Collection of Cess by Amul Research & Development Association shall be treated as ‘Medical Relief’, Exemption cannot be denied: ITAT Ahmedabad [Read Order]

Recently, the Ahmedabad bench of the Income Tax Appellate Tribunal has refused to deny the exemption granted to the Trust, Amul Research & Development Association by observing that the activity of collection of cess for providing “medical relief” cannot be a reason for denying the said benefit under the relevant provisions of the Income Tax Act, 1961. In the opinion of the Tribunal, the facilities provided by the appellant Amul Research & Development Association.

The assessee-trust, in the instant case was established with an aim to carryout research, development and extension work conducive to economic development of agriculturist.During the relevant assessment year, the assessee collected cess from milk producers members depositing milk with the primary milk cooperative society @ 12 paisa per liter in lieu of providing them research, animal nursery, fertility, vaccination and breed improvement facilities etc. the assessing officer, relying upon the provision of section 2(5) of the Finance Act, 2010 refused to give exemption to the assessee on ground that as per the above provision, the advancement of any other object of general public utility would not be charitable purpose, if it involves the carrying out of any activity in the nature of trade,commerce or business or any activity of rendering any service in relation to such 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 activities. The assessee maintained that the collection of cesswas not in the nature of any trade, commerce or business including any profit motive.

On appeal, the Commissioner of Income Tax (Appeals) has confirmed the above order. Hence, the assessee preferred a second appeal before the ITAT.

The Tribunal refused to agree with the findings of the lower authorities by observing that “both the lower authorities have wrongly rejected assessee’s exemption claim by invoking section 2(15) proviso of the act, since it neither carries out any activity in the nature of trade, commerce business nor any activities or renders any service in relation to the same whilst collecting the impugned cess @ 12 paisa per liter from milk producers in lieu of making them avail the above stated facilities. A co-ordinate bench of this tribunal in DCIT vs. Andhra Pradesh Civil Supplies Corporation (2016) 70 taxmann.con 48 (Hyderabad) also interprets the above stated proviso to conclude that an Assessing Officer has to satisfy the relevant conditions u/s. 2(15) 1st proviso in question before denying such an exemption. We accordingly accept assessee’s arguments on the main issue.”

Regarding the second question, I.e. whether the assessee’s action in making available its medical facilities admittedly in the nature of providing maternity, animal nursery, fertility, vaccination to milch animals belonging to milk producers in lieu of cess collection @ 12 paisa per liter deserves to be treated under the specific category of ‘medical relief’ or it has to be held as an association advancing any other objects of general publicutility, the Tribunal held that “Section 2(15) 1st proviso applies in latter category only being specific in nature. The Legislature allows exemption to assesses performing various charitable activities in various categories u/s. 2(15) of the act. One of them is ‘medical relief’. The Revenue’s endeavour seeks to exclude this category in case of animals from getting exemption by adopting a restrictive meaning in claiming its application in case of humans only.”

In the light of the Constitutional provisions and judicial pronouncements, the Tribunal emphasized that, “The assessee’s activities herein above in making available the facilities in question to milching animals are to ensure that they are free from diseases, their breed improvement and overall well being. We apply all the above stated constitutional provisions and case law to conclude that ‘medical relief’ in section 2(15) of the Act very much includes the above referred relief made available by the assessee to the milch animals in lieu of a nominal cess @ 12 paise per litre. We reiterate that we are dealing with a charitable purpose definition clause in a tax statute to be given a broader interpretation in order to give its full effect. We hold that assessee’s activities deserve to be treated under the former specific category of ‘medical relief’ not covered by sec. 2(15) proviso inserted w.e.f. 01-04-2009 in question. It is accordingly held to be not an entity advancing any other object or general public utility without prejudice to our findings hereinabove. We reverse findings of both the lower authorities on this count as well.”

Read the full text of the order below.

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