Income Tax Appellate Tribunal - Ahmedabad
Sabarmati Ashram Gaushala Trust, ... vs Assessee on 26 December, 2012
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ ''B'', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD,
"B" BENCH
सव[ौी ौी जी.
जी.सी.
सी.गुƯा,ा माननीय उपाÚय¢,
उपाÚय¢, एवं अिनल चतुवद
ȶ ȣ,
ȣ, लेखा सदःय के सम¢ ।
BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND
ANIL CHATURVEDI, ACCOUNTANT MEMBER)
ITA No.670/Ahd/2013
[Asstt.Year : 2009-2010]
Sabarmati Ashram Gaushala बनाम/Vs. ADIT (Exemption)
Trust Nagture View Building
Nr. Gandhi Ashram Ashram Road
Ashram Road, Ahmedabad Ahmedabad.
Pin : 380 027.
PAN : AAAJS 0266 L
(अपीलाथȸ / Appellant) (ू×यथȸ / Respondent)
िनधा[ǐरती कȧ ओर से/ :
Assessee by Shri Sanjay R. Shah
राजःव कȧ ओर से/ :
Revenue by Shri Alok Johri, CIT-DR
सुनवाई कȧ तारȣख/ :
Date of Hearing 10th May, 2013
घोषणा कȧ तारȣख/ :
Date of Pronouncement 07/06/2013
आदे श / O R D E R
PER G.C. GUPTA, VICE-PRESIDENT: This appeal by the
assessee for the assessment year 2009-2010, is directed against
the order of the CIT(A)-XXI, Ahmedabad dated 26.12.2012.
2. The grounds of the appeal of the assessee are as under:
"1. The order passed by the learned CIT(A) is erroneous and
contrary to the provisions of law and facts and therefore
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requires to be quashed. It is submitted that it be so held now.
2. The learned CIT(A) has erred in law and on facts by
holding that the object of the appellant trust is 'any other object
of general public utility•' and accordingly covered by proviso to
Section 2(15) of the Act, he has accordingly denied benefit of
Section II of the Act. The appellant submits that its object is
'relief to the poor' and accordingly proviso to Section 2(15) is
not applicable to its case. It is therefore entitled to benefit
tinder Section II or the Act. It is submitted that it be so held
now.
3. The learned CIT(A) has erred on facts by holding that the
activities of the appellant trust are commercial in nature. It is
submitted that the activities of the trust are in the nature of
'relief to the poor' and are carried on, on non-commercial
principles. It is submitted it he so held now.
4. The learned CIT(A) has erred in not directing the AO to
exclude capital grants of Rs.1,08,60,086/- from total income
when capital expenditure was not allowed since benefit of
section 11 has been denied.
5. The learned CIT(A) has erred in not directing the AO to
grant depreciation as per the Act on capital expenditure of
Rs.1,66,30,885 incurred during the year under consideration
when deduction of such expenditure was not granted in view of
denial of benefit under section 11 of the Act.
6. The learned CIT(A) has erred in not appreciating the tact
that the appellant is a trust created before commencement of
Income Tax Act. 1961 to whom the provisions of Section
11(1)(b) are applicable and accordingly its income derived
from property held under trust for the purpose for which trust
has been created would not be included in the total income of
trust. It is submitted that it be so held now."
3. The learned counsel for the assessee submitted that the AO
and the CIT(A) have erred in denying the benefit of section 11 of
the Act to the assessee-trust. He submitted that objects of the
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assessee-trust were "relief to the poor", and accordingly the
proviso to section 2(15) of the Act has been wrongly applied to
the case of the assessee. He submitted that department has
wrongly held that the activities of the assessee-trust were
commercial in nature. In fact the activities of the trust were
carried out on non-commercial principle. He submitted that the
section 2(15) of the Act was inserted by the Finance Act, 2008
w.e.f. 1.4.2009, and was applicable for the relevant assessment
year 2009-2010. However, a plain reading of provision of
section 2(15) read with its proviso makes it clear that the proviso
shall be applicable only when the activities of the assessee are
run on commercial lines with a motive to make profit, and not in
a case where the activities are conducted on non-commercial line,
and the profit received by the trust was merely incidental in
nature. He referred to the objects of the assessee-trust and
submitted that it has been registered by the Charity
Commissioner, as well as under Section 12A of the I.T.Act. He
referred to page no.1 of the trust-deed wherein it is mentioned
that after returning from South Africa to India in the year 1915,
Mahatma Gandhi acquired some of the land in Ranip and Wadaj
villages of Taluka Daskroi, District Ahmedabad and established
an institution named "Satyagrah Ashram" and started Gaushala
as one of the part of his constructive activities, and that, the said
Gaushala was run separately as an independent institution and
the eminent personalities of the country were named as its
trustees from time to time, including that of Shri G.V.Mavlankar.
