2013 (9) TMI 121 - AT - Income Tax

Goshala activities deemed charitable; Tribunal overturns tax authority's refusal.

Sri Gomandir Seva Trust Versus Commissioner of Income-tax

The Tribunal allowed the appeal of the assessee, setting aside the Commissioner of Income-tax's refusal to grant registration under section 12AA. The ... Charitable purpose u/s 2(15) - livestock - whether livestock does not come under the definition of charitable purpose. - refusal to grant registration u/s 12AA - Violation u/s 11 - Commissioner of Income-tax considered the application under the provisions of section 2(15) - when he sought to correlate the income generated whether was from business activities or from charitable activities and came to conclude that maintenance of livestock does not come under the definition of 'charitable purpose' and also does not come within the meaning of any other objectives of general public utility as regular business of selling of milk for maintenance of 'goshala' is being carried on by the assessee-trust, and holding so he again denied to give registration to the assessee under section 12A Held that:- charitable activities may have bent up profit making activities but is incidental to the activities carried out in so far as it has also been held that a cow renders income to the trust which Goshala is maintained by the trust. It is immaterial that the trust has been formed on the basis of transferring of the assets of the proprietorship concern which as per the trust deed has been given free of cost to the trust as part of the charity by the trustees themselves. A corpus therefore was formed on the basis of the assets rendered to the trust by the sole proprietorship which has to be assessed in accordance with the provisions of the Income-tax Act by the Assessing Officer and in no way interfered with the granting of registration to the assessee-trust by the learned Commissioner of Income-tax. Even the learned Departmental representative has not been able to establish that a violation of section 11, which was not the issue for consideration by the learned Commissioner of Income-tax for granting registration under section 12AA has been made. - registration u/s 12AA to be allowed - decided in favor of assessee. Issues Involved:1. Whether the activities of the goshala are charitable in nature.2. Whether the Commissioner of Income-tax was justified in refusing to grant registration under section 12A despite the Tribunal's direction.3. Whether the Commissioner of Income-tax's observations about the activities being for income generation were valid.4. Whether the Commissioner of Income-tax's refusal to grant registration was based on suspicion and surmises.5. Applicability of the case law cited by the Commissioner of Income-tax.Issue-wise Detailed Analysis:1. Charitable Nature of Goshala Activities:The Tribunal had previously directed the Commissioner of Income-tax to grant registration under section 12A, recognizing the maintenance of a goshala as a charitable activity. The Tribunal referenced the 'Orissa Goshala Act, 1961,' which defines a goshala as a charitable institution established for the purpose of keeping, breeding, rearing, and maintaining cattle. The Tribunal reiterated that selling milk, gobar, khatta, and manure are incidental to the objective of maintaining the goshala and are part of charitable activities, citing the case of Shri Haridevji Gaushala Trust v. CIT [2008] 24 SOT 14 (Agra).2. Justification of Refusal to Grant Registration:The Tribunal noted that the Commissioner of Income-tax's refusal to grant registration under section 12A was in utter disobedience of the Tribunal's earlier order. The Tribunal emphasized that the Commissioner's role at the stage of granting exemption under section 12A is limited to examining the genuineness of the activities and the object of the trust. The Tribunal found no dispute regarding the genuineness of the goshala's activities, thus the Commissioner was not justified in refusing registration.3. Observations on Income Generation Activities:The Tribunal found that the Commissioner of Income-tax's observation that the activities were only for generating income was not supported by any material evidence. The Tribunal highlighted that the maintenance of the goshala and livestock itself is a charitable activity within the meaning of section 2(15) of the Income-tax Act, 1961. The Tribunal also referenced the hon'ble Gujarat High Court's decision in CIT v. Swastik Textile Trading Co. P. Ltd. [1978] 113 ITR 852 (Guj), which held that setting up pinjrapoles and goshala are highly charitable purposes.4. Refusal Based on Suspicion and Surmises:The Tribunal criticized the Commissioner of Income-tax for basing his refusal on mere suspicion and surmises. It reiterated the settled law that suspicion, however strong, cannot take the place of evidence or proof. The Tribunal found the Commissioner's observations unjustified and lacking a factual basis.5. Applicability of Case Law Cited by the Commissioner:The Tribunal found that the case law cited by the Commissioner, Hiralal Bhagwati v. CIT [2000] 246 ITR 188 (Guj), was not applicable to the facts and circumstances of the appellant's case. Instead, the Tribunal found that the case supported the appellant's position.Conclusion:The Tribunal set aside the impugned order of the Commissioner of Income-tax and directed the Commissioner to grant registration under section 12AA as applied for by the assessee. The Tribunal emphasized that the activities of maintaining a goshala are charitable in nature, and the Commissioner's refusal to grant registration was not justified.In the result, the appeal of the assessee is allowed.