The DCIT, (Exemption),Circle-2, Ahmedabad V. Nandesari Industries Association, Nandesari

ITA 333/AHD/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7750 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 12-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMA PRASAD
• Keywords: Depreciation; Business expenditure; Charitable institution; Earning of tax free income; Benefit of exemption; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 37(1); 12AA; 143(2); 37; 263; 12; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 333/AHD/2018 (ASSESSMENT YEAR: 2010-11) DY. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE-2, AHMEDABAD V/S NANDESARI INDUSTRIES ASSOCIATION PLOT NO. 134/1, OPP. SHOPPING CENTRE, NANDESARI-391340 (APPELLANT) (RESPONDENT) PAN: AAATN 6770E APPELLANT BY : SHRI UMA PRASAD, SR. D.R. RESPONDENT BY : SHRI ANKIT CHOKSHI, C.A. ( )/ ORDER DATE OF HEARING : 11 -10-201 9 DATE OF PRONOUNCEMENT : 14 -10-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A)-9, AHMEDABAD DATED 08.12.2017 PERTAINING TO A.Y. 2010-11 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 333/ AHD/2018 . A.Y. 2010-11 2 1.THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN A LLOWING THE BENEFIT OF EXEMPTIONS U/S.11 WITHOUT CONSIDERING THE'FACT THAT THE ASSESSEE IS INVOLVED IN WIDESPREAD COMMERCIAL ACTIVITIES IN NATURE OF BUSIN ESS AND THE ACTIVITY OF THE ASSESSEE IS COVERED UNDER FIRST AND SECOND PROVISO TO SEC.2(15) OF THE ACT. 2.THE LD.CIT(A) HAS ERRED IN THE LAW AND ON FACTS I N DELETING THE ADDITION OF RS.2,85,05,353/- MADE ON ACCOUNT OF DISALLOWANCE OF CAPITAL EXPENDITURE WITHOUT APPRECIATING THE FACT THAT ONCE THE PROVISO TO SECT ION 2(15) IS APPLICABLE, THE BENEFIT OF SECTION 11 AND 12 CANNOT BE ALLOWED FURT HER. 3.THE REVENUE CARVES OVER LEAVE TO ADD, ALTER, AMEN D, MODIFY, SUBSTITUTE, DELETE AND / OR RESCIND ALL OR ANY GROUNDS OF APPEAL ON OR BEFORE THE FINAL HEARING, IN NECESSITY SO ARISES. 2. FACTS OF THE CASE ARE AS EMANATED FROM THE ASSESSME NT ORDER: 2. THE CASE WAS SELECTED UNDER SCRUTINY AND ACCORDI NGLY A NOTICE U/S. 143(2) OF THE I.T. ACT 1961 WAS ISSUED ON 13.09.2011 AND DULY SERVED ON THE ASSESSEE. