AI Drafter 
TaxTMI 
TaxTMI 
2019 (3) TMI 1920
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.... of convenience, a common and consolidated order is being passed. 2. Learned D. R., at the outset, submitted that assessee, upto assessment year 2008-09, had been claiming exemption u/s 11 under the head 'objects of general public utility' whereas from assessment year 200910 the assessee had claimed the exemption under the head 'preservation of environment'. Learned D. R. submitted that to avoid the proviso inserted in section 2(15) of the Act, (whereby the activities of general public utility are not treated as charitable if the activities involve trade or business) the assessee had claimed exemption under different head of preservation of forests. Learned D. R. placed reliance on the order of the Assessing Officer wherein the Assessing Officer did not allow the exemption u/s 11 of the Act. Learned D. R. further submitted that assessee had claimed certain expenses which related to prior period and therefore, the Assessing Officer had rightly made the addition and which learned CIT(A) has wrongly deleted. Further arguing the deletion of addition on account of forest development expenses, Learned D. R. submitted that Assessing Officer had rightly made the addition which learned C....
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....8-09 on similar grounds though in those years the assessee had claimed exemption under the head 'objects of general public utility'. However, during the year under consideration the assessee had claimed exemption under the specific head 'preservation of environment' (including watersheds, forest and wildlife) as this specific head has been included in the definition of section 2(15) w.e.f. 01/04/2009. The activities of the assessee remained same and the activities being carried out by the assessee has already been held charitable in nature. Learned CIT(A), while allowing relief to the assessee, has held that if the assessee falls into a specific category then specific category will have precedent over the general category. The matter regarding registration has attained finality when Hon'ble Supreme Court dismissed the appeal of the Revenue. The facts regarding grant of registration u/s 12AA has been reproduced by Tribunal in its order dated 13/12/2018for assessment year 02-03 to 08-09, which for the sake of convenience are reproduced below: "5. We have heard the rival parties and have gone through the material placed on record. We find that assessee was initially denie....
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....C/2007. (v) In the interim, the appellant also filed a Special Leave Petition (SLP) before the Hon'ble Supreme Court against the order dated 26-11-2002 as passed by the Hon'ble Allahabad High Court, for remanding the case back to CIT, Lucknow to decide the grant of registration afresh. While deciding the said SLP the Hon'ble Supreme Court vide its order dated 27-11-2007 reported under citation no (165 TAXMAN 533 ) held that the primary condition for grant of exemption under Section 11 is to have a registration under Section 12A of the Act and the same being pending for disposal before the Hon'ble Tribunal. The Hon'ble Tribunal was directed to decide the grant of registration against the order passed by the Commissioner rejecting the application filed under section 12A of the Act without being influenced by any of the findings recorded by the Hon'ble High Court in the impugned order. (vi) In pursuance of the directions of the Hon'ble Supreme Court in case reported under citation no 165 TAXMAN 533, the Hon'ble Income-Tax Appellate Tribunal at Lucknow in I.T.A No 512/LUC/2007 vide order dated 1601-2009 has proceeded to grant the regist....
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.... AO by placing reliance on the Judgment of the Hon'ble Allahabad High Court decided on 26.11.2002 and reported under 129 Taxman 527 wherein it exploitation of forest was held to be commercial activity and the AO not observing the directions of the Hon'ble Supreme Court as given -in Judgment reported in (165 Taxman 533). (b) The appellant vide its submissions has also rebutted the finding of the AO who relied on the judgment of the Hon'ble Allahabad High Court in appellants case dated 26-11-2002 cited under citation (129 TAXMAN 527) wherein the Hon'ble Court has held that the exploitation of forest is a commercial activity. (c) In this regard, I have gone through the submission of the appellant and the background in which the Hon'ble Court has pronounced its ruling dated 26/11/2002 cited under citation (129 TAXMAN 527). The subject ruling was pronounced by the Hon'ble Allahabad High Court with respect to the appellant's contention that its income is eligible for exemption under Section 11 of the Act if the benefit of Section 10(20) of the Act is not available to it. In the course of deciding the matter the Hon'ble High Court has stated t....
