The ACIT, (Exemptions), Circle-1, Ahmedabad V. Naroda Enviro Projects Ltd., Ahmedabad

ITA 2377/AHD/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0492 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 15-09-2016
• Court: TRIBUNAL

Judgement Text

ITA NO.2377/AHD/2016 ASSESSMENT YEAR: 2013-14 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO.2377/AHD/2016 ASSESSMENT YEAR: 2013-14 ASSTT. COMMISSIONER OF INCOME TAX VS. NARODA ENVIR O PROJECTS LTD., (EXEMPTIONS), PLOT NO.512-515, PHASE-1, CIRCLE-1, AHMEDABAD. GIDFC ESTATE, NARODA, AHMEDABAD 382 330. [PAN AAFFN 9138 D] (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. APARNA M. AGARWAL, CIT ( D.R.) RESPONDENT BY : NONE DATE OF HEARING : 13.11.2018 DATE OF PRONOUNCEMENT : 29.11.2018 O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAIN ST ORDER OF LD. CIT(A) DATED 22.07.2016 FOR THE ASSESSMENT YEAR 2013-14. 2 THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE THE LEARNED CIT(A) IS JUSTIFIED IN ALLOWING THE ASSESSEES APPE AL NEGATING THE FINDINGS OF THE ASSESSING OFFICER DENYING THE BENEFITS OF SE CTION 11 & 12 OF THE I.T. ACT AND DELETING THE ADDITIONS MADE OF RS.6,41 ,35,336/-.. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) IS JUSTIFIED IN TREATING THE ASSESSEES ACTI VITY AS CHARITABLE ACTIVITY AS PER SECTION 2(15) OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEAL) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. COMMISSIONER OF INCOME TAX (APPAL) MAY BE SET ASIDE AND THAT OF THE ASSESS ING OFFICER BE RESTORED. ITA NO.2377/AHD/2016 ASSESSMENT YEAR: 2013-14 PAGE 2 OF 5 3. FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAG ED IN THE ACTIVITY OF PRESERVATION OF ENVIRONMENT BY ABATEMENT AND CONTRO LLING POLLUTION OF ENVIRONMENT I.E. LAND, WATER AND AIR AND FOR THIS OBJECTIVE, THE ASS ESSEE IS PROVIDING POLLUTION CONTROL TREATMENT FOR DISPOSAL OF LIQUID AND SOLID INDUSTRI AL HAZARDOUS WASTE. THE ASSESSEE WAS ORIGINALLY REGISTERED AS A COMMERCIAL COMPANY U NDER THE COMPANIES ACT, 1956 ON 19/10/1995. THEREAFTER, THE ASSESSEE COMPANY WA S SUBSEQUENTLY CONVERTED INTO A COMPANY LIMITED BY SHARES, INCORPORATED U/S. 25 OF THE COMPANIES ACT, 1956; I.E. A COMPANY WHICH DOES NOT EXIST FOR EARNING THE PROFIT AS SUCH BUT EXIST FOR PROMOTION OF WELFARE AND WELLBEING OF THE SOCIETY AND PEOPLE AT LARGE. THE ASSESSEE COMPANY PRESENTLY HAS BEEN ACCORDED REGISTRATIONS U/S.12AA OF THE INCOME TAX ACT BY THE DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD AND A LSO HAD BEEN APPROVED AND RECOGNIZED AS AN INSTITUTION U/S.80G(5) OF THE INCO ME TAX ACT, 1961 AND THE JURISDICTION OF THE ASSESSEE COMPANY RESTS WITH THE DEPUTY DIRECTOR OF INCOME-TAX (EXEMPTION), AHMEDABAD. THIS REGISTRATION U/S. 12AA AND APPROVAL U/S.80(G)(5) OF THE I.T. ACT ARE IN FORCE EVEN AS ON THIS DATE. 3.1 IN POINT OF FACT, THE COMPANY WAS INCORPORATED WITH A SOLE OBJECT TO COMPLY WITH THE DIRECTION OF THE HON'BLE HIGH COURT OF GUJARAT IN PUBLIC INTEREST LITIGATION FOR THE INDUSTRIES OF NARODA GIDC AND PROMOTED BY NARODA IN DUSTRIES ASSOCIATION FOR THE