M/S APHAJ GAUE SEWA ASHRAM,BARNALA vs. CIT(E), CHANDIGARH

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ITA 1159/CHANDI/2017Status: DisposedITAT Chandigarh25 September 2018AY 0000-005 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that further examination was required regarding the dissolution clause, the actual number and health of animals, and the commercial nature of milk transactions. Therefore, the case was remanded back to the CIT(E) for a fresh decision.

What were the facts?

The assessee, an ashram, applied for registration under Section 12AA of the Income Tax Act after 17 years of operation. The CIT(E) rejected the application, citing commercial activities like milk purchase and sale, lack of a dissolution clause, and failure to pursue core charitable objects.

What were the issues?

Whether the ashram's activities were genuinely charitable and not commercial, and whether the absence of a dissolution clause warranted rejection of registration.

Which sections of the Income-tax Act were involved?

Section 12AA,Section 2(15),Section 13(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, CHANDIGARH BENCH “A”, CHANDIGARH

Before: SMT. DIVA SINGH, JM & Dr. B.R.R. KUMAR , AM

For Appellant: Shri. Tej Mohan Singh
For Respondent: Dr. Gulshan Raj
Hearing: 28/08/2018Pronounced: 25/09/2018

आदेश/Order PER DR. B.R.R. KUMAR:

The present appeal has been filed by the Assessee against the order of

the Ld. CIT(E), Chandigarh dt. 29/06/2017.

2.

In the present appeal Assessee has raised the following grounds: 1. That the Ld. CIT has erred in law as well as on facts in rejecting registration under section 12AA of the Act which is arbitrary & unjustified. 2. That the Ld. CIT has rejected the claim only for the reason that registration is being sought after a lapse of 17 years since its creation and further there is no dissolution clause in the MOA which is not the requirement for claiming registration under section 12AA and as such the order is arbitrary and unjustified. 3. That the registration has been refused only on the basis of suspicion, conjectures and surmises as is evident from the various unfounded findings as enumerated in the body of the order which is not permitted under the Law and as such the order refusing registration is illegal, arbitrary and unjustified.

3.

As per the order of the Ld. CIT(E), an application in Form No. 10A was

received in this office on 23.12.2016 seeking registration u/s 12A of the Income

Tax Act, 1961. The application reveals that the society is an ongoing entity that

has been in operation since 20.09.2000.

4.

The stated aims and objects of the society are to construct, maintain and

run the Aphaj Gaue Ashram at Bamala or any other place in India; to take care

of disabled, aged, ill and handicapped cows and the alike; to construct,

open/run hospital, dispensary, Eye Bank, Blood Bank, educational institution,

institutions, including department of scientific research for the reception and the

treatment of persons suffering from illness or otherwise needing medical aid or to

hire on rent building or hospital for reception and treatment or persons suffering

from illness or otherwise in need of medical aid for reception, rehabilitation or to

render financial assistance to the institutions established for the achievement of

the above objects in India; to build immoveable properties for carrying on

above mentioned activities and other promotional pursuits, also for creating

regular sources of income and set up special funds and trusts to manage such

properties and funds; to construct building for rental purpose for the

maintenance of the trust; to seek and receive donations, state grants, funds and

other financial assistance for fulfilling the above objects; to provide financial aid

to the needy, poor families for the fulfilment of their social obligations like

marriage of daughter etc.

5.

The provisions necessitated examination of two basic conditions for grant

of registration u/s 12AA. The same include, apart from the examination of

objects of the society, satisfaction of the competent authority in respect of

genuineness of activities as well particularly when the applicant is an ongoing

entity.

6.

The financial statements submitted by the applicant reflect the following:-

F.Y. Gross Receipt Net Surplus (%) Fixed Assets C ash & Bank Additions 2013-14 Rs. 29,39,275/- Rs. 4,28,626/- (14.6%) Rs. 35,44,332/- Fs 9,75,475/- Rs. 34,925/- 2014-15 Rs. 28,06,553/- Rs. 2,92,160/- (10.4%) Rs. 52,44,109/- Rs. 15,89,257/- Rs. 20,61,947/- 2015-16 Rs. 30,19,567/- (-) 1,31,122 Rs. 57,45,866/- Rs. 9,10,961/- Rs. 8,23340/- 2016-17 Rs. 35,69,216/- (-) 4,45,425 Rs, 55,30,226/- Rs. 9,99,677/- Rs. 74,305/-

7.