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The objects of the said trust were to breed the cattle and
endeavour to improve the quality of the cows and oxen in view of
the need of good oxen as India is prominent agricultural country
and the cow milk as food is both conducive to and requisite for
good health and longevity of human life, and likewise, other
objects. He referred to the order of the Joint Commissioner of
Sales-Tax (Legal), Gujarat State, Ahmedabad wherein the
assessee-trust was not considered as "trader" for the sales-tax
purpose, and it was specifically mentioned that the activities are
also not business like but are allied activities to meet the
objectives of the Trust. This order of the Joint Commissioner of
Sales-Tax (Legal) has been filed as additional evidence before
the Tribunal. He submitted that the issue is covered in favour of
the assessee with the decisions of the Hon'ble Delhi High Court
in the case of Institute of Chartered Accountants of India Vs.
DGIT, 13 Taxmann.com 175 dated 19-9-2011 and the case of
ICAI Accounting Research Foundation Vs. DIT(Exemption), 183
Taxmann 462, and that of ITAT, Chandigarh in the case of
Himachal Pradesh Environment Protection and Pollution Control
Board Vs. CIT, 42 SOT 343 and decision of the ITAT, Nagpur in
the case of Sevagram Ashram Pratishthan Vs. CIT, 129 TTJ 506.
He also referred to the article on the effect of proviso to section
2(15) of Shri V.P.Gupta, Advocate in 23 Taxman.com 421
(Article). The learned counsel for the assessee further submitted
that the assessee has interest income on investment amounting to
Rs.26,15,060/-, and if the same is excluded from the income side,
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there shall be excess of expenditure over the income for the
relevant year ending on 31-3-2009. He referred to the income
and expenditure of the assessee trust of the relevant accounting
year filed in the paper book before the Tribunal.
4. The learned CIT-DR has opposed the submissions of the
learned counsel of the assessee. He submitted that the language
of proviso to section 2(15) is very clear and that it has been
provided that "the advancement of any other object of general
public utility shall not be a charitable purpose, if it involves the
carrying on of any activity in the nature of trade, commerce or
business...." He submitted that the order of the Joint
Commissioner of Sales-Tax (Legal) has no relevance to the issue
before the Tribunal, as there are different parameters in the Sales
tax Act for levy of sales-tax. The assessee was selling cattle
semen, fodder, milk etc. at a profit over the years. He submitted
that the assessee-trust has a price mechanism, and therefore this
is a case where the assessee is carrying on activities in the nature
of trade, commerce or business, and therefore directly hit by the
proviso of section 2(15) of the Act. He relied on the order of the
AO and the CIT(A).
5. We have considered rival submissions and perused the
orders of the AO and the CIT(A), and also copies of various
documents filed in the compilation by the assessee. We have also
perused the contents of trust-deed of the assessee-trust filed in the
compilation before the Tribunal. We find that the proviso to
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section 2(15) of the Act was inserted by the Finance Act, 2008
w.e.f 1.4.2009, and therefore is applicable to the relevant
assessment year 2009-2010 in appeal before us. The only issue
before us for adjudication is that whether the proviso to section
2(15) is applicable to the facts of the case of the assessee for the
relevant assessment year 2009-2010. The proviso provides that
the advancement of any other object of general public utility shall
not be a charitable purpose, if it involves the carrying on of any
activity in the nature of trade, commerce or business, or any
activity of rendering any service in relation to any 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 activity. The second proviso
to section 2(15) provides that aforesaid first proviso shall not
apply if the aggregate value of the receipts from the activities
referred to therein is Rs.10 lakhs (Rs.25 lakhs from 1.4.2012) or
less in the previous year. We find that whether a charitable trust
is carrying an activity in the nature of trade, commerce or
business is question of fact, which will be decided based on the
nature, scope, extent and frequency of the activity, and also after
considering overall facts and circumstances of the case in its
entirety. The proviso is applicable only in relation to last limb of
the definition of charitable purpose i.e. "advancement of any
other object of general public utility" which means the activities
which promote the welfare of the general public and not the
individual interest of some person or persons or private profit and
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private gain. To understand the true meaning of proviso to
section 2(15), the speech of the Hon'ble Finance Minister while
piloting the Finance Bill, 2008 is also relevant, which is
reproduced hereinunder.
