TaxTMI 
TaxTMI 
2021 (9) TMI 1174
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....hich qualifies under the advancement of an act of general public utility, therefore the object of the assessee does not fall within 'charitable purpose' as defined in section 2(15) of the Act; 3. Ld. Commissioner of Income Tax (A) has erred in law and facts by allowing the appeal of the assessee ignoring the fact that the Registration u/s 12A of the I.T. Act, 1961 to the assessee was granted for "Preservation, supervision and development of forest" and not for the exploitation of forest produce; 4. Ld. Commissioner of Income Tax (A) has erred in law and facts by deleting the addition/disallowance made by the AO on disallowance of capital expenditure amounting to Rs. 5,16,73,527/- and disallowance of repayment of loans amounting to Rs. 16,99,99,664/. 5. Ld. Commissioner of Income Tax (A) has erred in law and facts by allowing exemption u/s 11 of the I.T. Act, 1961 ignoring the fact that the assessee is involved in the activities of trade/commerce/business and is as such hit by the provisions of the first proviso to section 2(15) of the I.T. Act, 1961; 6. Ld. Commissioner of Income Tax (A) has erred in law and facts by holding that assessee....
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....09. 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 been inc....
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....vide its order 13-06-2007 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'....
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....that activity of the assessee do not qualify under 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). ....
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....(d) In this context the Hon'ble Tribunal at Lucknow vide its order dated 16.01.2003 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 ....
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....that the activities of the appellant partly classify as charitable and partly as commercial and do not fall within the Expression "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....
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.... entrusted forest resources to U.P. Forest Corporation as per Section 14(a) with reference to the objects enshrined in the preamble "for better preservation, supervision and development of 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 Kamal 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 of 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 int....
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....d as entirely correct. The accounts are to be audited by the Govt. agent and the reports are to be each year tabled before each house of legislature 27. It is also clear that the Corporation was asked by the State Govt. 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 C....
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....logging methods, use of improved hand tools, mechanical hand saws, so that gradually a revolution could be ushered in the methods of felling, extraction and transport, as has been practiced by their fathers and forefathers for well over 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 Secti....
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....nvironment. The above stated order of the Hon'ble ITAT dated 16.01.2009 as outlined in para 5.1(d) as duly upheld by the Higher Judicial authorities is binding on the authorities below as held by the Hon'ble Jurisdictional Allahabad High Court in the Case of N. N. Agarwal v. CIT [1991] 189 ITR 769 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 o....
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....ing watershed's, forests and wildlife) as a charitable activity makes the appellant govern by the specific clause of "Preservation of Environment (including watershed's forests and wildlife) and not "advancement of any other general public utility. i) The above finding also hold good in light of the findings of the Hon'ble Supreme Court Judgment 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 particu....
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....conducting a charitable activity by way of printing newspaper and the same was held to be an activity in the nature of general public utility by the Privy Council. However post amendment, Assessing Officer questioned the claim of exemption on the pretext that the Tribune is doing a commercial activity by way of selling newspaper. In the instant case the Hon'ble court of Punjab & 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 involving 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 ....
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....r concerned. The details of the same are tabulated below: Asstt Year Date of Order Section under which passed Order 1990-91 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 assesse vide its written reply dated 29.12.2009 has claimed that in 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 assessee 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 I.T.A.T., vide its order dated 16.01.2009 in ITA No S12/LUC/2007, has granted registration to the assessee u/s 12A of the Income l-Tax Act, 1961. The assessee 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....
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....hat this issue has also been decided in favour of the assessee for assessment years 02-03 to 08-09 by the Tribunal vide order dated 13/12/2018. The findings of the Tribunal are contained in para 8 onwards, which for the sake of completeness are reproduced below: "8. Now coming to ground No. 4 & 6 which relate to deletion of addition which the Assessing Officer had made on account of prior period expenses. We find that this issue has also been dealt by learned CIT(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, the....
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....ent (163 TAXMAN 547) wherein the Hon'ble High Court while deciding a similar issue held that Royalty is to be allowed on actual payment and such deduction would be allowed only after its payment. In the present matter, though the liability to pay the royalty was in relation to the assessment years 1981-82 and 1982-83, the liability to pay the royalty was finalised on 2-1-1985, and, therefore, section 43B of the Act would apply with full force if the royalty is paid in the said assessment year. (v)The Allahabad High 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. & Industrie....
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....me tax Act, raise disputes as to the year in which the deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax-chargeable on the assessee in two different years is different; but in the case of income of a company, tax is attracted at a uniform rate, and whether the deduction In respect of bonus was granted in the assessment year 1952-53 or in the assessment year corresponding to the accounting year 1952. That is in the assessment year 1953-54, should be a matter of no consequence to the Department', and one should have thought that the Department would not fritter away our energies in fighting matters of this kind. But, obviously, judging from the references that come up to us every now and then, the Department appears to delight in raising points of this character which do not affect the taxability of the 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 a....