ITA No. 54 of 2019 [1] IN HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 54 of 2019 Date of decision: 20.1.2020 Commissioner of Income Tax (Exemptions), Chandigarh Appellant v. M/s Shri Panchayati Gaushala Society Respondent CORAM: HON'BLE MR. JUSTICE AJAY TEWARI HON'BLE MR. JUSTICE AVNEESH JHINGAN Present: Mr. Denesh Goyal, Senior Standing Counsel for appellant. AVNEESH JHINGAN, J. revenue has filed this appeal against order dated 9.4.2018 passed by Income Tax Appellate Tribunal, New Delhi (for short, 'the Tribunal'). appeal of respondent-society (hereinafter referred to as 'the society') was allowed and Commissioner of Income Tax (Exemptions) (for short, 'the CIT') was directed to grant approval to respondent-society under Section 80G of Income Tax Act, 1961 (for short, 'the Act'). Following substantial questions of law have been claimed: (i) Whether on facts and circumstances of case, Hon'ble ITAT was correct in disregarding fact that main emphasis of applicant society was generating income and accumulating surpluses in shape of FDRs? MANOJ KUMAR 2020.01.24 11:32 I attest to accuracy and (ii) Whether on facts and circumstances of case, authenticity of this document High Court,Chandigarh ITA No. 54 of 2019 [2] Hon'ble ITAT was correct in disregarding fact that major emphasis of society appeared to be accumulation of asset in form of FDRs and earning interest on same rather than utilization same for expansion? (iii) Whether on facts and circumstances of case and in law, Hon'ble ITAT was correct ignoring fact that society diverted from its objects and got involved in commercial activity? (iv) Whether on facts and circumstances of case ITAT has erred in placing reliance on fact of assessee having 12AA registration and by ignoring statutory condition that 12AA registration is merely pre- condition for entities to be eligible for approval u/s 80G(5) and that procedure involves examination of real purpose as laid down by Hon'ble Delhi High Court in case of M/s Kirti Chand Tarawati Charitable Trust vs. Director of Income Tax (Exemption) and others. [(1999) 152 CTR (Delhi 322]? (v) Whether on facts and circumstances of case, order of Appellate Tribunal is contrary to evidence and material on record of case and therefore, perverse? Relevant facts are that society was established on 16.5.1956 with following aims and objects: 2 keep and protect useless and old cows and cattle; to MANOJ KUMAR 2020.01.24 11:32 I attest to accuracy and authenticity of this document High Court,Chandigarh ITA No. 54 of 2019 [3] keep and maintain milk cows and useful bulls; to purchase cows and bulls in order to augment Income of Gaushala to meet expenses and make Gaushala sustainable; to protect breed of cattle; to sell surplus milk if any (after feeding calves) in order to meet day to day expenses; to make arrangements for fodder and shelters for keeping cattle and accordingly make arrangements for purchase; to make arrangements for cultivation for agricultural lands available with Gaushala to collect funds for above objects, and to control/supervise investment and expenditure. society is duly registered under Section 12AA of Act. application was made on 16.12.2016 for approval under Section 80G of Act. CIT rejected same vide order dated 29.6.2017 mainly on ground that society was generating certain income and as result, amount of FDRs was being enhanced over year. conclusion was that society had diverted from object of serving old, ill and lame cows and got involved in commercial activities. In appeal preferred by society, Tribunal on 9.4.2018 allowed appeal holding that there was nothing on record to substantiate that funds were utilised by society elsewhere and not for its aims and objects. It was also considered that registration under Section 12AA of Act was continuing. order of CIT was set aside and it was directed to grant registration under Section 80G of Act. Aggrieved of order of Tribunal, present appeal is filed. MANOJ KUMAR 2020.01.24 11:32 I attest to accuracy and authenticity of this document High Court,Chandigarh ITA No. 54 of 2019 [4] Learned counsel for revenue argued that Tribunal erred in allowing appeal, inspite of fact that there was substantial amount in FDRs of society and it was involved in commercial activities. challenge posed is that Tribunal erred in holding that registration under Section 12AA of Act was itself enough for approval under Section 80G of Act. Section 12AA(1) and Section 80G(5)(vi) of Act (for relevant assessment year) read as under:- 12AA. Procedure for registration. (1) Principal Commissioner or Commissioner, on receipt of application for registration of trust or institution made under clause (a) or clause (aa) [or clause (ab)] of sub-section (1)] of