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Amul Research and Development Association, C/o Amul Dairy Premises Versus The ITO, Ward-3, Income Tax Office, Anand

2016 (9) TMI 855 - ITAT AHMEDABAD

Exemption claimed u/s. 11(1)(a) denied - activities of milching animals - Held that:- It is an admitted fact that the assessee is not in any way involved in a trade, commerce or business. Nor does it carry out any activity in relation thereto since providing medical, maternity, nursery, fertility and vaccination facilities to bovine milch animals belonging to milk producers in lieu of collecting cess @ 12 paisa per liter of the milk produced. Both the ld. lower authorities are fair enough in not .....

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assessee’s status of a research association u/s. 35(1)(2) of the act. We fail to concur with this line of reasoning as section 35 rejection order denying deduction of expenditure on scientific research stands on a totally different footing as against the impugned exemption proceedings. We make it clear that we are dealing with section 2(15) r.w.s. 11 of the Act wherein the only issue is that of the assessee being engaged in charitable activities in furtherance to its charitable objects followed .....

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The assessee’s activities hereinabove in making available the facilities in question to milching animals are to ensure that they are free from diseases, their breed improvement and overall well being. We apply all the above stated constitutional provisions and case law to conclude that ‘medical relief’ in section 2(15) of the act very much includes the above referred relief made available by the assessee to the milch animals in lieu of a nominal cess @ 12 paise per litre. We reiterate that we a .....

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ee - ITA No. 3032 /Ahd/2013 - Dated:- 18-8-2016 - Shri S. S. Godara, Judicial Member and Shri Manish Borad, Accountant Member For The Revenue : Shri Sanjeev Kumar Dev, Sr. D.R. For The Assessee : Shri Sunil H. Talati, A.R. ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- This assessee s appeal for A.Y. 2010-11, arises from order of the CIT(A)-IV, Baroda dated 24-10-2013 in appeal no. CAB/IV-A- 35/13-14, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The instant .....

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ding that the activities of the appellant is not in the nature of charitable purpose in view of the definition of Section 2(15) of the Income Tax Act. It is submitted that the appellant trust is not at all collecting or receiving any CESS or fee for carrying on any activities in the nature of trade, commerce or business. In view of this, the invocation of section 2(15) and holding that the appellant trust is not entitled to exemption u/s. 11(1)(a) is erroneous and the same be reversed. (3) The L .....

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r section 72 of the Income Tax Act. It is submitted that the appellant is entitled to set off of losses of earlier years duly computed and quantified and the same be allowed in view of the specific treatment given by the Assessing Officer to the appellant trust. (5) The Ld. CIT (A) erred in not appreciating the facts and allowing alternate plea and ground that the appellant charitable trust is mainly doing the activity of medical relief to the animals and therefore, proviso to section 2(15) is n .....

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giene to control and eradicate animal diseases to name a few. There is no dispute about the assessee being engaged in all these activities. 4. The assessee filed its return on 05-10-2010 stating nil income. The Assessing Officer took up scrutiny. He came across assessee s gross receipts of ₹ 9,61,61,612/- including inter alia Sangh contributions of ₹ 3.5 crores, cess of ₹ 6,03,71,593/-, membership fee of ₹ 1,15,800/-, interest of ₹ 17,092/- and other receipts of  .....

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ance Act, 2010 with retrospective effect from 01-04-2009 providing that the advancement of any other object of general public utility would not be charitable purpose, if it involves the carrying owt of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to such trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activities. 5. The .....

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considered the order of the AO as well as the submissions made by the appellant. From the order of the Assessing Officer, it is seen that AO has denied exemption u/s. 11 to the appellant by holding that the objects of the appellant involved activities/services rendered for advancements of other object of general public utilities for which the appellant is receiving cess. He has also relied upon the fact that the appellant has been denied approval u/s. 35(1)(ii) of the IT Act, 1961 stating that .....

