M/s Baba Balaknath Gaushala Society, Mandi Gobindgarh V. CIT(E), Chandigarh

ITA 1247/CHANDI/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6397 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-07-2019
• Assessment Year: 2016-2017
• Appeal Filed On: 18-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VEENA JOSHI
• Assessee Lawyers: DEEPAK AGGARWAK
• Section: 12AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , ! ' # $ % & ' , ' BEFORE SMT.DIVA SINGH, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.1247/CHD/2017 / ASSESSMENT YEAR : 2016-17 M/S BABA BALAKNATH GAUSHALA SOCIETY, MANDI GOBINDGARH, PUNJAB. THE C.I.T.(EXEMPTIONS), CHANDIGARH. ./PAN NO: AACTB8370L /APPELLANT /RESPONDENT /ASSESSEE BY: SHRI DEEPAK AGGARWAK, ADV. ! / REVENUE BY: SMT.VEENA JOSHI, CIT(DR) $ /DATE OF HEARING : 11.07.2019 %&'( $ /DATE OF PRONOUNCEMENT: 31.07.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE APPLICANT SOCIETY AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (EXEMPTIONS), CHANDIGARH [(IN SHORT CIT(E)] DATED ITA NO.1247/CHD/2017 A.Y. 2016-17 2 23.6.2017, REFUSING GRANT OF REGISTRATION AS CHARIT ABLE SOCIETY U/S 12AA OF THE INCOME TAX ACT, 1961 (HEREI NAFTER REFERRED TO AS ACT). 2. BRIEF FACTS AS REVEALED FROM THE ORDER OF THE CI T(E) ARE THAT THE APPLICANT IS A SOCIETY IN OPERATION SINCE 1.10.2010 WITH ITS AIMS AND OBJECTS CENTERING AROUND TAKING C ARE OF COWS AND RUNNING GAUSHALA. THE PARAGRAPH NO.2 OF TH E LD.CIT(E)S ORDER ELABORATES THE AIMS AND OBJECTS O F THE APPLICANT SOCIETY AS UNDER: 2. THE STATED AIMS AND OBJECTS OF THE SOCIETY ARE TO TAKE CARE OF COWS, BY RUNNING GAUSHALA AT PREM NAGA R, MANDI GOBINDGARH BY COLLECTING FUNDS FROM THE MEMBE RS OR DONATIONS FROM WELL- WISHERS/DONATORS; APPLY FUN DS OF THE GAUSHALA FOR THE TAKE CARE OF MILCHING ANIMALS; TO CONDUCT WELFARE ACTIVITIES FOR THE SOCIETY, ANIMALS & BIRDS, ETC.; TO CONDUCT WELFARE ACTIVITIES FOR THE SOCIETY , ANIMALS & BIRDS ETC.; TO PROVIDE SHELTER TO A STRAY ANIMALS/C OWS, MEDICINES TO UNFIT COWS; TO GIVE REWARDS TO COWS BH AGATS; TO SAVE THE COWS FROM BUTCHERS (SLAUGHTERS)TO ORGANISE CAMP & MAKE AWARE THE PEOPLE REGARDING IMPORTANCE OF COW M ILK AND URINE; TO ORGANIZE CAMP FOR ENVIRONMENT CLEANIN G; TO CELEBRATE 'GOPA ASHTAMI & JANAM ASTAMI' FESTIVALS; TO WORK FOR NATIONAL INTEGRATION. 3. THE APPLICANT SOCIETY HAD APPLIED FOR REGISTRAT ION AS A CHARITABLE SOCIETY U/S 12AA OF THE ACT ON 2.12.2016 . THE LD.CIT(E) CALLED FOR INFORMATION FROM THE APPLICANT SOCIETY, WHICH IS REPRODUCED AT PARA 5 OF THE ORDER OF THE LD.CIT(E), AFTER CONSIDERING WHICH, THE LD.CIT(E) HELD THAT TH E ITA NO.1247/CHD/2017 A.Y. 2016-17 3 APPLICANT SOCIETY WAS NOT FIT FOR GRANT OF REGISTRA TION FOR THE FOLLOWING REASONS: 1) THE FINANCIALS OF THE SOCIETY REVEALED THAT ITS PREDOMINANT AIM WAS TO CARRY OUT COMMERCIAL ACTIVIT Y OF SALE OF MILK AND WAS NOT TO CARRY OUT ANY CHARIT ABLE ACTIVITIES. 