"I once again assure the House that genuine charitable
organizations will not in any way be affected. The CBDT
will, following the usual practice, issue an explanatory
circular containing guidelines for determining whether an
entity is carrying on any activity in the nature of trade,
commerce or business or any activity of rendering any
service in relation to any trade, commerce or business.
Whether the purpose is a charitable purpose will depend on
the totality of the facts of the case. Ordinarily, Chambers of
Commerce and similar organizations rendering services to
their members would not be affected by the amendment and
their activities would continue to be regarded as
"advancement of any other object of general public utility."
We find that the CBDT vide Circular No.11/2008 dated
19.12.2008 has explained the amendment as under:
"The newly inserted proviso to section 2(15) will apply only
to entities whose purpose is 'advancement of any other
object of general public utility' i.e. the fourth limb of the
definition of 'charitable purpose' contained in section
2(15). Hence, such entities will not be eligible for
exemption under section 11 or under section 10(23C) of the
Act if they carry on commercial activities. Whether such an
entity is carrying on an activity in the nature of trade,
commerce or business is a question of fact, which will be
decided based on the nature, scope, extent and frequency of
the activity."
We find that reading of the proviso to section 2(15) along
with speech of the Hon'ble Finance Minister and Circular of the
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CBDT reproduced above make it clear that only the institutions
carrying on commercial activities are intended to be covered by
the proviso, not the genuine charitable institutions. The activity
will be deemed to be in the nature of trade, commerce or
business, only if same is carried on with the intention to earn
profit. The Courts in series of decisions have held that it is an
activity carried on in a systematic manner with a view to earn
profit, which will be termed as "business". Accordingly, in order
to hold that the activity is in the nature of trade, commerce or
business, there should be profit motive. If during the course of
carrying out any activity on non-commercial lines, some profit is
received by the Trust, which is incidental to the activities of the
trust, the same shall not be construed to be activity in the nature
of trade, commerce or business of the assessee. We find that the
present trust before us was in a way founded by the Father of the
Nation, late Mahatma Gandhi. On page no.1 of the trust-deed, it
is mentioned that after returning from South Africa to India in the
year 1915, Mahatma Gandhi acquired some land in Ranip, Wadaj
villages of Daskroi, District Ahmedabad and have established an
institution named "Satyagrah Ashram" and started Gaushala as
one of the part of the constructive activities. However, its
administration and property were kept separately as a separate
department i.e. Trust from the beginning. Some eminent
personalities of the country were its trustees. The objects of the
trusts are reproduced hereunder:
1. To breed the cattle and endeavor to improve the quality
of the cows and oxen in view of the need of good oxen as
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India is prominent agricultural country and the cow
milk as food is both conducive to and requisite for good
health and longevity of human life. In order to improve
the quality of the cattle, it is very essential to use a high
quality bulls. Hence to produce and to get produced the
best pedigreed bulls and to castrate the scrub bulls and
propagate the work to prepare bullocks by castrating
the bulls which do not become good bulls.
2. To produce and to sell the cow milk and its various
preparations so as to popularize the use of cow milk and
do all other works for the same.
3. To hold and cultivate or get cultivated agricultural
lands, to keep grazing lands etc necessary or desirable
for cattle keeping and breeding or to rehabilitate and
assist Rabaris and Bharwads.
4. To hold and cultivate other land also in order to
experiment in the improvement in agriculture and obtain
financial support in all the activities of the institution.
5. To make necessary arrangements for getting
informatics: and scientific knowledge and to do
scientific research with regard to keeping and breeding
of the cattle, agriculture, use of milk and its various
preparations etc and to establish scientific laboratories ,
libraries, reading rooms relating to the keeping of the
cattle, improvement of agriculture etc and recognize or
assist such institutions.
6. To establish other allied institutions like leather work
etc and to recognize and help them in order to make the
cow keeping economically viable successfully.
7. To publish books, periodicals, monthlies,
advertisements, pamphlets, statements etc from time to
time and for that matter to arrange for printing press,
building etc in order to popularize the objects of the
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trust.