section 12A, shall (a) call for such documents or information from trust or institution as he thinks necessary in order to satisfy himself about genuineness of activities of trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about objects of trust or institution and genuineness of its activities, he; (i) shall pass order in writing registering trust or institution; (ii) shall, if he is not so satisfied, pass order in writing refusing to register trust or institution, and copy of such order shall be sent to applicant: Section 80G(5)(vi) : Deduction in respect of donations to MANOJ KUMAR 2020.01.24 11:32 I attest to accuracy and authenticity of this document High Court,Chandigarh ITA No. 54 of 2019 [5] certain funds, charitable institutions, etc. In computing total income of assessee, there shall be deducted, in accordance with and subject to provisions of this Section:- (5) This Section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub- section (2), only if it is established in India for charitable purpose and if it fulfills following conditions, namely : (vi) in relation to donations made after 31st day of March 1992, institution or fund is for time being approved by Commissioner in accordance with rules made in this behalf. Section 12A of Act provides conditions for applicability of Sections 11 and 12 of Act. Section 12AA of Act provides for procedure of registration for availing benefits under Section 12A of Act. Under Section 12AA(1)(a) of Act Principal Commissioner or Commissioner in order to satisfy himself about genuineness of activities of trust or institution can call for such document or information as he deems necessary. If satisfied about genuineness of object, he passes order registering trust or institution, otherwise rejects application. Under Section 80G of Act recognition is given to trust or institution for purpose that assessee giving donations to such institution becomes entitled to claim deduction of amount donated. Sub-section 5 MANOJ KUMAR 2020.01.24 11:32 I attest to accuracy and authenticity of this document High Court,Chandigarh ITA No. 54 of 2019 [6] of Section 80G of Act stipulates conditions for application of Section 80G of Act to donations made to any institution or fund referred to in sub clause (iv) of Clause (a) of Sub Section (2). contentions raised by appellant-revenue lack merit. From averment of society before CIT, it was evident that out of total 350 cows, only 20-30 cows were milking. doubt raised by CIT was as to how 20-30 cows could produce milk worth `16,54,634/-. said doubt was baseless as CIT was swayed by figure. If figure is roughly worked out to daily amount and if average price per litre milk is taken as `40/-, production would come to 114 litres of milk day. objection that amount in FDRs had enhanced will not enhance case of revenue. There is not even iota of evidence to establish that amount was not being utilised for aims and objects of society but for some other purpose. amount only gives protection to society for daily needs, if occasion so arises that there is scarcity of funds as society has almost 350 cows to take care and to feed. It cannot be ruled out that such cushion may be required considering nature of work done by society. contention that society had diverted itself into commercial activities is belied from ratio of milking and non-milking cows. Out of 350 cows, only 20 to 30 cows were milk yielding. ratio would be 32:3. said ratio is pointer against plea of revenue. There cannot be any objection if society while achieving its aims and objects is able to generate some funds so that its daily expenses can be met of its own. MANOJ KUMAR There is no quibble on proposition that registration under 2020.01.24 11:32 I attest to accuracy and authenticity of this document High Court,Chandigarh ITA No. 54 of 2019 [7] Section 12AA of Act itself would not be enough for approval under Section 80G of Act. Tribunal has only considered that aims and objects of society have been found genuine while granting registration under Section 12AA of Act and for granting approval under Section 80G of Act, reasons have been recorded and denial of approval not sustained. Learned counsel for revenue has neither been able to show that view taken by Tribunal is erroneous nor any material on record is shown to hold that order of Tribunal is legally unsustainable. No substantial question of law arises. appeal is dismissed. (AVNEESH JHINGAN) (AJAY TEWARI) JUDGE JUDGE 20.1.2020 mk Whether speaking/reasoned: Yes/No Whether reportable: Yes/No MANOJ KUMAR 2020.01.24 11:32 I attest to accuracy and authenticity of this document High Court,Chandigarh Commissioner of Income-tax (Exemptions), Chandigarh v. Shri Panchayati Gaushala Society