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....ers to open an issue which has been duly decided in favour of the appellant and with the facts remaining identical at the time of pronouncement by Hon'ble ITAT as well as the time of assessment proceedings. Consequent to the findings of the Hon'ble ITAT Lucknow and its examination of the fact that the Appellant is not doing commercial activity and which is upheld by the Hon'ble Higher Judiciary at a later date (in this case after the Hon'ble High Courts order dated 26-11-2002), the said findings of Hon'ble ITAT as duly attained finality would prevail. (e) I find merits in the arguments of the appellant on the basis of the Judgment of the Hon'ble High Court Of Madras in Seshasayee Paper & Boards Ltd. v. Inspecting Assistant Commissioner (24 TAXMAN 604) and the decision of the Hon'ble Mumbai High Court in the case of Murlidhar Bhagwandas v. Commissioner of Income-tax (284 ITR 548). The same has been discussed in detail in Ground 3 above. (f) In view of the above discussion and judgments of the Hon'ble Courts as elaborated above, I hold that the AO has erred in not applying the findings of order of Hon'ble Supreme Court (reported i....
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....ate Government; (b)to prepare projects relating to forestry within the State; (c)to undertake research programmes relating to forest and forest products and render technical advice to State Government matters relating to forestry; (d)to manage, maintain and develop such forests as are transferred or entrusted to it by the State Government; (e)to perform such functions as the State Government may from time to time require. c) On perusal of the Section for which the appellant was incorporated, it is seen that the very primary purpose for its incorporation was "to undertake removal and disposal of trees and exploitation of forest resources entrusted to it by the State Government". The modus operandi being adopted for removal trees and the exploitation of produce has been diagrammatically explained by the appellant in his submissions put forth before me. It is also to be seen that the activities of the appellant are being done under a defined working plan of the Central Government and the state Government which is duly monitored. The activities undertaken by the appellant are also in line with the findings of the Hon'ble Supreme Court in....
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.... illicit felling of trees. In the second place, the Corporation is a wholly Government owned Corporation dedicated to the better preservation and development of forests and better exploitation afforest produce. The profits of the Corporation are in truth the profit of the state itself. The state by establishing this Corporation does not intend to enter into a commercial activity. The activity is only furtherance of the object of the establishment of the Corporation itself. The prime aim of establishment of the Corporation is environment stability and maintenance of ecological balance. The revision of economical benefit, if any, is only supporting to the principles of the above aim. It is not the prime object and therefore it is difficult to hold that assessee's activities are for commercial exploitation of forest which will disentitle the assessee to obtain registration. Assessee is not treating forest just as a source of revenue. 25. The submission of the assesse to the effect that National Commission on Agriculture bought out its interim report on produce of various tress in August 1972 in which it recommended establishment of Forest Corporation for the purpose of at....
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....akes it clear that there was a protracted litigation in the a case in the year 1980 between the State of U.P. and private Contractors who was highest bidder not getting the award of contract due to apprehension of the work being detrimental of the forestry. Ultimately the issues was decided in favour' of the Govt by the Hon'ble Supreme Court of India. It says that the case reported in 2 SCC 365 in the case of State of U.P. V Vijay Bahadur Singh, the Hon'ble Supreme Court of India held as under:- "In the first place....... The State is not merely interested in realizing revenue but is equally interested in the preservation and development of forests. It cannot knowingly enter into contracts with bidders who must have, at the back of their minds the opportunity or the gamble of illicit felling of trees. In the second place the Corporation is a wholly Government owned Corporation dedicated to the better preservation and development afforests and the better exploitation of forest produce. The profits of the Corporation are in truth the profits of the Slate itself." The Hon'ble Court upheld the Contention of the State for allowing the exploitation of the private....
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....igh Court in ITA No 70 of 2009 bearing date 12-05-2010 and Hon'ble Supreme Court in SLP No CC 2590/2011 bearing date 12-05-2011. The orders of the Higher Judicial Authorities are reproduced below: Hon'ble Jurisdictional Allahabad High Court in case no ITA No 70 of 2009 bearing date 12-05-2010 "Present appeal under Section 260A of the Income-Tax Act has been preferred raising o question whether U.P. Forest is liable for grant of certificate under Section 12-A of the Income-Tax Act 1961 ? It is has been admitted at bar that Hon'ble Supreme Court while dealing with the same issue in a case reported in (2008) 297 ITR 1 U.P. Forest Corporation Vs. Deputy Commissioner of Income-lax, settled that U.P. Forest Corporation is eligible for grant of certificate under Section 12-A of the Income-Tax Act, 1961. In view of the law settled by the Hon'ble Supreme Court there appears to be no justification to admit the appeal on the same issue. So far as condonation of delay is concerned once delay has been condoned there appears to be more justification to admit the appeal on the same issue, Being concluded by finding of fact no substantial questio....
