PRINCIPAL COMMISSIONER OF INCOME TAX (EXEMPTIONS) vs. ANIMAL BREEDING RESEARCH ORGANISATION(INDIA)

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TAXAP/522/2018HC GujaratGJHC24029279201811 June 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The Tribunal had allowed the benefit of exemptions under Section 11 to the assessee. The Tribunal's decision was based on its earlier judgment concerning the same assessee and the Gujarat High Court's judgment in the case of Director of Income-Tax (Exemption) v. Sabarmati Ashram Gaushala Trust. In the cited case of Sabarmati Ashram Gaushala Trust, the Gujarat High Court had held that the objects of the Trust clearly established it was for general public utility and for charitable purposes. The objects included breeding cattle, improving the quality of cows and oxen, producing and selling cow milk, cultivating agricultural lands, keeping grazing lands, rehabilitating and assisting Rabaris and Bharwads, conducting scientific research related to cattle and agriculture, establishing allied institutions, and publishing study materials. The High Court found that the assessee's activities were in line with these charitable objectives. Therefore, the Revenue's appeal was dismissed.

What were the facts?

The Revenue is in appeal against the Income Tax Appellate Tribunal's order dated November 9, 2017. The respondent-assessee, Animal Breeding Research Organisation (India), is a registered Trust. For assessment year 2011-12, the Assessing Officer noted that the assessee's principal income of Rs. 4.84 crores out of total income of Rs. 5.08 crores arose from the sale of semen. The Assessing Officer was of the opinion that this activity constituted business and did not fall within the definition of 'charitable purpose' under Section 2(15) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) allowed the assessee's appeal, leading to the Revenue's appeal to the Tribunal. The Tribunal rejected the Revenue's appeal, relying on a previous judgment concerning the same assessee and a Gujarat High Court judgment in the case of Director of Income-Tax (Exemption) v. Sabarmati Ashram Gaushala Trust.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in allowing the benefit of exemptions under Section 11 of the Act without considering that the assessee is involved in widespread commercial activities in the nature of business and the activity of the assessee is covered under the first and second proviso to Section 2(15) of the Act? Assessee's Contention: The judgment does not record specific contentions made by the assessee before the Tribunal or High Court, other than the fact that the Tribunal relied on previous judgments. The Tribunal's decision was based on the objects of the Trust and the Gujarat High Court's ruling in Sabarmati Ashram Gaushala Trust. Revenue's Contention: The Revenue contended that the assessee was engaged in widespread commercial activities in the nature of business, and its activities fell under the first and second provisos to Section 2(15) of the Act, thereby disentitling it from the benefit of exemptions under Section 11.

Which sections of the Income-tax Act were involved?

Section 11,Section 2(15)

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Cause title — parties, addresses and appearances
C/TAXAP/522/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 522 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX (EXEMPTIONS) Versus ANIMAL BREEDING RESEARCH ORGANISATION(INDIA) ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 MR B S SOPARKAR(6851) for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 11/06/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   09.11.2017 raising following question for our consideration: “Whether,   on   the   facts   and   in   the circumstances   of  the   case  and   in  law,   the Tribunal   was   justified   in   allowing   the benefit   of   exemptions   u/s   11   of   the   Act without   considering   the   fact   that   the assessee   is   involved   in   widespread commercial activities in nature of business and the activity of the assessee is covered under   first   and   second   proviso   to   section 2(15) of the Act?”

2.

Respondent­assessee is a registered Trust.  Some of the objects for which the Trust is registered are as under: C/TAXAP/522/2018 ORDER “AIMS AND OBJECTIVES The aims and objects of the Society are as under: 1) The society is established with a view to   undertake   and   promote   activities connected with the development of cattle and buffaloes   (with   special   reference   to   the breeding   and   genetic   improvement)   and   to engage   in   other   allied   activities   such   as development of draught animal power systems, feed and fodder development for live stock and   to   extend   necessary   suport   persons (including dairy farmers) for carrying out any of such activities in different parts of India   and   generally   to   promote   economic upliftment   of   the   farmers   segment.     The society is not established for the purpose of profit. 2) To   achieve   the   aforesaid   objectives, the society may carry on all or any of the following activities; …....”

3.

For the assessment year 2011­12, the Assessing Officer during scrutiny assessment noticed that the assessee's   principal   income   of   Rs.4.84   crores (rounded   off)   out   of   the   total   income   of   Rs.5.08 crores   (rounded   off)   arose   out   of   the   activity   of sale   of   semen.     He   was   of   the   opinion   that   the assessee   was   engaged   in   a   business   which   was undertaken with a proper motive and therefore would not   fall   within   the   definition   of   'charitable purpose'   as   provided   under   section   2(15)   of  the C/TAXAP/522/2018 ORDER Income Tax Act, 1961 ('the Act' for short).

4.

The   assessee   carried   the   matter   in   appeal. Commissioner   of   Income   Tax   (Appeals)  allowed   the assessee's appeal, upon which, the Revenue approached the Tribunal.  The Tribunal by the impugned judgment, referring   to   the   earlier   judgment   in   case   of   this very   assessee   and   relying   upon   the   judgment   of Division Bench of this Court in case of Director of Income­Tax (Exemption) v. Sabarmati Ashram Gaushala Trust reported in [2014] 362 ITR 539 (Guj), rejected the Revenue's appeal.

5.

In   case   of  Sabarmati   Ashram   Gaushala   Trust (supra),   under   somewhat   similar   background,   this Court had observed as under:

“11. We are wholly in agreement with the view of   the   Tribunal.   The   objects   of   the   Trust clearly   establish   that   the   same   was   for general   public   utility   and   where   for charitable purposes. The main objectives of the   trust   are   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; to produce and sale the cow milk; to hold and cultivate   agricultural   lands;   to   keep grazing   lands   for   cattle   keeping   and breeding; to rehabilitate and assist Rabaris and Bharwads; to make necessary arrangements for   getting   informatics   and   scientific C/TAXAP/522/2018 ORDER 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.”

6.

In the result, this Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH

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