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eing carried out by it and has claimed that there is no trade, commerce or any business within the meaning of section 16 is carried 2(15) which is carried out by the appellant. In this regard it is seen that the appellant has itself stated that it has incurred huge expenditure on research on maternity, animal nursery, infertility, vaccination, etc which are the activities for advancements of the objects of general public utilities which includes the benefit or expenditure incurred or activities .....

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ellant has also claimed that its activities do not involve any profit motive and hence it is not carrying on any trade or business. Accordingly, it has claimed that it is not hit by the amended provisions of section 2(15). An alternative plea has also been taken that its activities are in the nature of medical relief to animals and hence are not covered by the amended provisions of section 2(15). 3.3.2 The provisions of section 2(15) as applicable to A.Y. 2009-10 have already been reproduced abo .....

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production and sale of the same which brings profit to large numbers of farmers as well as the Dudh Utpadak Mandalis. In lieu of rendering such services, the appellant is receiving cess from the farmers who are selling their milks. There is 3 tier cooperative structure for production and sale of milk in Gujarat. This structure consists of a Dairy Cooperative Society at the village level affiliated to a Milk Union at the district level, which in turn is federated into a Milk Federation at the st .....

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t level of this structure, are profit oriented. The appellant is providing services to such milk producers and their cattle. As against this the appellant is charging a cess of 12 paisa per litre of milk deposited by the milk producers with Village Dairy Cooperative Society. Thus the appellant's claim that the cess being received by it is not for rendering any service in relation to any trade or business is not correct. This is also supported by the fact that the appellant has also received .....

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order of prescribed authority rejecting the appellant's application for grant of approval u/s. 35(1)(ii) of the Act, it is seen that the authority has clearly mentioned in his order that the appellant is carrying on trade activity. The relevant paragraphs are as follows: "2.3 So far as the nature of research activity is concerned, it is seen that you have entered into confidentiality agreement dated 27.11.2007 with M/s. DSM New Business Development B.V. a private limited company incorp .....

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ed to increase fertility and the overall health condition of dairy animals, which in turn provides economic help to the farmers and knowledge sharing. D. For the purpose set out above, DSM has agreed to supply to the Recipient, know-how for the development of the above mentioned feed program. DSM exclusive products (cattle feed premix) and also equipment (namely, I-Check and I-Ex) and vials for the implementation of the above referred feed program according to said MOU. E. For the purpose set ou .....

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ndian cows for overseas client cannot be termed as scientific research of empirical nature for the purposes of section 35(1)(ii) of the IT Act, 1961. 2.4 You have also entered into agreement with M/s. BIOMIX, Mumbai, a company specializing in the field of pharmaceuticals and diagnostic industries and developing patented diagnostic and therapeutic products and clinical trials, to allow them your cheese plant for production of RECEPTOL and colostrums products for exclusive use by BIOMIC, for the p .....

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ence, it continued to be a charitable trust and could not be denied the legitimate benefit provided u/s. 11 of the IT Act 1961. In this regard it is seen that the registration u/s. 12A & 12AA are pre-requisite for claiming benefit of exemption u/s 11. But even after registration u/s. 12A and 12AA, an assessee has to fulfill the conditions laid down in section 11 & 13 in order to get the exemption u/s. 11. As per section 11(1)(a), income derived from property held under trust fully or cha .....

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or business for a cess or fee or any other consideration, then its purpose will not remain charitable purpose. Another condition is that for the purpose being not held as charitable purpose, the aggregate value of receipts from activity referred in first proviso to section 2(15) should be more than ₹ 25 lakhs in the previous year. Thus for determining that whether the trust has derived income from charitable purposes or not in order to grant exemption u/s. 11, the activities of the trust a .....

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ome of the appellant is accepted, then the provisions of clause (15) of section 2 will be of no relevance. It is a settled principle of interpretation of statute that the interpretation of provisions of an act cannot be made in such a way that a particular provision becomes redundant. The harmonious construction of the previous of the Act are required to be made so that affect can be given to all such provisions of the Act. Hence, the appellant's contention are rejected. Reliance is also pla .....