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....uld introduce judicial indiscipline, which is not called for even in such cases. It would lead to a chaotic situation". Similarly the Order of Hon'ble ITAT dated 06.03.2009 for A.Y. 2002-03 in appellants case too has attained finality. i)Accordingly I hold that once the activities of appellant are held to be in the nature of "Preservation of environment" therefore these activities are held to be Charitable in Nature and the same cannot be categorized partly as charitable and partly as non-charitable as they are covered within the objects for which it was incorporated and is functioning on those lines." We do not find any infirmity in the order of learned CIT(A), therefore, ground No. 3 & 5 are also dismissed. 4.2 The activities of the assessee remained same and there is no change and therefore, following the judicial precedent in the case of the assessee itself, the activities being undertaken by the assessee are held to be charitable in nature. As regards the arguments of Learned D. R. that in earlier years the assessee had claimed exemption under the head 'objects of general public utility' whereas in the years under consideration the assessee had claimed....
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....r to only some of them his intention is that these latter directions should prevail as regards these while as regards all the rest the earlier direction should have effect. In Pretty v. Solly (1) (quoted in Craies on Statute law at p. 205, 5th Edition) Romilly, M.R. mentioned the rule thus: "The rule is, that whenever there is a particular enactment and a general enactment in the same statute and the latter, taken in its most comprehensive sense, would overrule the former, the particular enactment (1) (1859) 26 beav. 606, 610.must be operative, and the general enactment must be taken to affect only the other parts of the statute to which it may properly apply". The rule has been applied as between different provisions of the same statute in numerous cases some of which only need be mentioned: De Winton v. Brecon (1), Churchill v. Crease (2), United States v. Chase (3) and Carrol v. Greenwich Ins. CO. (4). Applying this rule of construction that in cases of conflict between a specific provision and a general provision the specific provision prevails over the general provision and the genera provision applies only to such cases which are not covered by the special provision,....
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....ended with effect from 01.04.2009 on the other. As we observed earlier the Supreme Court held that the concluding the crucial words "not incolving the carrying on of any activity for profit" go with the words "object of public utility" and not with "advancement". In our view the proviso introduced by the 2009 amendment does not change this position. The opening words of the proviso "provided that the advancement of any other object of general public utility" were also a part of section 2(15) as it originally stood. The words that follow in the proviso "shall not be a charitable purpose, if it involves the carrying of any activity in the nature of trade, commerce or business.....etc." replaced the words in the original Section 2(15) "not involving the carrying on of any activity for profit". On a parity of the reasoning in Surat Art Silk case, the words in the proviso that follow the opening words "Provided that the advancement of any other object of general public utility" equally apply to the "object of general public utility" and not to the word "advancement". The plain language of the proviso does not convey an intention to the contrary. Infact, the legislature could ha....
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....01.2009 in ITA No S12/LUC/2007, has granted registration to the assesse u/s 12A of the Income l-Tax Act, 1961. The assesse vide its written reply dated 29.12.2009 has claimed that in view of the said decision of the Hon'ble I.T.A.T., its entire income is exempt u/s 11 of the income- Tax Act, 1961. After a careful considerations of the material on record and in compliance with the I.T.A.T.'s directions, exemption claimed by the assesse u/s 11 is allowed and the returned income is accepted 1997-1998 29.12.2009 Section 254 read with Section 143(3) Hon'ble I.T.A.T., vide its order dated 16.01.2009 in I.T. Act No 512/LUC/2007, has granted registration to the assesse u/s 12A of the Income-Tax Act, 1961. The asesse vide its written reply dated 29.12.2009 has claimed that in view of the said decision of the Hon'ble I.T.A.T., its entire income is exempt u/s 11 of the Income -Tax Act, 1961, After a careful considerations of the material on record and in compliance with the I.T.A.T.'s directions, exemption claimed by the assesse u/s 11 is allowed and the returned income is accepted 1998-1999 29.12.2009 Section 254 read with Section 143(3) Hon'ble I.T.A.....