ESTABLISHMENT AND RUNNING OF COMMON EFFLUENT TREATM ENT PLANT AT NARODA (CETP) AND TREATMENT, STORAGE AND DISPOSAL FACILITY AT ODH AV, AHMEDABAD (TDSF) AND WORK FOR POLLUTION ABATEMENT AND ENVIRONMENTAL PROTECTIO N. THUS, THE PROJECT WAS SET UP UNDER THE DIRECTION, GUIDANCE AND SUPPORT OF HON'BL E GUJARAT HIGH COURT AND VARIOUS LOCAL AND STATE LEVEL AGENCIES VIZ. COLLECTION, GID C, AMC, GPCB, ETC. 3.2 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 30/09/2013 DECLARING TOTAL INCOME AT R S. NIL. THE ASSESSEE HAS ALSO FILED AUDITORS REPORT U/S. 12A(B) OF THE INCOME TAX ACT I N FORM NO.10B. THE SAID RETURN WAS PROCESSED U/S. 143(1) ACCEPTING THE INCOME AS R ETURNED. 3.3 THE ASSESSEE'S CASE CAME TO BE SELECTED FOR SCR UTINY AND IN RESPONSE TO NOTICE ISSUED U/S. 143(2) AND 142(1), THE ASSESSEE CAUSED APPEARANCE BEFORE THE ASSESSING OFFICER AND FURNISHED ALL THE DETAILS CALLED FOR BY HIM. THE ASSESSEE FILED ELABORATE AND DETAILED WRITTEN SUBMISSIONS DATED 17/12/2015 EXPLA INING AND JUSTIFYING ITS CLAIM OF EXEMPTION U/S. 11 AND 12 OF THE I.T. ACT. THE ASSE SSEE SUBMITTED BEFORE THE ITA NO.2377/AHD/2016 ASSESSMENT YEAR: 2013-14 PAGE 3 OF 5 ASSESSING OFFICER THAT THE ASSESSEE IS A CHARITABLE INSTITUTION, IT IS A COMPANY REGISTERED U/S. 25 OF THE COMPANIES ACT, 1956 WHICH DOES NOT EXIST FOR PROFIT NOR HAS IT ANY PROFIT MOTIVE, THAT IT IS REGISTERED U/S.12AA O F THE I.T. ACT AND REGISTERED WAS ACCORDED BY THE DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD WHO HAS ALSO ACCORDED APPROVAL U/S.80(G)(5) OF THE I.T. ACT, THA T THE ACTIVITIES OF THE APPELLANT IN PRESERVATION OF ENVIRONMENT BY ABATEMENT AND CONTRO LLING OF POLLUTION OF ENVIRONMENT I.E. LAND, AIR AND WATER, THAT INCOME OF THE APPELL ANT IS ALSO EXEMPT ON PRINCIPLE OF MUTUALITY AND THAT THE APPELLANT'S CLAIM FOR EXEMPT ION U/S.11 & 12 WAS DULY EXAMINED AND VERIFIED BY HIS PREDECESSOR ASSESSING OFFICER I N THE SCRUTINY ASSESSMENT MADE IN A.Y. 2006-2007 & 2008-09 WHO HAD ALLOWED THE ASSESS EE THE BENEFITS OF SECTION 11 AND 12. THE APPELLANT HAS ALSO BROUGHT TO THE NOTIC E OF THE ASSESSING OFFICER THAT EVEN AS PER THE AMENDED PROVISIONS OF SECTION 2(15) OF THE I.T. ACT, THE APPELLANT CONTINUED TO BE A CHARITABLE INSTITUTION AND ITS AC TIVITIES ARE CHARITABLE IN NATURE. 3.4 IT WAS ALSO EXPLAINED BEFORE THE ASSESSING OFFI CER THAT IN A.Y. 2009-10 IN THE ASSESSEES OWN CASE, THE PREDECESSOR ASSESSING OFFI CER HAS DENIED THE ASSESSEE THE BENEFIT OF SECTION 11 AND 12 IN THE SCRUTINY ASSESS MENT MADE U/S. 143(3) BUT ON APPEAL FILED AGAINST THE ASSESSMENT ORDER, THE CIT (A) HAD HELD THAT THE ASSESSEE IS ENGAGED IN CHARITABLE ACTIVITIES AS DEFINED IN SECT ION 2(15) OF THE I.T. ACT AND THAT IT IS NOT ENGAGED IN CARRYING ANY BUSINESS ACTIVITY AS SU CH AND THAT IT IS ELIGIBLE FOR EXEMPTION U/S.11 & 12 OF THE I.T. ACT. IT WAS ALSO SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE APPEAL FILED BY THE DEPARTMENT AGA INST THE ORDER OF CIT(A) FOR A.Y. 2009-10 WAS DISMISSED BY THE ITAT VIDE APPELLATE OR DER DATED 29/01/2015 IN ITA NO. 546/AHD/2013 WHEREIN THE ITAT HAS