TaxTMI 
TaxTMI 
2019 (4) TMI 769
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....ance of capital expenditure and addition of Rs. 90,45,483/- made on account of disallowance of ECP contribution expenses. 3. The facts on all vital points are common, therefore for the facility of reference we take the facts from the Asstt.Year 2014 15. 4. Brief facts of the case are that the assessee is a trust registered under section 12AA of the Income Tax Act. The assessee is running a common effluent treatment plant for treatment of polluted water generated by industrial units around Nandesari area, who are members of the appellant trust. The assessee has filed return of income on 7.8.2014 declaring NIL income. The case of the assessee was selected for scrutiny assessment by issuance of notice under section 143(2) of the Act. During the assessment proceedings, the AO noticed that the assessee-trust has claimed application of capital expenditure of Rs. 4,71,49,186/- which included depreciation of Rs. 3,19,05,911/-. The AO doubted a part of the capital expenditure of Rs. 1,52,43,275/- to be disallowable on the ground that predominant object of the assessee-trust is to make profit; there was no spending of the income exclusively for the purpose of charitable activitie....
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.... to the AO provision of section 2(15) of the Act is applicable to the assessee-trust, because the predominant object of the assessee is in the nature of trade, business or commercial activities and to make profit, and therefore, there is no exclusive usage of income or profit for the charitable purpose as defined in section 2(15) of the Act, and therefore, the assessee is not entitled for benefit under section 11 of the Act. The ld.CIT(A) has considered both the issues in detail and observed that the activities of the assessee trust clearly falls within the ambit of the clause of preservation of environment and the assessee is eligible for all the benefits under sections 11 and 12 and all the capital expenditure incurred by the assessee has to be considered as application of income. By holding so, the ld.CIT(A) has also treated ECP contribution of Rs. 90,45,483/- as part of application of income, and accordingly disallowance to this extent also deleted. 7. We find that similar issue was also raised by the assessee in the Asstt.Year 2010-11 and the Tribunal has allowed the claim of the assessee vide order dated 28.11.2017. The relevant part of order of the Tribunal reads as under....
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....utuality. This results into the fact that they fall under the first proviso of section 2(15). Above stated facts are giving sufficient ground to me , to take the opinion that assessee is hit by the first proviso of the subsection 15 of section 2, which was introduced by the Finance Act, 2008 (w.e.f. 1.4.2009), according to which the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any services in relation to any trade, commerce or business, for a cess or fee or any other consideration beyond Rs. 25 lakhs, irrespective of the use or application or retention, of the income from such activity. And this led to the forfeiture of exemption u/s 13(8)." 4. Aggrieved, assessee carried the matter in appeal before the ld. CIT(A) but without any success. Ld. CIT(A) while upholding the order of the Assessing Officer on this point inter alia observed as follows :- "3.3.1. I have considered the submissions of the learned Authorized Representative and the order of the Assessing Officer. There is no dispute t....
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....ated above will not affect its character as such since the proviso provides that the advancement of any other object of general public utility shall not be regarded as charitable purpose if it involves in carrying on any activity in the nature of trade, commerce or business or rendering any service in relation to any 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 activity. Assessing Officer has dealt in details all objections of the appellant and passed the order considering various case laws cited by him. There is no infirmity in the order of the Assessing Officer and the same is upheld." 5. Assessee is aggrieved and is in appeal before me. When this appeal was called out for hearing, my attention was invited to a division bench order of this Tribunal in the case of DDIT vs. Naroda Enviro Projects Ltd. ITA No.546/Ahd/2013, order dated 29.01.2015, wherein on materially identical facts of the case, similar action of the Assessing Officer was held to have been correctly reversed by the CIT(A) on the basis of following reasons: "4. After going th....
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....of assessee's MOU after its conversion as Company u/ s. 25 of the Companies Act. The plain reading of objects of company reveals that main object is protection of environment by abetment of pollution of various kinds like water, air, soil, etc. In this background, activities of assessee company squarely falls u/ s. 2(15) of the Income-tax Act. The proviso to Section 2(15) is applicable to objects of general public utility. The same was also clarified vide CBDT Circular No. 11 dated 19.12.2008. Since assessee company is directly engaged in preservation of environment as per Section 2(15), the proviso as pointed by Assessing Officer is not applicable in the instant case. Accordingly, Assessing Officer was not justified to conclude that assessee is not doing any charitable activity. With regards to Assessing Officer's contention that assessee is carrying out business activity and is in the nature of profit making, we find that benefit of exemption cannot be denied on the ground that it had made surplus/ profits as long as it is not meant for private profit of seller. Profit making is not predominant object of activity. Under the facts and circumstances, CIT(A....
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....on the basis, as the learned Commissioner has chosen to proceed, that regulatory functions are not activities for charitable purposes, for the elementary reason that the expression "charitable purposes", under section 2(15), includes "any other objects of the general public utility" which, as we have noted above, is an expression of wide import. In the scheme of things which operate in the contemporary society, many of these regulatory functions are entrusted to the bodies independent of the Government and the object of the bodies so entrusted with the regulatory functions are, in our humble understanding, clearly pursuing objects of general public utility. We must emphasize once again that the connotations of "charitable purposes", in view of specific provisions of the Act, are significantly wider than connotations of this expression in common parlance." 7. Ld. Departmental Representative's main contention is (1) that so far as the decision in the case of Himachal Pradesh Environment Protection & Pollution Control Board (supra) is concerned, it is in the case of a regulatory body whereas the case before me is of a voluntary association industries and; secondly that if the....