development Authority. Consequently, the Tribunal directed the Learned CIT(E) to grant registration to the assessee trust under Section 12A. As a consequential relief, the appeal concerning approval under Section 80G was also allowed.

What were the facts?

The assessee, Shri Gau Sewa Trust, filed two appeals before the Income Tax Appellate Tribunal (ITAT), Delhi Bench. The appeals challenged orders passed by the Learned Commissioner of Income Tax (Exemptions), Delhi. The first order, dated 26th May 2026, rejected the assessee's application for registration under Section 12AB(1)(b)(ii)(B) of the Income-tax Act, 1961, and consequently, registration under Section 12A(1)(ac)(ii). The second order, dated 22nd May 2026, rejected the assessee's application for approval under Section 80G(5) of the Act. The assessee trust was established in 2008 with objects including promotion of gaushalas, welfare of cows, and research in gau seva. The assessee had previously been granted registration and approval. The rejection was based on the CIT(E)'s view that income from the sale of milk exceeded 20% of total receipts, making the activity commercial and violating the proviso to Section 2(15) of the Act.

What were the issues?

1. Whether the assessee trust is eligible for registration under Section 12A(1)(ac)(ii) of the Income-tax Act, 1961, when its activities include the sale of cow milk, which the revenue contends constitutes trade or business violating the proviso to Section 2(15) of the Act? Assessee's Contentions: - The Learned Counsel argued that the CIT(E) was under the wrong impression that the sale of milk was commercial in nature and violated Section 2(15). - The assessee relied on the ITAT, Ahmedabad Bench decision in Sabarmati Ashram Gaushala Trust Vs. ADIT(Exemption) and the Gujarat High Court's affirmation in Director of Income-tax (Exemption) Vs. Sabarmati Ashram Gaushala Trust, which held that the sale of milk by a gaushala is incidental to charitable objects and not profit-motivated. Revenue's Contentions: - The Learned CIT(E) rejected the application on the grounds that the assessee was earning receipts from the sale of milk, which exceeded 20% of total receipts, violating Section 2(15) of the Act. - The CIT(E) concluded that the trust's activities were in the nature of trade, commerce, or business, and that the assessee was not eligible for registration as its purpose was not charitable in terms of the proviso to Section 2(15), and it worked exclusively as a commercial entity.

Which sections of the Income-tax Act were involved?

Section 12AB,Section 12A,Section 80G,Section 2(15)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI

Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL

For Appellant: Shri Ved Jain Advocate, Shri Ayush Garg, CA
For Respondent: Shri Lal Ram Sanga Sailo, CIT-DR
Hearing: 13.07.2026Pronounced: 13.07.2026

2 ITA-5987 & 5988/Del/2026

3 ITA-5987 & 5988/Del/2026

4 ITA-5987 & 5988/Del/2026

5 ITA-5987 & 5988/Del/2026

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