AFFIRMED THE FIND ING OF THE CIT (A) TO THE EFFECT THAT THE ASSESSEE IS A CHARITABLE INSTITUTION U/S.2 (15) OF THE I.T. ACT AND THE PROVISO TO SECTION 2(15) IS NOT APPLICABLE TO IT AND THAT THE ASSESSEE IS ELIGIBLE FOR THE BENEFITS OF SECTION 11 & 12. IT WAS ALSO EXPLAINED BEFORE THE ASSESSING OFFICER THAT ON THE BASIS OF THE ASSESSMENT ORDER U/S.143(3) FOR A.Y. 2009-10 , THE DIRECTOR OF INCOME TAX (EXEMPTION), AHMEDABAD HAD ISSUED NOTICE U/S.12AA(3 ) OF THE I.T. ACT FOR CANCELLATION OF THE REGISTRATION WHICH WAS GRANTED TO THE ASSESS EE. BUT, AFTER DUE VERIFICATION OF THE FACTS AND THE ACTIVITIES CARRIED ON BY THE ASSESSEE , THE DIRECTOR OF INCOME TAX WAS DULY SATISFIED THAT THE ASSESSEE IS GENUINELY ENGAG ED IN CHARITABLE ACTIVITIES AND ACCORDINGLY HE DROPPED THE PROCEEDINGS U/S. 12AA (3 ) VIDE HIS ORDER DATED 20/3/2013. ITA NO.2377/AHD/2016 ASSESSMENT YEAR: 2013-14 PAGE 4 OF 5 THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT S IN PROPER PERSPECTIVE AND IN UTTER DISREGARD TO THE FACT THAT THE ACTIVITIES CARRIED O N BY THE ASSESSEE IN PRESERVATION OF THE ENVIRONMENT AND ABATEMENT AND CONTROL OF POLLUT ION OF LAND, AIR AND WATER ARE OF CHARITABLE NATURE AS PER THE DEFINITION OF SECTION 2(15) OF THE I.T. ACT, FINALIZED THE ASSESSMENT FOR A.Y. 2013-14 BY HIS ORDER U/S. 143(3 ) DATED 18.03.2016 DETERMINING TOTAL INCOME OF RS.6,41,35,336/- AND CHARGED TAX TH EREON. 4. THEREAFTER, ASSESSEE PREFERRED FIRST STATUTORY A PPEAL BEFORE THE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW THE DEPARTMENT IS BEFORE US AGAINST THE ORDER PASSED BY THE LD. CIT(A). 5. AT THE OUTSET, LD. AUTHORISED REPRESENTATIVE CIT ED AN ORDER OF ITAT IN ASSESSEES OWN CASE IN ITA NO.546/AHD/2013 FOR THE ASSESSMENT YEAR 2009-10 WHEREIN IN SIMILAR CIRCUMSTANCES THE ITAT HAS GIVEN RELIEF TO THE ASSESSEE AND RELEVANT PARAGRAPHS OF ITATS ORDER IS REPRODUCED H EREUNDER :- 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, WE FIND THAT MAIN OBJECT OF ASSESSEE COMPANY WAS CONVERTED AS PER SECTION 25 OF COMPANIES ACT CLARIFIES THAT ASSESSEE COMPANY IS IN AREA OF ENVIRONMENTAL PROTECTION, ABETMENT OF POLLUTION OF WATER, AIR, SO LID, ETC. GENERATED BY INDUSTRIAL UNITS IN AND AROUND VATVA AND ODHAV AREA OF AHMEDAB AD. ACCORDINGLY, ASSESSING OFFICER HAS NOT DISPUTED THE FACT THAT AS SESSEE IS DOING BASIC ACTIVITY OF TREATMENT OF VARIOUS POLLUTANTS GENERATED BY IND USTRIAL UNITS. IT IS ALSO NOT DISPUTED BY ASSESSING OFFICER THAT SURPLUS GENERATE D IS NOT DISTRIBUTED TO ITS MEMBERS/SHAREHOLDERS, ETC. THE ASSESSEE CANNOT LOO SE EXEMPTION MERELY ON THE GROUND THAT IT HAS MADE SURPLUS AS LONG AS ASSE SSEE IS NOT GENERATING SURPLUS FOR PRIVATE PROFIT OF THE SETTLER OR ANY OT HER PERSON. IN THIS SITUATION, ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT ASSESSEE WAS GENERATING SURPLUS OR PROFIT MAKING WAS THE PREDOMINANT OBJECT OF ASSESSEE. ASSESSEE COMPANY WAS INCORPORATED WITH A SOLE OBJECT TO COMP LY WITH DIRECTIONS OF HON'BLE HIGH COURT OF GUJARAT IN A PIL FOR INDUSTRI ES OF NARODA GIDC FOR ESTABLISHMENT IN RUNNING OF COMMON EFFLUENT