The Commissioner Of Income Tax (Exemptions), Chandigarh v. M/S Shri Panchayati Gaushala Society

ITA No. 54 of 2019} 1] IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No. 54 of 2019Date of decision: 20.1.2020 The Commissioner of Income Tax (Exemptions), Chandigarh.. Appellant V. M/s Shri Panchayati Gaushala Society .. Respondent CORAM:HON'BLE MR. JUSTICE AJAY TEWARIHON'BLE MR. JUSTICE AVNEESH JHINGAN Present: |Mr. Denesh Goyal, Senior Standing Counsel for the appellant. AVNEESH JHINGAN, J. The revenue has filed this appeal against the order dated9.4.2018 passed by the Income Tax Appellate Tribunal, New Delhi (forShort, ‘the Tribunal’). The appeal of the respondent-society (hereinafterreferred to as ‘the society’) was allowed and Commissioner of Income Tax(Exemptions) (for short, ‘the CIT") was directed to grant approval to therespondent-society under Section 80G of the Income Tax Act, 1961 (forShort, ‘the Act’). Following substantial questions of law have been claimed: “(1) Whether on the facts and circumstances of the case, theHon'ble ITAT was correct in disregarding the fact that themain emphasis of the applicant society was generating theincome and accumulating surpluses in shape of FDRs? (ii) Whether on the facts and circumstances of the case, the ITA No. 54 of 2019|2] Hon'ble ITAT was correct in disregarding the fact that themajor emphasis of the society appeared to beaccumulation of asset in the form of FDRs and earninginterest on the same rather than utilization the same forexpansion?major emphasis of the society appeared to beaccumulation of asset in the form of FDRs and earninginterest on the same rather than utilization the same forexpansion? (111) Whether on the facts and circumstances of the case and inlaw, the Hon'ble ITAT was correct ignoring the fact thatthe society diverted from its objects and got involved incommercial activity?law, the Hon'ble ITAT was correct ignoring the fact thatthe society diverted from its objects and got involved incommercial activity? (iv) Whether on the facts and circumstances of the case theITAT has erred in placing reliance on the fact of theassessee having 12AA registration and by ignoring theStatutory condition that 12AA registration is merely a pre-condition for entities to be eligible for approvalu/s 80G(5) and that the procedure involves examination ofthe real purpose as laid down by the Hon'ble Delhi HighCourt in the case of M/s Kirti Chand Tarawati CharitableTrust vs. Director of Income Tax (Exemption) and others.1(1999) 152 CTR (Delhi 322]?ITAT has erred in placing reliance on the fact of theassessee having 12AA registration and by ignoring theStatutory condition that 12AA registration is merely a pre-condition for entities to be eligible for approvalu/s 80G(5) and that the procedure involves examination ofthe real purpose as laid down by the Hon'ble Delhi HighCourt in the case of M/s Kirti Chand Tarawati CharitableTrust vs. Director of Income Tax (Exemption) and others.1(1999) 152 CTR (Delhi 322]? (v) Whether on the facts and circumstances of the case, theorder of the Appellate Tribunal is contrary to the evidenceand material on the record of the case and therefore,3&%4&%'&AGorder of the Appellate Tribunal is contrary to the evidenceand material on the record of the case and therefore,3&%4&%'&AG Relevant facts are that the society was established on16.5.1956 with the following aims and objects: “2...... Keep and protect useless and old cows and cattle; to ITA No. 54 of 2019}3] keep and maintain milk cows and useful bulls; to purchasecows and bulls in order to augment the Income of Gaushalato meet the expenses and make the Gaushala sustainable; toprotect the breed of cattle; to sell the surplus milk if any(after feeding calves) in order to meet day to day expenses;to make arrangements for fodder and shelters tor keepingthe cattle and accordingly make arrangements for purchase;to make arrangements for cultivation for agricultural landsavailable with Gaushala to collect funds for the aboveobjects, and to control/supervise investment andexpenditure.” Relevant facts are that the society was established on16.5.1956 with the following aims and objects: “2...... Keep and protect useless and old cows and cattle; to ITA No. 54 of 2019}3] keep and maintain milk cows and useful bulls; to purchasecows and bulls in order to augment the Income of Gaushalato meet the expenses and make the Gaushala sustainable; toprotect the breed of cattle; to sell the surplus milk if any(after feeding calves) in order to meet day to day expenses;to make arrangements for fodder and shelters tor keepingthe cattle and accordingly make arrangements for purchase;to make arrangements for cultivation for agricultural landsavailable with Gaushala to collect funds for the aboveobjects, and to control/supervise investment andexpenditure.” The society is duly registered under Section 12AA of the Act.An application was made on 16.12.2016 for approval under Section 80G ofthe Act. The CIT rejected the same vide order dated 29.6.2017 mainly onthe ground that the society was generating certain income and as a result,the amount of FDRs was being enhanced over the year. The conclusion wasthat the society had diverted from the object of serving old, ill and lamecows and got involved in commercial activities. In an appeal preferred by the society, the Tribunal on 9.4.2018allowed the appeal holding that there was nothing on record to substantiatethat the funds were utilised by the society elsewhere and not for its aims andobjects. It was also considered that registration under Section 12AA of theAct was continuing. The order of the CIT was set aside and it was directedto grant registration under Section 80G of the Act. Aggrieved of the order of the Tribunal, the present appeal is ITA No. 54 of 2019|4] Learned counsel for the revenue argued that the Tribunal erredin allowing the appeal, inspite