TMI Blog2017 (3) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... tify) would normally be a sine qua non for the activity to be considered as trade, commerce or business. Therefore, in the present facts, it is not as though the keeping of the cows and milking them was with a view to carry out activity in the nature of trade, commerce or business to earn profits. The Revenue has not shown how even in the absence of profit motive, the activity of obtaining milk and selling the same would still be an activity of trade, commerce or business. In the alternative, Mr. Malhotra submitted that the proviso to Section 2(15) of the Act would apply even if it is not trade, commerce or business but only in its nature. However, how and why the activity of selling milk obtained incidentally while taking care of the cows, is in the nature of trade, business or commerce is not shown. Admittedly, in the present facts, the dominant activity carried out by the respondent assessee's Trust for over 130 years is to take care of old, sick and disabled cows. In these circumstances, an incidental activity of selling milk which may result in receipt of money, by itself would not make it trade, commerce or business nor an activity in the nature of trade, commerce or busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing any service in relation to any trade, commerce or business, for a cess or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lac rupees or less in the previous year . Therefore, in view of the newly added proviso, charitable purpose would not include advancement of any other object of general purpose utility, if it involves carrying out activities in the nature of trade, commerce or business, with receipts in excess of ₹ 10 lakhs. 5. In view of the above amendment, the Director of Income Tax (Exemption) issued a showcause notice on 3rd November, 2011 calling upon the respondent assessee to showcause as to why its registration under Section 12A of the Act should not be withdrawn under Section 12AA(3) of the Act. The basis of the above notice was that the income and expenditure account of the respondent assessee, revealed income on account of sale of milk at ₹ 1.57 crores and income from interest and dividend at ₹ 58.34 lakhs. Thus, indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been brought on record to suggest that the respondent Trust conducted its affairs solely on commercial basis. 9. The impugned order after recording the above facts inter alia placed reliance on a decision of the Tribunal in the case of Sabarmati Ashram Gaushala Trust Vs. ADIT (Exem) 25 ITR 701 on an identical facts situation wherein it has been held that the activities of selling milk by a Panjrapole will not by itself make the newly added proviso to Section 2(15) of the Act applicable. Further, reliance was also placed in the impugned order upon the decision of the Delhi High Court in ICAI Vs. Director General of Income Tax (Exemption) 347 ITR 99 to hold that the activities of selling milk by the respondent assessee would be incidental in running a Panjrapole in view of the proviso to Section 2(15) of the Act. Thus, the appeal of the respondent assessee was allowed. 10. The basic grievance of Mr. Malhotra, learned Counsel appearing for the Revenue is that as the respondent had receipts of ₹ 1.57 crores on account of sale of milk, it would cease to be an Institution for charitable purposes as the proviso to Section 2(15) of the Act would be applicable. Therefore, accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If it is the former, the purpose would not be a charitable purpose, but, if it is the latter, the charitable character of the purpose would not be lost. Thus, the test is dominant activity. 12. In support of his submission that large percentage of milk is sold at market price, Mr. Malhotra sought to rely upon order dated 26th December, 2011 passed by the Assessing Officer and order dated 1st March, 2013 passed by the Commissioner of Income Tax (Appeals) [CIT(A)] in regular assessment proceedings, denying the benefit of Section 11 of the Act for the Assessment Year 2009-10. This for the reason that it is only in the order of the CIT(A), is it recorded that the milk is sold at market rate. This on the ground that the Tribunal had heard both the appeals i.e. one emanating from Section 12AA(3) of the Act (present Appeal) and the other arising from an order under Section 143(3) of the Act for A.Y. 2009-10, denying exemption under Section 11 of the Act were heard together and disposed of by one order. We did not permit him to refer to the record as found in the other appeal (arising from Section 143(3) of the Act) so as to decide the present appeal which emanates from the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order withdrawing the registration. 14. We may at this stage, also usefully refer to the decision of Punjab and Haryana High Court in the case of Commissioner of Income Tax Vs. Jagadhri Electric Supply and Industrial Co. 140 ITR 490 when in an appeal from the order of the Commissioner under Section 263 of the Act to Tribunal, the Revenue sought to rely upon orders passed by the Assessing Officer and the CIT(A) to support it. The Court held it is not permissible. The Court observed permitting this would in effect amount to allowing sharing of the exclusive jurisdiction vested in the Commissioner under Section 263 of the Act with the Assessing Officer who passed the order in assessment proceedings. The appeal has to be decided only on the grounds on the basis of which the Commissioner of Income Tax exercised his powers of revision under Section 263 of the Act. In the present facts also, the appeal from the order dated 12th December, 2011 of the Director of Income Tax (Exemption) should be decided only on the grounds mentioned in the impugned order for cancellation of registration and no other grounds / evidence not considered by the Director of Income Tax (supra) can be looked int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) was appealed to before the Hon'ble Gujarat High Court being Tax Appeal No.1162 of 2013. The question posed for consideration was whether the proviso to Section 2(15) of the Act would be applicable in case of the Sabarmati Ashram Gaushala Trust (supra) as it was selling milk which generated considerable revenue. This in the context of exemption under Section 11 of the Act. The Gujarat High Court disposed / dismissed on 15th January, 2014 after considering the statutory provisions, the speech of Finance Minister while introducing the proviso and the CBDT Circular issued in the context of newly added proviso to Section 2(15) of the Act, observing as under : It is not aimed at excluding the genuine charitable trusts of general public utility but is aimed at excluding activities in the nature of trade, commerce or business which are marked as charitable purpose . Many activities of genuine charitable purposes which are not in the nature of trade, commerce or business may still generate marketable products. After setting off of the cost, for production of such marketable products from the sale consideration, the activity may leave a surplus. The law does not expect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce and material to show that the activity has continued on sound and recognized business principles, and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. The test as prescribed in Raipur Manufacturing Company (1967) 19 STC 1 (SC) and Sai Publication Fund (2002) 258 ITR 70 (SC); (2002) 126 STC 288 (SC) can be applied. The six indicia stipulated in Lord Fisher (1981) STC 238 (sic) are also relevant. Each case, therefore, has to be examined on its own facts. (emphasis supplied) 17. We find ourselves in complete agreement with the reasoning set out by the Gujarat High Court in its order dated 15th January, 2014 in Income Tax Appeal No.1162 of 2013 (supra). Although the same was rendered in the context of exemption being denied under Section 11 of the Act and it was not a case of withdrawal of registration. Nevertheless, the reasoning therein would be equally applicable to the present facts as it considered the applicability of the proviso to Section 2(15) of the Act as arising in this case. One more fact that may be noted is that Mr. Malhotra sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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