TREAT MENT PLANT AND ITS STORAGE AND DISPOSAL FACILITY AT ODHAV, AHMEDABAD. THE PR OJECT WAS SETUP UNDER THE DIRECTIONS AND GUIDELINES OF HON'BLE HIGH COURT OF GUJARAT AND VARIOUS LOCAL AND STATE LEVEL AGENCIES VIZ. COLLECTOR, GIDC, AMC, GPC B, ETC. AS PER DIRECTIONS OF HON'BLE HIGH COURT OF GUJARAT, IT WAS SINE-QUA-N ON FOR INDUSTRIAL UNITS TO BECOME MEMBER OF ASSESSEE COMPANY FOR MEETING THE P OLLUTION CONTROL PARAMETERS LAID DOWN BY GPCB. THE AMOUNT COLLECTED FROM THE MEMBERS VARIED DEPENDING UPON THE QUANTUM OF EFFLUENT, NATU RE OF EFFLUENT TO BE TREATED AS WELL AS OTHER FACTORS PERTAINING TO POLLUTANT OF DIFFERENT KIND COMING FROM THE INDUSTRIAL UNITS. THUS, ASSESSEE IS ENGAGED IN TH E ACTIVITY OF PRESERVATION OF ENVIRONMENT BY ABETMENT AND CONTROLLING POLLUTION O F ENVIRONMENT I.E. LAND, WATER AND AIR. FOR THIS OBJECTIVE, ASSESSEE IS PROV IDING POLLUTION CONTROL TREATMENT FOR DISPOSAL OF LIQUID AND SOLID INDUSTRI AL WASTE. IT IS UNDISPUTED THAT ASSESSEE WAS INCORPORATED U/S. 25 OF THE COMPANIES ACT. ASSESSEE WAS DULY ITA NO.2377/AHD/2016 ASSESSMENT YEAR: 2013-14 PAGE 5 OF 5 REGISTERED U/S. 12AA AND ALSO U/S. 80G(5) OF THE IN COME-TAX ACT. THE SAID CERTIFICATES WERE ISSUED AFTER DUE VERIFICATION BY CONCERN AUTHORITIES. ASSESSING OFFICER HAS IGNORED MODIFIED OBJECTS OF ASSESSEES MOU AFTER ITS CONVERSION AS COMPANY U/S. 25 OF THE COMPANIES ACT. THE PLAIN RE ADING OF OBJECTS OF COMPANY REVEALS THAT MAIN OBJECT IS PROTECTION OF E NVIRONMENT BY ABETMENT OF POLLUTION OF VARIOUS KINDS LIKE WATER, AIR, SOIL, E TC. IN THIS BACKGROUND, ACTIVITIES OF ASSESSEE COMPANY SQUARELY FALLS U/S. 2(15) OF TH E INCOME-TAX ACT. THE PROVISO TO SECTION 2(15) IS APPLICABLE TO OBJECTS O F GENERAL PUBLIC UTILITY. THE SAME WAS ALSO CLARIFIED VIDE CBDT CIRCULAR NO. 11 D ATED 19.12.2008. SINCE ASSESSEE COMPANY IS DIRECTLY ENGAGED IN PRESERVATIO N 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 OFFICERS CONTENTION THAT ASSESSEE IS CARRYING OUT BUSINESS ACTIVITY AND IS IN THE NATURE OF PROFIT MAKING, WE FIND THAT BENEFIT OF EX EMPTION 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) WAS JUSTIFIED IN HO LDING THAT ASSESSEE IS DOING CHARITABLE ACTIVITY AS PER SECTION2(15) OF THE INC OME-TAX ACT, BENEFIT OF SECTION 11 & 12 OF THE INCOME-TAX ACT IS AVAILABLE TO IT. ACCORDINGLY, CIT(A) WAS JUSTIFIED IN DIRECTING ASSESSING OFFICER TO TREAT T HE ACTIVITY OF ASSESSEE COMPANY AS CHARITABLE AND FURTHER RIGHTLY DIRECTED TO DELET E THE ADDITION OF RS.2,53,21,438/-. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMIS SED. 6. SINCE ITAT HAS GIVEN RELIEF TO THE ASSESSEE AND HAS DISMISSED THE APPEAL OF THE REVENUE, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF THE ITAT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10, WE DISMISS THE AP PEAL OF THE REVENUE. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF NOVEMBER, 2018. SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, THE 29 TH DAY OF NOVEMBER, 2018 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER UE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD