AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 1865
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.... 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. 5. Learned A. R., on the other hand, invited our attention to the sequence of events and submitted that the Tribunal, vide order dated 16/01/2009, had originally allowed registration u/s 12A of the Act and the Tribunal, vide order dated 06/03/2009 while following the earlier order dated 16/01/2009, has already held that assessee was a charitable institutti....
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....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, had held that if the assessee falls into a specific category then specific category will have precedent over the general category. The Tribunal, while dismissing the appeals of the Revenue vide its order dated 29/03/2019 in I.T.A. Nos.357 to 360/Lkw/2017 for assessment year 2009-10 to 11-12 & 13-14, I.T.A. No.282/Lkw/2017 for assessment year 2012-13 and I.T.A. No.556/Lkw/2018 for assessment year 2014-15, has held as under: "4. We have heard the rival parties and have gone through the material placed on record. We find that vide order dated 13/12/2018 the Tribunal has dismissed the appeals of the Revenue for assessment year 2002-03 to 2008-09 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 b....
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....06-2007 in compliance to the terms of the directions of the Hon'ble Allahabad High Court in Civil Misc Writ Petition No 173 (MB) of 1998 reconsidered the merits for grant of registration under Section 12A of the Act. The CIT, Lucknow proceeded to deny registration on the findings that the appellants activities do not qualify to be in the nature of Charitable Activities and reliance was also placed on the Judgment of the Hon'ble Allahabad High Court in appellants own case reported in (129 TAXMAN 527) wherein the Hon'ble Court has observed that the "Exploitation of forest" is a commercial Activity. (iv) The order of the CIT Lucknow dated 13-06-2007 denying registration under Section 12A of to the Act to the appellant was again challenged before the Hon'ble ITAT, Lucknow in ITAT appeal No I.T.A No 512/LLIC/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 i....
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....nder head 'preservation of environment' (including watersheds, forest and wildlife) has also been decided by the Tribunal for assessment year 02-03 to 08-09 in favour of the assessee, which findings for the sake of completeness, are reproduced below: "As regards the contention of Revenue that activities of the assessee do not fall within the definition of preservation of environment, we find that learned CIT(A), after relying on the decision of Hon'ble I.T.A.T., as upheld by Hon'ble Supreme Court, has held that the activities of the assessee are charitable in nature. The learned CIT(A) has noted these facts in his order and the relevant findings of learned CIT(A) are reproduced below: "Ground of appeal No. 5 & 6 (a) This ground of appeal relates to the inference drawn by the 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 find....
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....while granting exemption to the Appellant under Section 12A has categorically gave its findings as summarised and reproduced in the paragraph 5.1(d) of this order that the activities of the appellant are charitable and not being conducted on any commercial lines with respect to exploitation of forests. The subject finding of the Hon'ble ITAT vide its order dated 16.01.2009 has attained finality pursuant to dismissal of the appeal preferred by the Department both by at Hon'ble Jurisdictional Allahabad High Court in case no 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 (refer to the contents of the orders as reproduced above in para 5.1(e) of this order). The AO cannot travel beyond his powers 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 d....
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....on "Charitable Purpose". b) In light of the findings of the AO, it becomes imperative to understand that working of the appellant and whether the same classifies to be charitable in nature for the purposes of Section 2(15) of the Act. The appellant has placed before me the copy of the enactment under which it was incorporated. Section 14 of the said enactment provides the following: "Section 14.: Function of the Corporation Subject to the provisions of this Act, -and to any general or special directions of the State Government, the functions of the Corporation shall be following, namely: (a)to undertake removal and disposal of trees and exploitation of forest resources entrusted to it by the State 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 appe....
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.... forests and better exploitation of forest produce within the state and for matters connected therewith". In the decision relied upon by the assessee in the case of M.C. Mehta Vs Kama/ Nath (supra), it was held that State is the Trustee of all the natural resources which are meant for public use and enjoyment. The state as a trustee is a under a legal obligation to protect the natural resources which includes forest. The state is not merely interested in realizing revenue but is equally interested in preservation and development of forests. It cannot knowingly enter into contracts with bidders who must have at the back of their minds the opportunity oc 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 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....
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....vt. to check illegal felling of the trees and provide gainful employment to the Tribals living in and around forest. The exploitation of the forest was confined to removal and disposal of fallen, dried and diseased trees. The felling of growing trees, it is stated is strictly prohibited. "Commercial Exploitation" which was one of the reasons cited by the C.I.T. not to grant registration, appears to be superfluous. The role and status of the Corporation is given at page 6 of the paper book-l, vide which the assessee explain the synopsis of the charitable purposes of the Corporation. SI No 8 at page 6 of the paper book-l makes 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....
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....a century." (Extracts from Annual Report of the Period 1.10.1975 -30.09.1976 relevant to assessment year 1977-78)" 29. The reading of the above makes it clear that exploitation of the forest is not for any commercial purpose but for preservation. Hence, we are of the View that the Objections given by the C.I.T. to overlook the claim of the registration is incorrect" e) Further the observations / decisions of the above Hon'ble ITAT Order in ITA 512/LUC/ 2007 has attained finality pursuant to dismissal of the appeal preferred by the Department both by Hon'ble Jurisdictional Allahabad High 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 ....
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.... wherein it has been held that "Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing officer and since he acts in a quasi judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore merely on the ground that the Tribunal's order is the subject matter of revision in the High Court or the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would 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 ....
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....nt in the case of J. K. Cotton Spinning & Weaving Vs The State of Uttar Pradesh & Ors on 12 December, 1960 (1961 AIR 1170) which has been relied by the appellant and the same is being reproduced below: "The rule that general provisions should yield to specific provisions is not an arbitrary principle made by lawyers and judges but springs form the common understanding of men and women that when the same person gives two directions one covering a large number of matters in general and another 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 ....
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....unjab & Haryana has held the following: "38. The question in this appeal which pertains to the assessment year 2009-10 is the effect of the amendment ot section 2 (15) introduced on 19.12.2008 which came into force with effect from the financial year 01.04.2009. 39. It is necessary to compare section 2(15) as it stood under the 1961 Act and as interpreted by the Supreme Court in Surat Art Silk's case ((supra)), on the one hand and Section 2 (15) as it was amended 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 Sect....
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....view of the said decision of the Hon'ble'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 1995-1996 29.12. 2009 Section 254 read with Section 143(3) Hon'ble'ble I.T.A.T., vide its order dated 16.01.2009 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 19971998 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.....
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....T(A) exhaustively and after relying on number of case laws and keeping in view the facts and circumstances of the case, the learned CIT(A) has allowed relief to the assessee by holding as under: "5.7 Ground of appeal No. 8 (a)This ground of appeal relates to disallowance of expenses amounting to Rs. 6,63,812 by the AO for the reason that these expenses pertain to prior period and were accordingly 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 expens....
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....h Court in the case of Commissioner of Income-tax v. Amrit Banaspati Co. Ltd (59 ITR 388) with respect to payment of dearness allowance wherein the Hon'ble Court has held that the claim to deduction, therefore, was only admissible in the year when the liability under the award was finally determined. vi) Similar findings have also been given in 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....