Trust wins section 80G approval for environmental preservation activities despite selling recycled materials commercially

ITAT Mumbai allowed the appeal and set aside the CIT(E)'s order denying section 80G approval. The trust, established for environmental preservation and registered under Bombay Public Trusts Act 1950, was denied approval on grounds that it spent CSR funds and sold recycled materials commercially. ITAT held that environmental preservation activities constitute charitable purposes regardless of material sales, as the trust's primary objective was environmental conservation. The tribunal found no other objections raised by CIT(E) and no questions regarding genuineness of activities, concluding all conditions for section 80G approval were satisfied.

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Issues Involved:
1. Rejection of application for approval under section 80G(5) of the Income Tax Act, 1961.
2. Determination of whether the appellant trust's activities qualify as 'charitable purpose' under section 80G(5).
3. Denial of effective opportunity of hearing to the appellant trust.

Summary of Judgment:

1. Rejection of Application for Approval under Section 80G(5):
The assessee challenged the impugned order dated 30/03/2023, passed by the learned Commissioner of Income Tax (Exemption), Mumbai, which rejected the assessee's application for approval under section 80G of the Income Tax Act, 1961. The application was filed in Form 10AB, and the rejection was based on the grounds that the assessee is engaged in commercial activity and not in charitable purposes as required under section 80G(5).

2. Determination of Charitable Purpose:
The main object of the assessee, as per the Trust Deed dated 09/10/2019, is the preservation of the environment through recycling post-consumer plastic waste. The learned CIT(E) rejected the application on the basis that the activities of the assessee, such as selling recycled plastic granules, are commercial. However, the Tribunal found that the preservation of the environment is included in the definition of "charitable purpose" under section 2(15) of the Act. The Tribunal noted that the assessee is registered under section 12AA of the Act and satisfies all conditions laid down in section 80G(5), including not benefiting any particular religious community or caste and maintaining regular accounts.

3. Denial of Effective Opportunity of Hearing:
The assessee claimed that it was not provided an effective opportunity of hearing before the rejection of its application. The Tribunal observed that the learned CIT(E) did not raise any doubts regarding the genuineness of the activities conducted by the assessee and found that the assessee was performing an important role in recycling plastic waste, which is essential for environmental protection.

Conclusion:
The Tribunal concluded that the assessee's activities fall under the category of preservation of the environment, which is a charitable purpose. The revenue generated from these activities is used solely for plastic waste management. Therefore, the Tribunal set aside the impugned order dated 30/03/2023 and allowed the appeal, granting the approval under section 80G of the Act.

Order Pronounced:
The appeal by the assessee is allowed, and the order was pronounced in the open Court on 29/11/2023.

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