Trust not hit by proviso to sec. 2(15) due to selling cow's milk if main object of trust was to take care of cows

DIT (Exemptions) v. Shree Nashik Panchvati Panjrapole [2017] 81 taxmann.com 375 (Bombay)

Facts:

a) The object of assessee-trust was to run, inter alia, a Panjrapole, i.e., protection of cow and oxen. It also used to sell mil procured from the cows to the general public at nominal rate.

b) DIT (E) cancelled assessee-trust's registration by invoking section 12AA(3) on the ground that its income by way of sale of milk, interest and dividend was in excess of Rs. 10 lakhs and, therefore, would casese to be a charitable trust.

c) The Tribunal held that the activity of selling milk by a Panjarapole would not by itself make the proviso to section 2(15) applicable. Further, it held that selling milk would be incidental in running a Panjarapole.

d) Aggrieved-revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under:-

1. The dominant function of the Trust was to provide an asylum to old, maimed, sick and stray cows. Further, only 25 per cent of the cows being looked after yielded milk and if the milk was not procured, it could be detrimental to the health of the cows. Therefore, the milk obtained and sold by the trust was an activity incidental to its primary/principal activity.

2. In the instant case, the activity of milking the cows and selling the milk was almost binding on the trust, in the process of giving asylum to the cows. The activity to be considered in the nature of trade, commerce or business would in most cases have to be carried out on a regular basis with a view to earn the profit.

3. The presence of the profit intent would normally be a sine qua non for the activity to be considered as trade, commerce or business. Therefore, in the present facts, it was not as though the keeping of the cows and milking them was with a view to carry out an activity in the nature of trade, commerce or business to earn profits.

4. Admittedly, the dominant activity carried out by the trust was to take care of old, sick and disabled cows. In these circumstances, an incidental activity of selling milk which might have resulted in receipt of money, by itself would not make it trade, commerce or business nor an activity in the nature of trade, commerce or business to be hit by the proviso to section 2(15) - [2017] 81 taxmann.com 375 (Bombay)