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT, 1961 BY THE ACIT,CIRCLE-2(2),BARODA ON 07.02.2013 BY INVOKING T HE FIRST PROVISO TO 2(15) OF THE ACT AND THEREBY FORFEITURE THE EXPENDITURE U/S 13(8) OF THE ACT, AND DETERMINED ASSESSED INCOME AT RS,7,41.130/-. AGAINS T THIS ORDER, ASSESSEE HAD FILED APPEAL BEFORE THE LD. CIT(A)-II, BARODA WHICH WAS DISPOSED OFF AND APPEAL WAS DISMISSED BY THE LD. CIT(A)-II, BARODA VIDE APP ELLATE ORDER NO.CAB/II- 209/12-13 DATED 04.02.2014. MEANWHILE, IT WAS NOTIC ED THAT THE ASSESSING OFFICER HAD TAKEN SURPLUS IN THE ASSESSMENT ORDER A S PER P & L A/C OF RS. 1,32,027/- WHICH WAS WORKED OUT BY THE ASSESSEE AFT ER DEBITING RS. 4,87,76,924/- ON ACCOUNT OF EXPENDITURE ON OBJECTS ON THE TRUST, THIS EXPENSES OF RS. 4,87,76,924/- INCLUDED AN AMOUNT OF 2,85,05,353 /- AS CAPITAL EXPENDITURE WHICH WAS MADE BY THE ASSESSEE AS PROVISIONS FOR IN FRASTRUCTURE PROJECT, PROJECT MARGIN A/C, CONTRIBUTION FOR INFRASTRUCTURE PROJECT AND ECP CONTRIBUTION. TO PROTECT THE LEAKAGE OF REVENUE, THE PR. CIT(OSD) (E XEMPTIONS), AHMEDABAD HAS PASSED ORDER U/S 263 OF THE I.T. ACT ON 27.03.2015 AND DIRECTED TO MAKE A DE- NOVO ASSESSMENT FOR A.Y. 2010-11. ACCORDINGLY, A NO TICE U/S 143(2) R.W.S. 263 OF THE I.T. ACT, 1961 WAS ISSUED ON-07.08.2015. 3. SUBSEQUENTLY, A NOTICE U/S. 142(1) OF THE I T AC T ALONGWITH SHOW-CAUSE LETTER DATED 10-12-2015 WAS ISSUED WHICH ARE AS UNDER: ITA NO. 333/ AHD/2018 . A.Y. 2010-11 3 'THE SCRUTINY OF THE RECORDS REVEALS THAT YOU HAVE CLAIMED FOLLOWING EXPENDITURE WHICH WAS IN NATURE OF CAPITAL EXPENDITURE PARTICULARS AMOUNT (RS) INFRASTRUCTURE PROJECT MARGIN A/C PROVISION 2,05,00,000/- CONTRIBUTION FOR INFRASTRUCTURE PROJECT 34,00,000/- INFRASTRUCTURE OF PROJECT 3,49,377/- ECP CONTRIBUTION 42,55,976/- TOTAL 2,85,05,353/- THE ABOVE EXPENDITURES CLAIMED BY YOU AS REVENUE EX PENDITURE, ARE IN FACT EXPENDITURE OF CAPITAL NATURE. YOU ARE THEREFORE RE QUESTED TO SHOW CAUSE AS TO WHY THE ABOVE EXPENDITURE OF RS 2,85,05,353/- SHOUL D NOT BE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE TRUST. FURTHER DURING THE YEAR UNDER CONSIDERATION, THE AS SESSEE TRUST HAS INCURRED/APPLIED THE INCOME FOR THE OBJECT TO THE E XTENT OF RS. 4,07,92,391/- (6,12,92,391-2,05,00,000 PROVISIONS) WHICH WAS 66.5 5% OF THE TOTAL INCOME THE ASSESSEE TRUST HAD NOT APPLIED 85% OF INCOME AS PRO VIDED U/S. 11 OF THE ACT. THE ASSESSEE TRUST WAS REQUIRED TO FILE FORM NO 10 FOR THE ACCUMULATION OF THE FUNDS AS PROVIDED IN SECTION 11(2) OF THE I. T. ACT. ON PERUSAL OF THE RECORDS IT IS FOUND THAT THE ASSESSEE TRUST HAS NOT FILED PRESCRIBE FORM 10 SPECIFYING THE ACCUMULATION /PROVISIONS OF RS. 2,05,00,000/- TO THIS OFFICE, STATING THE PURPOSE AND THE PERIOD FOR ACCUMULATIO N FOR FUTURE APPLICATIONS. SINCE ASSESSEE TRUST FAILED TO FILED SUCH FORM NO 10, YOU ARE REQUESTED TO SHOW CAUSE WHY THE AMOUNT OF RS. 2,05,00,000/- SHOULD