2) THERE WAS A SUBSTANTIAL DEPOSIT IN ITS BANK ACCOUNT DURING THE PERIOD OF DEMONETIZATION, WHICH INDICATED THAT IT INDULGED IN DEMONETIZING CURRENCY DURING THE SAID PERIOD WHICH IN TURN WAS A CLEAR POINTER TO THE ACTIVITIES OF THE APPLICANT NOT BEIN G TRANSPARENT. 3) THERE WAS A CHANGE IN THE GOVERNING BODY OF THE SOCIETY THROUGH A RESOLUTION PASSED, BUT NO EVIDENC E IN RESPECT OF THE ACCEPTANCE OF THE CHANGE BY THE REGISTRAR OF THE SOCIETY HAD BEEN PROVIDED BY THE APPLICANT. THE RELEVANT FINDINGS OF THE LD.CIT(E) AT PARAS 6 T O 9 OF HIS ORDER ARE AS UNDER: 6. ON THE FIXED DATE SH. SAMEER GARG, CHARTERED ACC OUNTANT APPEARED AND FILED WRITTEN SUBMISSION IN. RESPONSE TO ABOVE NOTED QUERIES. THE COUNSEL WAS REQUESTED TO SUBMIT THE FI NANCIAL STATEMENT FOR THE F.Y. 2016-17 WHICH WAS SUBMITTED BY THE APP LICANT ON 15.06.2017 THROUGH E-MAIL. THE FINANCIAL STATEMENTS SUBMITTED BY THE APPLICANT REFLECT THE FOLLOWING:- F.Y. GROSS RECEIPT NET SURPLUS FIXED ASSETS CASH & BANK ADDITIONS 2013-14 RS.7,955/- RS.(-)343 RS.35,178/- 10,152/- N IL 2014-15 RS.8,000/- RS.(-)988 RS.65,640/- 8,702/- RS .31,000 ITA NO.1247/CHD/2017 A.Y. 2016-17 4 2015-16 RS.7,15,986/- RS.630/- RS.9,42,970/- RS.1,0 2,002/- RS.9,66,244/- 2016-17 RS.19,70,500/- RS.1,72,588/- RS,12,30,391/- RS.7,95088/- RS.11,38,105/- IT IS EVIDENT THAT IN THE FIRST TWO YEARS OF THE SO CIETY'S EXISTENCE THE RECEIPTS ARE MINISCULE. THERE IS AN ABRUPT INCREASE IN THE TOTAL RECEIPT OF THE SOCIETY DURING F.Y. 2015-16 AND F.Y. 2016-17 DUE TO RECEIPT OF RS. 6,23,125/- AND RS. 11,20,7567-, RESPECTIVELY, F ROM THE SALE OF '''MILK. ADDITIONS OF RS. 1,72,700/- HAS BEEN SHOWN IN THE LIVE STOCK I.E. PURCHASE OF MILCH ANIMALS DURING F.Y. 2015-16, AS REVEALED FROM THE BALANCE SHEET AND TO THAT EXTENT IT'S CLEARLY E STABLISHED TO BE AN ENTERPRISE THAT PREDOMINANTLY AIMS AT SALE/COMMERCE OF/IN MILK. THE MAJOR SOURCE OF RECEIPTS HAS BEEN SHOWN FROM SA LE OF MILK WHICH CLEARLY POINT OUT THAT THE ACTIVITIES ARE OF COMME RCIAL NATURE AND NOT OF CHARITY AS CLAIMED. 