Malanadu Farmers Society Vs DCIT (ITAT Cochin)
The Income Tax Appellate Tribunal (ITAT), Cochin, decided two connected appeals concerning assessment years 2016–17 and 2022–23, arising from orders passed by the National Faceless Appeal Centre which had upheld reassessment and regular assessment orders denying exemption under Section 11 of the Income-tax Act, 1961. The assessee is a charitable society registered under the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 and under Section 12A of the Income-tax Act. Its stated objects are social welfare activities aimed at improving the living conditions of poor and marginal sections of society, with special emphasis on small and marginal farmers. For the relevant years, the assessee filed returns declaring nil income after claiming exemption under Section 11.
The Assessing Officer reopened the assessment for AY 2016–17 under Section 147 and completed assessment for AY 2022–23 under Section 143(3), holding that the assessee was not genuinely engaged in charitable activity. The AO observed that the assessee’s major activity was procurement, processing, and sale of milk, with turnover exceeding ₹107 crore and net surplus of about ₹13.93 crore, and concluded that the assessee was carrying on a commercial milk business rather than providing relief to the poor. Consequently, exemption under Section 11 was denied and the surplus was brought to tax. The Commissioner (Appeals) affirmed the AO’s findings.