NOT DISA LLOWED AND ADDED TO THE TOTAL INCOME OF THE TRUST. ' 4. IN RESPONSE TO THESE NOTICES AND SHOW CAUSE SHRI ANKIT CHOKSHI, CA AND AUTHORIZED REPRESENTATIVES OF APPEARED FROM TIME TO TIME AND FURNISHED THE REPLY OF THE SHOW CAUSE WHICH IS REPRODUCED AS UNDER: 'REGARDING YOUR ABOVE SHOW CAUSE NOTICES, YOUR ASSE SSEE TRUST HUMBLY SUBMIT FOLLOWING ITA NO. 333/ AHD/2018 . A.Y. 2010-11 4 1. REGARDING DISALLOWANCE U/S. 37(1) OF THE ACT AS CAPITAL EXPENDITURE WITH REGARDS TO CONSIDERING THE ABOVE MENTIONED EXP ENSES AS CAPITAL EXPENDITURE IT IS HUMBLY SUBMITTED THAT EXPENDITURE OF RS. 2,05,00,000/-DEBITED TO 'INFRASTRUCTURE PROJECT MARGIN A/C PROVISION' IS IN RESPECT OF PROVISION MADE FOR INFRASTRUCTURE MARGIN AMOUNT PAYABLE TO GIDC FOR S. W. DRAINAGE NETWORK UNDER CIP II AND III. EXPENDITURE OF RS. 34,00, OOO/-DEBI TED TO 'CONTRIBUTION TO INFRASTRUCTURE PROJECT' IS IN RESPECT OF PAYMENT MA DE TO GIDC TOWARDS CONTRIBUTION FOR INFRASTRUCTURE PROJECT. RS. 3,49,3 77/- REPRESENTS PAYMENTS TO BANK OF BARODA TOWARDS INTEREST AND REVIEW CHARGES ON TERM LOAN FOR RCC ROAD PROJECT. RS. 42,55,976/-REPRESENTS M & F CONTRIBUTI ON TO ECP AS WELL AS CONTRIBUTION FOR CONSTRUCTION OF PIPELINE (I.E. M&R CONTRIBUTION RS. 17,55,976/- + CONTRIBUTION FOR PIPELINE RS. 25,00,000/-). THUS AL L THE EXPENSES UNDER CONSIDERATION ARE IN NATURE OF 'CONTRIBUTION'. NO C APITAL ASSET COMES UNDER AS'SESSEE'S CONTROL BY INCURRING SUCH EXPENSES. ALS O ASSESSEE HAS NO RIGHT IN ASSET WHICH COMES INTO EXISTENCE. IN SUCH A SCENARI O 'CONTRIBUTION' NEEDS TO BE TREATED AS REVENUE EXPENDITURE AND THE SAME IS ALLO WABLE U/S 37 OF THE ACT. RELIANCE IS PLACED ON THE FOLLOWINGS. JCIT VS. DEVERSONS INDUSTRIES LTD. - 104 ITD 171 (A HD) HEAD NOTE:- SECTION 37(1) OF THE INCOME TAX ACT, 1961 -BUSINESS EXPENDITURE -ALLOWABILITY OF- ASSESSMENT YEAR 1996-97 - WHETHER CONTRIBUTION MADE BY ASSESSEE TOWARDS SETTING-UP OF A COMMON EFFLUENT TREATMENT PLAN (ETP ), AS ALSO CONVEYANCE OF EFFLUENT FROM THEIR POINTS OF DISCHARGE BY POLLUTIN G UNITS, OF WHICH ASSESSEE WAS ONE, TO ITS ULTIMATE POINT OF DISPOSAL, ON DIRECTIO N OF HIGH COURT IN A CIVIL PETITION, WAS ALLOWABLE AS BUSINESS EXPENDITURE - HELD, YES - WHETHER CONTRIBUTION HAVING BEEN MADE, IN PURSUANCE TO COURTS DIRECTION WITH A DOMINANT PURPOSE TO PREVENT DISRUPTION/DISLOCATION OF BUSINESS AND / OR ADVERSE CLAIMS ON IT, TIME OF ACTUAL SETTING-UP OR OPERATION OF FACILITY, WHICH WOULD ON LY BE SUBSEQUENT TO TIME OF CONTRIBUTION, BEING ITS OFF SPRING, TO WHICH END CO NTRIBUTED