Tuesday, June 10, 2014

Holy Cow! No revocation of registration of trust working for welfare of cows if it made profit from sale of milk

Where assessee-trust was established for purpose of cow breeding and protection of cows and oxen, incidental income earned by it from sale of milk could not be regarded as carrying on activity of trade or commerce within meaning of proviso to section 2(15).


a)The assessee-trust was established for cow breeding, protection of cows and oxen. It got registration under section 12AA.

b)The DIT(E) found that income of assessee from sale of milk was far in excess of prescribed limit under proviso to section 2(15).

c)He, thus, opined that assessee was doing regular activities which were in the nature of business by way of sale of milk and was directly hit by the proviso to section 2(15). He, accordingly, cancelled the registration of trust. The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)The dominant purpose of the trust was to provide asylum for old, sick, weak, disabled and stray animals and birds, more particularly cows and other cattle and to bring about improvement in breeding of cattle for the beneficial promotion, upkeep, maintenance and propagation of cows.

2)It could not be denied that milk needs to be procured from cows, otherwise it will be detrimental if the milk is not procured from time-to-time. The milk so procured was distributed free of charge to children, hospitals, schools, etc., and, thereafter, the remaining milk was distributed to public at large at a very nominal rate. This activity could not be deemed as business, trade or commerce.

3)The assessee-trust was engaged in multifarious activities of diverse nature but the primary and the dominant activity was “panjrapole”. This predominant object had been held as charitable purpose by the Gujarat High Court in case of CIT v. Swastik Textile Trading Co. (P.) Ltd. [1978] 113 ITR 852 (Guj.)

4)The assessee-trust would not loose its character of charitable purpose merely because some profits arose from the activity of the sale of milk. Such activity could not be carried on in such a manner that it would not result in any profit.

5)There was no material available on record, which could suggest that the assessee-trust was conducting its affairs solely on commercial lines with a motive to earn profit only. The proviso to section 2(15) was not applicable to the instant case and the assessee deserved continuance of registration under section 12AA. Accordingly, the order of the DIT(E) was to be set aside.- SHREE NASHIK PANCHVATI PANJARPOLE V. DIT (E) [2014] 45 taxmann.com 220 (Mumbai - Trib.)