7. FURTHER, THERE IS A SUBSTANTIAL DEPOSIT IN CASH IN THE BANK ACCOUNT OF THE APPLICANT SOCIETY DURING THE PERIOD OF DEMONETIZATION WHICH CLEARLY INDICATES SOCIETY'S INDULGENCE IN DEM ONETIZED CURRENCY DURING THE SAID PERIOD. MOREOVER, THE QUANTUM OF DE POSITS DURING THE PERIOD IS SUBSTANTIALLY HIGHER THAN THE DEPOSIT S MADE PRIOR TO THE PERIOD OF DEMONETIZATION. NO EVIDENCE HAS BEEN PROVIDED THAT THESE DEPOSITS WERE IN NEW CURRENCY. NO EVIDENCE O F AVAILABLE CASH WITH THE SOCIETY HAS BEEN ADDUCED EITHER. THE ABSEN CE OF SIMILAR DEPOSITS IN THE MONTH OF JANUARY 2017 TO MARCH 2017 FURTHER EXACERBATE THE MATTER. THE SAID FINDINGS ARE CLEAR POINTERS TO THE ACTIVITIES OF THE APPLICANT NOT BEING TRANSPARENT. CERTAINLY A SUBSTANTIAL CHUNK OF DONATIONS/ INCOME OF THE APPLI CANT HAS BEEN KEPT AWAY FROM THE BANKING CHANNELS TILL THE DENOMI NATIONS IN VOGUE MADE ILLEGAL. THIS ALSO BELIES TRUST REPOSED IN THE SOCIETY, CLAIMING OSTENSIBLY TO THE CHARITABLE, BY ITS DONORS AND ALS O THE INTENDED BENEFICIARIES. 8. THERE IS A CHANGE OF GOVERNING BODY OF THE SOCIE TY THROUGH A RESOLUTION. HOWEVER, NO EVIDENCE IN RESPECT OF ACCE PTANCE OF THE CHANGE IN COMPOSITION BY THE REGISTRAR OF SOCIETIES HAS BEEN PROVIDED BY THE APPLICANT. MERE FURNISHING OF INFOR MATION TO THE REGISTRAR DOES NOT CONVEY HIS ACCEPTANCE OF THE CHA NGE. FURTHER, THE DOCUMENTS ON RECORDS REVEAL THAT THE ENTIRE GOVERNI NG COUNCIL HAS BEEN REPLACED WITH A NEW ONE. IN THE ABSENCE OF ANY EVIDENCE TO THE EFFECT THAT THE CHANGE OF THE GOVERNING COUNCIL HAD BEEN ACCEPTED BY THE REGISTRAR OF THE SOCIETIES, IT IS U NCLEAR WHETHER THE SAID ACTION AMOUNTED TO DISSOLUTION OF THE SOCIETY OR IS A SIMPLE TAKEOVER BY NEW MEMBERS. ITA NO.1247/CHD/2017 A.Y. 2016-17 5 9. IN VIEW OF THE ABOVE THE ACTIVITIES OF THE SOCIE TY CANNOT BE TERMED TO FALL UNDER THE CATEGORY OF 'CHARITABLE PURPOSE'. THE ACTIVITIES, DISCUSSED ABOVE, ARE ALSO POINTERS TOWARDS COMMERCE IN MILK INCLUDING ITS PRODUCTION AND SALE. IT IS DEARLY NOT A GAUSHALA THAT COULD BE ACCEPTED AS HOME TO THE SICK AND ABANDONED CATTL E. THE EVIDENCE OF SUBSTANTIAL DEPOSITS OF CASH DURING THE PERIOD O F DEMONETIZATION IN STARK CONTRAST TO MINISCULE DEPOSITS BOTH PRE AN D POST DEMONETIZATION CLEARLY DOESN'T REFLECT GENUINENESS OF ACTIVITIES. THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA IS A CCORDINGLY REJECTED. 4. AGGRIEVED BY THE SAME, THE APPLICANT SOCIETY HAS COME UP IN APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING BEFORE US, THE LD.COUNSEL FOR THE SOCIETY CONTENDED THAT THE FINDI NGS BASED ON WHICH THE LD.CIT(E) HAD DENIED THE GRANT O F REGISTRATION WERE INCORRECT. THE LD.COUNSEL CONTEND ED THAT THE PRIMARY FINDING OF THE LD.CIT(E) THAT THE APPLICANT SOCIETY WAS INDULGING IN COMMERCIAL ACTIV ITY OF SELLING MILK WAS NOT BASED ON CORRECT APPRECIATI ON OF FACTS. IT WAS CONTENDED THAT THE SALE OF MILK WA S ONLY INCIDENTAL ACTIVITY TO THE MAIN ACTIVITY OF LO OKING AFTER THE COWS. THE LD.COUNSEL FOR THE SOCIETY CONTENDED THAT THE