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of the appellant is that it is doing activity of medical relief. The objects of the appellant have been reproduced by the AO in his assessment order. From this it can be seen that the objects of the appellant are multi faceted. The first object of the appellant is to carry research, development and extension work conductive to the economic development of agriculturist and to provide an organization for the benefit and service to the farmers and further to implement programs to improve the produ .....

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activities for the benefits of the farmers. The object to undertake research and run veterinary hospitals, laboratory services, medicines and veterinary help to cattle etc. are only one of the 17 objects of the appellant trust. Hence, the objects of the appellant can be called only as advancements of any other objects of general public utility and not as providing medical relief. Hence, this contention of the appellant is also rejected. 7. We have heard both the parties reiterating their respec .....

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nce providing medical, maternity, nursery, fertility and vaccination facilities to bovine milch animals belonging to milk producers in lieu of collecting cess @ 12 paisa per liter of the milk produced. Both the ld. lower authorities are fair enough in not disputing genuineness of all these research and development activities. Its objects forming part of the lower appellate order pages 7 to 9 along with the receipts in question do not indicate any trading, commercial or business activity element. .....

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the impugned exemption proceedings. We make it clear that we are dealing with section 2(15) r.w.s. 11 of the Act wherein the only issue is that of the assessee being engaged in charitable activities in furtherance to its charitable objects followed by application of income in furtherance thereto. We accordingly are of the opinion that both the lower authorities have wrongly rejected assessee s exemption claim by invoking section 2(15) proviso of the act, since it neither carries out any activity .....

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1st proviso in question before denying such an exemption. We accordingly accept assessee s arguments on the main issue. 8. We now proceed to adjudicate an equally important question as to whether the assessee s action in making available its medical facilities admittedly in the nature of providing maternity, animal nursery, fertility, vaccination to milch animals belonging to milk producers in lieu of cess collection @ 12 paisa per liter deserves to be treated under the specific category of med .....

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application in case of humans only. 9. We have applied our thoughtful consideration to rival contentions. There can hardly be any second thought that the legislature intends to promote all charitable purposes enumerated u/s. 2(15) of the Act. We put up a very specific query as to whether it has ever issued any memorandum of expression on this interpretation issue. Learned representatives reply in negative. We deem it appropriate in this backdrop of facts to proceed on adjudication of the issue .....

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t, but the principles therein are nevertheless fundamental in the governance of the country and it shall be duty of the State to apply these principles while making laws. This is followed by Articles 48 and 48A. Former one enjoins an obligation on the State for making endeavour to organize agricultural and animal husbandry on modern and scientific lines and shall, in particular, take steps for preserving and improving the breeds and prohibiting the slaughter of cows and calves and other milch an .....

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arely comes within the four corners of the article 48 of the act amounting to taking steps for preserving and improving the breeds of cows and calves and other milching animals. This Act gives rise to a safe inference that the State makes all its laws keeping in mind these Directive Principles contained in Chapter IV hereinabove including those under Article 265. We further notice that similar provisions are also there in chapter IV(A) incorporating fundamental duties of every Indian citizen Art .....

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India in a recent judgment Animal Welfare Board of India vs. A. Nagaraja and others Civil Appeal no. 5387/2014 decided on 07-05-2014 known as the famous Jalli Kattu ban case. Their lordships take into account all corresponding provisions in the Constitution of India, Prevention of Cruelty on Animals Act, various guidelines of World Health Organization of animal health (of which India is a member) recognizing five freedoms for animals such as freedom for hunger, thrust and mal-nutrition, freedom .....

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Constitution, while safeguarding the rights of humans, protects life and the word "life" has been given an expanded definition and any disturbance from the basic environment which includes all forms of life, including animal life, which are necessary for human life, fall within the meaning of Article 21 of the Constitution. So far as animals are concerned, in our view, "life" means something more than mere survival or existence or instrumental value for human-beings, but to l .....

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