of the fact that there was substantial amountin the FDRs of the society and it was involved in commercial activities. Thechallenge posed is that the Tribunal erred in holding that registration undersection 12AA of the Act was itself enough for approval under Section 80Got the Act. Section 12AA(1) and Section 80G(5)(v1) of the Act (for therelevant assessment year) read as under:- “1T2ZAA. Procedure for registrati——(1) The PrincipalCommissioner or Commissioner, on receipt of an applicationfor registration of a trust or institution made under clause (a)or clause (aa) [or clause (ab)] of sub-section (1)] of section12A, shall— (a) call for such documents or information from the trust orinstitution as he thinks necessary in order to satisfy himselfabout the genuineness of activities of the trust or institutionand may also make such inquiries as he may deem necessaryin this behalf; and (b) after satisfying himself about the objects of the trust orinstitution and the genuineness of its activities, he;—_ (i) shall pass an order in writing registering the trust orinstitution; (11) Shall, if he is not so satistied, pass an order in writingrefusing to register the trust or institution, and a copy ofsuch order shall be sent to the applicant: Section 80G(5)(v1) : Deduction 1n respect of donations to ITA No. 54 of 2019}>] certain funds, charitable institutions, etc.In computingthe total income of an assessee, there shall be deducted, inaccordance with and subject to the provisions of thisSection:- xX xX xX xX x X (5) This Section applies to donations to any institution orfund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitablepurpose and if it fulfills the following conditions, namely : XX XX XX| (vi) in relation to donations made after the 31st day of March1992, the institution or fund is for the time being approvedby the Commissioner in accordance with the rules “made inthis behalf.” Section 80G(5)(v1) : Deduction 1n respect of donations to ITA No. 54 of 2019}>] certain funds, charitable institutions, etc.In computingthe total income of an assessee, there shall be deducted, inaccordance with and subject to the provisions of thisSection:- xX xX xX xX x X (5) This Section applies to donations to any institution orfund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitablepurpose and if it fulfills the following conditions, namely : XX XX XX| (vi) in relation to donations made after the 31st day of March1992, the institution or fund is for the time being approvedby the Commissioner in accordance with the rules “made inthis behalf.” section 12A of the Act provides conditions for applicability ofsections 11 and 12 of the Act. Section 12ZAA of the Act provides foprocedure of registration for availing the benefits under Section 12A of theAct. Under Section 12AA(1)(a) of the Act the Principal Commissioner orthe Commissioner in order to satisfy himself about the genuineness of theactivities of the trust or institution can call for such document orinformation as he deems necessary. If satisfied about genuineness of object,he passes the order registering the trust or institution, otherwise rejects theapplication. Under Section 80G of the Act recognition is given to trust orinstitution for the purpose that assessee giving donations to such institutionbecomes entitled to claim deduction of the amount donated. Sub-section 5 ITA No. 54 of 2019160] of Section 80G of the Act stipulates the conditions for application ofsection 80G of the Act to the donations made to any institution or fundreferred to in sub clause (iv) of Clause (a) of Sub Section (2). The contentions raised by the appellant-revenue lack merit,From the averment of the society before the CIT, it was evident that out oftotal 350 cows, only 20-30 cows were milking. The doubt raised by the CITwas as to how 20-30 cows could produce milk worth416,54,634/-. The saiddoubt was baseless as the CIT was swayed by the figure. If the figure isroughly worked out to the daily amount and if an average price per litremilk is taken as.=40/-, the production would come to 114 litres of milk aday. The objection that the amount in FDRs had enhanced will notenhance the case of the revenue. There is not even an iota of evidence toestablish that the amount was not being utilised for the aims and objects ofthe society but for some other purpose. The amount only gives a protectionto the society for daily needs, if the occasion so arises that there is scarcityof funds as the society has almost 350 cows to take care and to feed. Itcannot be ruled out that such a cushion may be required considering thenature of the work done by the society.The contention that the society had diverted itself intocommercial activities is belied from the ratio of milking and non-milkingcows. Out of 350 cows, only 20 to 30 cows were milk yielding. The ratiowould be 32:3. The said ratio is a pointer against the plea of revenue. Therecannot be any objection if a society while achieving its aims and objects isable to generate some funds so that its daily expenses can be met of its own. There is no quibble on the proposition that registration under ITA No. 54 of 2019|/] section 12AA of the Act itself would not be enough for approval undersection 80G of the Act. The Tribunal has only considered that aims andobjects of the society have been found genuine while granting registrationunder Section 12AA of the Act and for granting approval under Section80G of the Act, the reasons have been recorded and the denial of approvalnot sustained. Learned counsel for the revenue has neither been able toshow that the view taken by the Tribunal is erroneous nor any material onrecord is shown to hold that the order of the Tribunal is legallyunsustainable| No substantial question of law arises.The appeal is dismissed. (AVNEESH JHINGAN)(AJAY TEWARI)JUDGE JUDGE 20.1 20208HWhether speaking/reasoned:Yes/NoWhether reportable:Yes/No