AMOUNTS WERE TO BE UTILIZED BY A SEPARATE BODY, WOULD NOT BE RELEVANT FOR PURPOSE OF DEDUCTION, CONTRIBUTION HAVING SERVED BUSINESS PURPOSE INSOFAR AS ASSESSEE WAS CONCERNED - HELD, YES FACTS: ITA NO. 333/ AHD/2018 . A.Y. 2010-11 5 THE ASSESSEE MADE PAYMENTS TO THE MUNICIPAL CORPORA TION/INDUSTRIAL DEVELOPMENT CORPORATION (IDC) AND ALSO TO COMPANY ' O' TOWARDS SETTING-UP OF COMMON EFFLUENT TREATMENT PLANT (ETP), AS ALSO CONV EYANCE OF SAID EFFLUENT FROM ITS POINT OF DISCHARGE (BY THE POLLUTING UNITS, OF WHICH THE ASSESSEE WAS ONE) TO ITS ULTIMATE POINT OF DISPOSAL, ON DIRECTION OF THE HIGH COURT. THE ASSESSING OFFICER HELD THE AFORESAID PAYMENTS AS CAPITAL EXPE NDITURE AND DISALLOWED SAME. THE ASSESSING OFFICER ALTERNATIVELY STATED THAT, EV EN IF SAID EXPENDITURE WAS HELD TO BE REVENUE IN NATURE, IT WOULD NOT MERIT ALLOWAN CE, AS SAID FACILITY WAS NOT ACTUALLY SET-UP OR PUT TO USE, EITHER DURING ASSESS MENT YEAR UNDER CONSIDERATION OR EVEN FOR SUBSEQUENT TWO YEARS AND SO ON ACCOUNT OF PRINCIPLE OF ACCRUAL OF EXPENDITURE, SAME COULD NOT BE CONSIDERED TO BE REL ATABLE TO THE RELEVANT ASSESSMENT YEAR. ON APPEAL, THE COMMISSIONER (APPEA LS), HOWEVER, ALLOWED THE ASSESSEE'S CLAIM, HOLDING THAT SAID EXPENDITURE, TH OUGH RESULTING IN AN ENDURING BENEFIT TO THE ASSESSEE YET WAS NOT AN ADVANTAGE TH AT COULD BE SAID TO BE IN CAPITAL FIELD AND, THUS, WAS ALLOWABLE AS REVENUE E XPENDITURE, BEING SOLELY FOR THE ASSESSEE'S BUSINESS PURPOSES. HELD: IT IS THE DUTY OF THE EACH' INDUSTRIAL UNIT TO DISC HARGE THE EFFLUENT EMANATING FROM ITS WORK INTO THE PUBLIC DRAINAGE/SEWERAGE SYSTEM, DULY TREATED, I.E., RENDERED FORM, TO THE EXTENT DEFINED UNDER THE RELEVANT LAWS ) OF THE VARIOUS TOXIC AND OTHER CONTAMINANT MATERIAL THEREIN. IT WAS, THUS, ON THE FAILURE ON THE PAN OF THE INDUSTRIAL UNITS, OF WHICH THE ASSESSEE'S UNIT WAS, ADMITTEDLY, ONE TO DO SO THAT, ON A PETITION BEING FILED BEFORE THE HIGH COURT, IT DIRECTED THE SAID INDUSTRIES TO CONTRIBUTE TOWARDS THE SETTING-UP OF U COMMON ETP, AS ALSO TOWARDS THE COST OF THE FACILITIES REQUIRED FOR ITS CONVEYANCE, AS WITH OUT THE SAME BEING IN PLACE NO EFFECTIVE REMEDY OF THE MALADY WOULD COME INTO EFFE CT. IT WAS IN THAT BACKGROUND THAT THE ASSESSEE, AMONG OTHERS, CONTRIBUTED THE IM PUGNED AMOUNT TO THE MUNICIPAL CORPORATION AND '0'. [PARA 13] THE OBLIGATION OF THE ASSESSEE AS AN INDUSTRIAL UNI T, UNDER THE LAW, BEING ONLY TO TREAT THE EFFLUENT TO THE REQUIRED DEGREE PRIOR TO ITS DISCHARGE IN THE PUBLIC DRAINAGE, THE CONTRIBUTION MADE BY IT, ON