8. To accept all the trusts and benefactions not inimical to
the trust objects conditionally or otherwise.
9. To open schools and hostels for imparting education in
cow keeping and agriculture having regard to the trust
objects or to help such schools and hostels and to make
suitable arrangements for training workers required for
the trust work.
10. To get the money from time to time as required for
the trust work by way of gift, borrow on securities of the
trust properties or obtain in any other way as deemed fit
by the trustees.
11. To undertake such other activities from time to time
for achieving or helping the trust objects as deemed fit
by the trustees.
7. We find that the assessee trust was registered with Charity
Commissioner and the copy of the certificate issued by the
Charity Commissioner has been filed in the compilation before
us. The Commissioner of Income-tax, Gujarat has registered the
assessee-trust under Section 12A. The Joint Commissioner of
Sales-Tax (Legal) vide its order dated 2.9.2006 has noted that the
activities of the assessee-trust are also not business like, but are
allied activities to meet the objectives of the trust, and hence as
per the exception in notification (notification section 2(10)), the
applicant cannot be considered as trader. We find that for the
applicability of proviso to section 2(15), the activities of the trust
should be carried out on commercial lines with intention to make
profit. Where the trust is carrying out its activities on non-
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commercial lines with no motive to earn profits, for fulfillment of
its aims and objectives, which are charitable in nature and in the
process earn some profits, the same would not be hit by proviso
to section 2(15) of the Act. We find that the aims and objects of
the assessee-trust are admittedly charitable in nature, and was
granted registration by the Charity Commissioner as well as by
the Commissioner of Income-Tax (Exemption) under Section
12A of the Act. The assessee has carried out its activities for
the fulfillment of its object of breeding the cattle and to improve
the quality of the cows and oxen and had sold semen, fodder,
milk etc. and in the process some profit was earned by the
assessee-trust, which is incidental in nature. The activities
undertaken by the assessee-trust for the fulfillment of its
charitable objects on non-commercial lines are not hit by the
proviso to section 2(15) of the Act. We find that for the
applicability of newly inserted proviso to section 2(15) of the
Act, the objects of the trust, the purpose and manner of activities
of the Trust, whether to make profit or whether the profit earned
was incidental to the activities of the trust, overall facts and
circumstances in its entirety, the volume of the profit received by
the trust, and whether the activities of the trust were conducted in
a way to fulfill its object of the trust, which have essentially to be
charitable in nature, and the intention of the trustees, all have to
be considered to arrive at a just and fair conclusion. In fact the
cases where profit making is the object should be distinguished
from the cases, where, although the objects of the trust are wholly
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charitable, but some profit was made out of the activities
undertaken by the Trust for the purpose of achieving the objects
of the general public utility. The objective of the proviso to
section 2(15) is to deny exemption to such assessee who are
engaged in business activities in the garb of charitable purpose.
It shall however not effect the cases of charitable institutions,
which are carrying on charitable activities genuinely and the facts
of the each case has to be seen to decide whether the proviso to
section 2(15) is applicable to the facts of the case of the assessee.
Mere selling some product at a profit will not ipso facto hit the
assessee by applying the proviso to section 2(15) and deny the
exemption available under Section 11 of the Act. The intention
of the trustees and the manner in which the activities of the
charitable trust/institution are undertaken are highly relevant to
decide the issue of applicability of proviso to section 2(15) of the
Act.
The Hon'ble Delhi High Court in Institute of Chartered
Accountants of India Vs. DGIT (supra) has considered this
controversy. The facts of the case were that DCIT(Exemption)
passed an order under Section 263 of the Act, taking a view that
ICAI was running a coaching class and it was a business activity,
and therefore it has violated the provision of Income Tax Act.
The Tribunal held that the order passed by the DIT(Exemption)
was not correct in the facts of the case. The Hon'ble High Court
after going through the facts and discussing the legal position,
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held that in the case of the institute, it cannot be said that it was
carrying on business and has observed as under:-
"20. The purpose and object to do business is normally to
earn and is carried out with a profit motive; in some cases
the absence of profit motive may not be determinative. The
appellant has given no such finding as far as the activities
of the institute are concerned. The appellant without
examining the concept of business has held that the
institute was carrying on business as coaching and
programmes were held by them and a fee is being charged
for the same."