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....ly disallowed as prior period expenses. The AO in the assessment order has pinpointed out that the appellant should have made a provision in its accounts for that year in which the purchase price/royalty was to be paid. The AO further stated that the appellant is following mercantile system of accounting, therefore, these expenses were disallowed. (b) In this regard the appellant has submitted that the said amount of Rs. 6,63,812 cannot be considered as a Prior period expenses in light of the fact that such amount is only determinable and crystallised after the close of the Financial Year i.e. the said expenses had not crystallized at the close of the relevant Financial Year. (c) During the course of appellate proceedings it was submitted that the basis -of determining this expense is a certain percentage which is decided In the Committee meeting held after close of the Financial Year. Therefore, the said amount is crystallized in the subsequent F.Y. in which it is determinable. The appellant in his replies has given a thrust on the time period when these expense are crystallized and thereafter only the same can be recorded in the books of accounts. The appellant ....
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....the following Judgments of Hon'ble High Court: * Hon'ble High Court Of Delhi In the case of Commissioner of Income-tax, New Delhi v. Shri Ram Pistons & Rings Ltd(174 TAXMAN 147) * Hon'ble High Court Of Delhi in the case of Commissioner of Income-tax v. Triveni Engg. & Industries Ltd. (196 TAXMAN 94) (e) The undersigned has gone through the written submissions of the appellant and the above cited judgments and on perusal it is evident that the expenses can only be booked when the same are known to the appellant and for that matter its crystallisation and determination of expenses is necessary. The key words are 'determined' and 'crystallised'. The appellant was certain of the expenses to be paid only when it was decided/finalised by the Committee of the Government of Uttar Pradesh after the close of the earlier year. The contention of the appellant is supported by the judgment of the Hon'ble Gujarat High Court in the case of Saurashtra Cement & Chemical Industries Ltd. v. CIT (213 ITR 523) where it has been categorically held that merely because an expense related to a transaction of an earlier year does not become a liabili....
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....he assessee or the tax that the Department is likely to collect from him whether in one year or the other." (h) In light of the written submissions of the appellant and judgments cited it ;is to be seen that there being no change in rate of taxes, the amount incurred under the said head has to be allowed in the AY under consideration as the said expenses were determined and crystallized during the AY under consideration. Accordingly, the disallowance made by the AO under the head Prior Period expenses is hereby deleted. The said expenses are allowed for the reason that these expenses were determined and crystallized only during the AY under consideration. Ground of appeal No. 8 is allowed." Finding no infirmity in the order of learned CIT(A), these grounds of appeal of the Revenue are also dismissed." 5.1 Following the above findings of the Tribunal in the case of the assessee itself, we dismiss ground No. 4 in all appeals. 6. As regards addition on account of forest development expenses in assessment year 2009-10, the learned CIT(A) has deleted the addition by holding as under: "5.7 Ground of appeal No. 7 a)This ground....
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.... Tax Assessment Proceedings completed on U.P. Forest Corporation for the Financial Year 2008-09 relevant to Assessment Year 2009-10 that: I am the in- charge of the accounts department of U.P Forest Corporation; As and when required, the Chief Account Officer, U.P. Forest Corporation as well as the other personnel working with the accounts department has accompanied the Authorized Representative of U.P. Forest Corporation to the office of the Assessing Officer in connection with the Assessment proceedings for ASSESSMENT YEAR 2009-10; The relevant documents in form minutes of meetings sanctioning the approval of the funds, negotiable instruments such as drafts, cheques demonstrating disbursal o funds, utilization certificate as issued from the field offices were produced before the Assessing Officer in the course of hearings for substantiating the expenses incurred by U.P. Forest Corporation and the same were duly checked and verified by the Assessing Officer. DEPONENT VERIFICATION Verified that the contents of my above said affidavit are true and correct to the best of my knowledge and belief and nothing has been concealed therein.....
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....rest building etc. Thus, it is hereby held that appellant has incurred expenses for the objects for which it was created. The finding of the Assessing Officer that the amount was not utilized for forest development activities cannot be upheld and accordingly the addition/disallowance of Rs. 7,13,52,744/- stands deleted. The grounds of appeal No. 7 is allowed." 6.1 The learned CIT(A) has rightly relied on the CAG report wherein the auditor had not pointed out anything adverse with regard to the expenses and therefore, has rightly held that the expenses were shown in line with the objects and therefore, we do not find any infirmity in the same. In view of the above, ground No. 5 of the Revenue's appeal is dismissed. 7. Now coming to ground No. 6 in assessment year 2009-10 regarding material loss, the learned CIT(A) has dealt with this issue in para 5.9 of his order, which is reproduced below: "5.9 Ground of appeal No. 9 a) This ground relates to the disallowance of expenses debited under the head material loss amounting to Rs. 29,26,607/-. In the course of appellate proceedings the appellant stated that the nature of the activities involved is s....