FACT OF THE MATTER WAS THAT SUBSTANTIAL NUMBER OF COWS OWNED BY IT WERE NON- MILCHING COWS. A DETAIL IN THIS REGARD, SHOWING THE TOTAL NUMBER OF COWS WITH THE APPLICANT GAUSHALA AN D BREAK UP OF COWS AS MILCHING AND NON-MILCHING COWS ITA NO.1247/CHD/2017 A.Y. 2016-17 6 AS ON 10.4.2018, WAS FILED BEFORE US. THE SAME WAS STATED TO BE CERTIFIED BY THE OFFICE BEARERS OF THE SOCIETY. THE LD.COUNSEL FOR THE APPLICANT SOCIETY, THEREFORE, CONTENDED THAT THIS FINDING OF THE LD.CI T(E) WAS TOTALLY INCORRECT AND THE APPLICANT WAS PRIMARI LY INDULGING IN ITS STATED OBJECT OF LOOKING AFTER COW S WHILE MILK PRODUCTION WAS ONLY AN INCIDENTAL ACTIVI TY AND THE REVENUE GENERATED FROM THE SAME WAS PLOUGHED BACK FOR THE STATED OBJECT OF THE SOCIETY ONLY. FURTHER THE LD.COUNSEL CONTENDED THAT THE MER E FACT THAT THERE WAS SUBSTANTIAL DEPOSIT OF CASH IN THE BANK ACCOUNT OF THE SOCIETY DURING DEMONETIZATION, DID NOT LEAD AUTOMATICALLY TO ANY ADVERSE INFERENC E BEING DRAWN AGAINST IT DIRECTLY SINCE IT WAS COMMO N KNOWLEDGE THAT DURING THIS PERIOD A LARGE NUMBER OF PEOPLE WITH DEMONETIZED CURRENCY IN HAND HAD DISPOSED OFF THE SAME BY DONATING TO VARIOUS SOCIET IES. THAT THE APPLICANT SOCIETY WAS ALSO A BENEFICIARY O F THIS ACT AND, THEREFORE, MERELY BECAUSE THE QUANTUM OF CASH DEPOSIT IN BANK DURING THIS PERIOD WAS HIGH ER AS COMPARED TO OTHER MONTHS, CANNOT LEAD TO THE INFERENCE THAT THE APPLICANT SOCIETIES ACTIVITIES W ERE NOT TRANSPARENT. AS FOR THE FINDING OF THE LD.CIT(E ) ITA NO.1247/CHD/2017 A.Y. 2016-17 7 THAT THE APPLICANT SOCIETY HAD NOT SUBMITTED THE EVIDENCE OF THE ACCEPTANCE OF CHANGE IN COMPOSITION OF ITS GOVERNING BODY, BY THE REGISTRAR OF SOCIETY, TH E LD.COUNSEL FOR THE SOCIETY CONTENDED THAT THE ONLY REQUIREMENT AS PER LAW WAS INTIMATING THE REGISTRAR OF THE CHANGE, WHICH WAS DULY DONE BY THE SOCIETY. THE LD.COUNSEL FOR THE SOCIETY CONTENDED THAT THE SOCIETIES REGISTRATION ACT DID NOT REQUIRE ANY ACCEPTANCE BY THE REGISTRAR TO SUCH CHANGE AND MERE INTIMATION WAS SUFFICIENT. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(E). BUT AT THE SAME TIME LD. DR STATED THAT THE MATTER COULD BE RESTORED BACK TO TH E LD.CIT(E) FOR ADJUDICATION AFRESH IN THE LIGHT OF T HE FACTS NOW BROUGHT TO THE FORE BY THE LD.COUNSEL FOR THE ASSESSEE SINCE THE SAME NEEDED TO BE VERIFIED ALSO. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE ORDER OF THE LD.CIT(E).ADMITTEDLY, THE LD.CIT(E) HAS DENIED GRANT OF REGISTRATION AS A CHARITABLE SOCIETY U/S 12AA OF THE ACT, ON FINDING THAT THE APPLICANT SOCIETY WAS PRIMARILY INDULGING IN ITA NO.1247/CHD/2017 A.Y. 2016-17 8 COMMERCIAL ACTIVITY OF SELLING MILK AND ON NOTING T HAT THERE WAS SUBSTANTIAL DEPOSIT OF CASH IN ITS BANK ACCOUNT DURING DEMONETIZATION PERIOD SHOWING THAT THE ACTIVITIES OF THE APPLICANT SOCIETY WERE NOT TRANSPARENT AND FURTHER FOR THE REASON THAT THE CHANGE IN THE CONSTITUTION OF THE GOVERNING BODY OF THE SOCIETY HAD NOT BEEN SHOWN TO BE ACCEPTED BY TH E REGISTRAR OF SOCIETIES. THE CONTENTIONS MADE BY THE LD.COUNSEL FOR THE SOCIETY BEFORE US SHOWS THAT THE ISSUES RAISED BY THE LD.CIT(E) NEED FURTHER DELIBERATION AND INVESTIGATION BEFORE ARRIVING AT A NY CONCLUSION. AS REGARD THE COMMERCIAL ACTIVITY CARR IED OUT BY THE APPLICANT SOCIETY, THE CONTENTION THAT I T HAD OWNED PRIMARILY NON-MILCHING COWS WHILE THE MILCHING COWS WERE VERY FEW IS A VITAL FACT POINTED OUT BY THE LD.COUNSEL FOR THE ASSESSEE, WHICH, IF FOUND CORRECT MAY HAVE IMPACT ON THE CONCLUSION DRAWN VI S A VIS THE ACTIVITY CARRIED OUT BY THE APPLICANT SOC IETY BEING PRIMARILY COMMERCIAL OR NOT. THE APPLICANT SOCIETY HAS SUBMITTED DETAIL OF THE NATURE OF COWS OWNED BY IT, BUT THE SAME, WE FIND, NEEDS TO BE VERIFIED AND INVESTIGATED FURTHER BEFORE ARRIVING A T ANY FINDING ON THE ISSUE. FURTHER THE ISSUE OF CHANGE I N ITA NO.1247/CHD/2017 A.Y. 2016-17 9 CONSTITUTION OF THE GOVERNING BODY NOT BEING ACCEPT ED BY THE REGISTRAR OF SOCIETY, THE CONTENTION OF THE SOCIETY THAT THERE WAS NO SUCH REQUIREMENT IN THE A CT ALSO, NEEDS TO BE LOOKED INTO. MOREOVER, WE FIND TH AT REGARDING THE FINDING OF EXCESS CURRENCY/CASH BEING DEPOSITED IN BANK DURING DEMONETIZATION PERIOD, THE ASSESSEE HAS CONTENDED THAT THE SAME HAS NOTHING TO DO WITH ITS OWN INCOME AND COULD IN FACT BE ATTRIBU TED TO PEOPLE WHO WERE DISPOSING OFF THEIR DEMONETIZED CURRENCY TO CHARITABLE SOCIETIES DURING THIS PERIOD . WE FIND THAT ALL THE ISSUES RAISED BY THE LD.CIT(E) NE ED TO BE EXAMINED AND INVESTIGATED FURTHER BEFORE ARRIVIN G AT THE CONCLUSION VIS A VIS THE ELIGIBILITY OF THE APPLICANT SOCIETY TO GRANT OF REGISTRATION U/S 12AA OF THE ACT, IN VIEW OF THE ABOVE CONTENTIONS RAISED BY THE LD.COUNSEL FOR THE SOCIETY. 8. WE, THEREFORE, CONSIDER IT FIT TO RESTORE THE IS SUE BACK TO THE LD.CIT(E) TO CONSIDER THE GRANT OF REGISTRATION AFRESH AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE APPLICANT SOCIETY. 9. IN THE RESULT, THE APPEAL OF THE APPLICANT SOCIE TY IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1247/CHD/2017 A.Y. 2016-17 10 ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $ % & ' (DIVA SINGH ) (ANNAPURNA GUPTA) ! ' /JUDICIAL MEMBER () ' /ACCOUNTANT MEMBER # /DATED: 31 ST JULY, 2019 * * &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35# / GUARD FILE &) ' / BY ORDER, / ASSISTANT REGISTRAR