In ICAI Accounting Research Foundation Vs. DIT (E)
(supra), the Hon'ble Delhi High Court has considered the
controversy, wherein the department has taken a view that
research foundation was carrying on research activity by taking
fees and charges, and therefore it is not eligible for exemption as
charitable institution. The Hon'ble High Court has considered
the concept of business and charitable purpose and also the
proviso to section 2(15) and held that the research foundation was
not carrying on any business activity and it was eligible as
charitable institution. The Hon'ble Delhi High Court's
observations are as under: -
"The amended definition of 'charitable purpose' would not
alter this position. No doubt, proviso to this definition
clarifies that advancement of any other object of general
public utility will not be treated as charitable purpose if it
involves the carrying on of any activity in the nature of
trade, commerce or business or any activity of rendering
service in relation to trade, commerce or business.
However, what is not appreciated by the respondent No. 1
is that the merely on undertaking those three research
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projects at the instance of the Government/local bodies the
essential character of the Petitioner Foundation cannot be
converted into the one which carries on, cannot be treated
as the activity which carries on trade, commerce or
business or activity of rendering any service in relation to
trade, commerce or business."
ITAT, Chandigarh Bench in the case of Himachal Pradesh
Environment Protection and Pollution Control Board Vs. CIT
(supra) considered the scope of proviso to section 2(15) and
observed that -
"Tribunal observed that "it is also important to bear in
mind that insertion of proviso to section 2(15) does not
mean that in case an assessee is to receive any payment for
anything done for trade, commerce or business, the
assessee will be hit by the said proviso." Further, the
Tribunal has observed as under in this regard:-
"As CBDT rightly puts it, sweeping 'generalizations
are not possible' and 'each case will have to decided
on its facts'. The question then arises whether on the
present set of facts it can be said that the assessee
was engaged in trade, commerce or business or in
rendering of a service to trade, commerce or
business. As far as assessee being engaged in trade,
commerce or business is concerned, it is not even
learned Commissioner's case that running a
organization, set up under the statute law, for
controlling, preventing and abating pollution, is
pursuing trade, commerce or business. Obviously, a
trade, commerce or business implies an activity with
profit motive even though public good may be a
secondary benefit from such an activity. This is not
the case before us. The legal framework under which
the assessee is set up is quite clear and unambiguous
and it reflects will of the lawmakers in no uncertain
terms, which is to prevent pollution."
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8. These decisions of the Hon'ble Courts/Tribunal make the
scope of applicability of proviso to section 2(15) of the Act clear
that to decide the applicability of the said proviso, the entirety of
the facts and circumstances of the case, and in particular the fact
that the activities of the trust/institution whether are carried out
with a motive to earn profit or profit earned was merely
incidental while conducting the charitable objects of the trust,
have to be considered. In this case before us, if the interest on
investment received by the assessee during the year amounting to
Rs.26,15,060/- is taken away from the income side of the
assessee, there is a net excess of expenditure over the income
during the relevant period, and it cannot be said that the assessee
has carried out its activities in the advancement of its charitable
objects in a way to earn profit on commercial line. Even if at the
end of the accounting year, there is some profit received by the
assessee while conducting the charitable objects of the Trust, the
same shall be merely incidental in nature and shall not attract the
applicability of proviso to section 2(15) of the Act. There is no
material/evidence brought on record by the Revenue which may
suggest that the assessee was conducting its affairs on
commercial lines with motive to earn profit or has deviated from
its objects as detailed in the Trust Deed of the assessee. In these
facts and circumstances of the case, we have no hesitation in
holding that the proviso to section 2(15) is not applicable to the
facts and circumstances of the case, and the assessee was entitled
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to exemption provided under Section 11 of the Act for the
relevant assessment year, and we direct accordingly.
However, we make it clear that this decision is delivered in
peculiar facts and circumstances of the case, and shall not be
taken as a precedent for charitable trusts doing business or trade
under the garb of charitable activities.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in Open Court on the date mentioned hereinabove.
Sd/- Sd/-
(अिनल चतुवȶदȣ / ANIL CHATURVEDI) जी.
जी.सी.
(जी सी.गुƯा/G.C.
ा GUPTA)
लेखा सदःय /ACCOUNTANT MEMBER उपाÚय¢ /VICE-PRESIDENT
Copy of the order forwarded to:
1) : Appellant
2) : Respondent
3) : CIT(A)
4) : CIT concerned
5) : DR, ITAT.
BY ORDER
DR/AR, ITAT, AHMEDABAD -16-