Ld. CIT(E) held that major source of the receipt is through sale of milk and

manure while major expenditure is on fodder & feed. Financial statements of the

F.Y. 2016-17 reveals that the society has incurred expenditure of Rs. 9,54,619/-

towards purchase of milk which do not corroborate with that of the aims &

object of the society. The major source of receipts has been shown from sale of

milk which clearly point out that the activities are of commercial nature and not

of charity as claimed. The issue of both purchase and sale of milk clearly

establishes that this is an enterprise that predominantly aims at sale/commerce

of/in milk. The activities do not partake the character of 'charitable purpose' as

envisaged in section 2(15) of the Act. It is also clear from the documents on

record that the main objects of the society i.e. taking care of disabled, aged, ill

and hand capped cows have not been pursued. Moreover, there is no

evidence of activities carried out towards fulfilment of other objects of the

society mentioned in the MoA.

8.

He further held that, in the absence of the Dissolution clause, the

presumption of the law is that the assets and liabilities of the society will be

distributed amongst the members of the society in case the society closes its

operations or is disbanded. The provision} of Section 13(l)(c) of the Act are

clearly attracted without this dissolution clause. Lack of dissolution clause is also

in contravention to the necessary conditions laid down by the Society's

Registration Act, 1360.

9.

Giving the above rationale, Ld. CIT(E) held that society cannot be termed

to fall under the category of "charitable purpose" and the application for grant

of registration u/s 12 AA was rejected.

10.

Before us, Ld. DR submitted Aims and Objects of the Trust alongwith details

of the Trustees and office bearers. Copies of the Audit Report under section 12A

(b) in Form 10B alongwith balance sheet and income and expenditure account

have been filed. During the course of hearing in response to the Court query as

to number of cows farming part of Gaushala, Area , Record of Vaccination and

the medicines, the assessee has submitted the details from page no. 1 to 99 of

the Paper Book. These additional evidences since required for adjudication of

the case have been accepted under Rule 29 of ITAT Rules.

11.

Ld. AR has also argued that all the cows in the Ashram are handicapped

cows and not able to produce milk on a commercial basis. The assessee has

also submitted an affidavit from Shri. Baljinder Singh claiming that the milk sold

by the Trust is from the cows maintained by him and the society has only helped

him in selling the milk. However no evidence of receipt of the money by Shri

Baljinder Singh has been submitted.

12.

He relied on the orders in the case of DIT(E) Vs. Sabarmati Ashram

Gaushala Trust in ITA No. 1162 of 2013, DIT(E) Vs. Shree Nashik Panchvati

Panjrapole 397 ITR 501 (Bombay), CIT(E) Vs. Tara Educational & Charitable Trust

in ITA No. 247 of 2015 and CIT-II Vs. Surya Educational & Charitable Trust 355 ITR

280 (P&H). Based on the above evidences it was argued that the exemption

needs to be considered by the Authorities.

13.

Ld. DR on the other hand argued that it was not very clear on the records

and census as to how many animals are crippled and how many were milch

yieldy and argued that physical verification is required to determine the

eligibility under section 12AA.

14.

We have heard Ld. Representatives of both the parties and perused the

material available on record and we find that interest of justice would be met

by sending the file back to the file of the DIT(E) to examine the issue afresh

regarding the dissolution clause, existence of animals, physical verification of

health status and to verify the evidences regarding the purchase and sale of

milk by conducting enquiries as deem fit and to take a decision in accordance

with the provisions of the Income Tax Act,1961, and keeping in view the

established judgments quoted above.

15.

Order pronounced in the open Court.

Sd/- Sd/- �दवा �संह डा. बी.आर.आर. कुमार, (DIVA SINGH) (Dr. B.R.R. KUMAR) �याय�क सद�य/ Judicial Member लेखा सद�य/ Accountant Member AG Date: 25/09/2018

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar

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