THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH vs. M/S GAUSHALA TRUST SOCIETY, AMBALA CITY

Facts

The Commissioner of Income Tax (Exemptions), Chandigarh (the revenue) filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT). The ITAT had reversed the order of the Commissioner, Income Tax, Chandigarh, who had refused registration under Section 12A of the Income Tax Act, 1961, to the respondent, M/s Gaushala Trust Society. The Commissioner's refusal was based on the grounds that the respondent did not own property, held large fixed deposits (FDRs), spent a meager amount on cow medicines relative to its income, and sold milk produced by its cows. The respondent runs a Gaushala with approximately 540 cows.

Held

The High Court agreed with the views of the ITAT and dismissed the appeal filed by the revenue. The ITAT had found that the respondent's fixed deposits were justified as they represented compensation for acquired property, held to secure new premises due to ongoing litigation. The ITAT also noted that the Commissioner's finding regarding low expenditure was incorrect, as the society was maintaining and feeding 540 cows. The Tribunal further held that the Commissioner's presumption about the objects of the respondent was erroneous and that the lack of immovable property did not disqualify the society from registration. The High Court found no reason to interfere with the ITAT's decision, upholding the principle that the ITAT's findings of fact, when reasonable, are binding.

Key Issues

1. Whether the ITAT was justified in reversing the Commissioner's order and granting registration under Section 12A of the Income Tax Act, 1961, to the respondent-Gaushala, despite the Commissioner's findings regarding lack of property, substantial FDRs, and alleged low expenditure on cow welfare. Assessee's contentions (as inferred from the ITAT's findings): The respondent argued that only a small percentage of cows were yielding milk. The fixed deposits were held because the society's original premises were acquired by the government, and the compensation was invested to enable the acquisition of new premises if the current rented premises had to be vacated due to ongoing litigation. The society's object was to maintain all cows, not just sick or injured ones, and the expenditure on feeding and looking after 540 cows was substantial. The lack of immovable property did not preclude registration. Revenue's contentions (as inferred from the Commissioner's order and the appeal): The revenue contended that the respondent did not own any property, held large FDRs, spent a disproportionately small amount on medicines for the cows, and generated income by selling milk, which indicated commercial activity rather than charitable purposes.