THE DIREC TION OF THE HIGH COURT TO CONTRIBUTE TOWARDS THE LAYING OF THE NETWORK OF PIP ELINES REQUIRED FOR THE CONVEYANCE OF THE DISCHARGE, IN VIEW OF THE HIGH C OST PROJECT ENTAILED, BEING OUTSIDE THE FINANCIAL CAPACITY OF THE RELEVANT AUTH ORITY, BEING MUNICIPAL ITA NO. 333/ AHD/2018 . A.Y. 2010-11 6 CORPORATION, WAS ONLY AN OBLIGATION THAT IT ASSUMED AS A RESPONSIBLE CITIZEN. IN ITS ABSENCE, THE ENTIRE SCHEME, AS SOUGHT TO BE PUT IN PLACE BY THE SAID COURT, TO ALLEVIATE A CONTINUING HARDSHIP/PROBLEM, WOULD BECO ME UNWORKABLE/ UNFEASIBLE. THAT, IT MAY HAVE ALSO BEEN MOTIVATED, AS APART OF THE GROUP OF PARTICIPATING INDUSTRIAL UNITS OF THE AREA, TO BUY PEACE WITH TH E STATE INDUSTRIES, OR THE POLLUTION CONTROL DEPARTMENT, OR TO SAFEGUARD THEM SELVES FROM THE PENAL CONSEQUENCES, THAT MAY VISIT ON ACCOUNT OF THEIR VI OLATION OF THE LAW IN THE PAST, THOUGH RELEVANT FROM BUSINESS STAND-POINT, ARE IRRE LEVANT TO THE PURPOSE OF THE NATURE AND SCOPE OF THE OBLIGATION UNDER THE LAW. R ATHER, IF AT ALL, THOSE CONSIDERATION IS ONLY WENT TO SUPPORT THE ASSESSEE' S ARGUMENT OF THE SAID CONTRIBUTION BEING MADE ONLY TO PROTECT ITS BUSINES S AS AN ONGOING ENTITY AND, THUS, ITS BUSINESS INTERESTS/PROFITABILITY, WITH NO CONCOMITANT FINANCIAL BENEFIT/INTEREST, SO THAT THE EXPENDITURE WAS ONLY A REVENUE EXPENDITURE, INCURRED WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS. A S SUCH, THE ARGUMENTS OF THE ASSESSEE WERE TO BE AGREED WITH, THAT THE SAID EXPENDITURE WAS REVENUE IN NATURE, THE ONLY ADVANTAGE THE ASSESSEE DERIVING FROM THE SAID EXPENDITURE BEING AVOIDANCE OF PROTRACTED LITIGATIO N AND ENABLING ITS SMOOTH CONDUCT, AND, THUS, PROTECTING ITS BUSINESS PROFITS AND ASSETS; IT BEING NOT CHARGED UNDER LAW TO DO SO, AND, THUS, WAS A REVENU E EXPENDITURE ALLOWABLE IN FULL. IN DOING SO, THE COST OF THE PIPELINE 5. THE ABOVE CONTENTIONS OF THE ASSESSEE HAVE BEEN CAREFULLY CONSIDERED AND FOUND TO BE SELF SERVING AND DEVOID OF ANY FORCE CO NSIDERING THE FACTS OF THE CASE AND HENCE NOT ACCEPTABLE AS FOR THE FOLLOWING REASO NS. 5.1 THE ACTIVITIES OF THE ASSESSEE ARE AIMED AT EAR NING PROFIT AS IT IS CARRYING ON ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS. FURTHER, PROFIT MAKING BY THE ASSESSEE IS NOT MERE INCIDENTAL OR BYPRODUCT OF THE ACTIVITY OF THE ASSESSEE. THE MAIN PRE-DOMINANT PURPOSE OF ASSESSEE IS MAKING PROFIT, IT IS REAL OBJECT OF THE ASSESSEE AND ALSO THERE IS NO SPENDING OF THE I NCOME EXCLUSIVELY FOR THE PURPOSE OF CHARITABLE ACTIVITIES AND PROFITS OF THE ASSESSEE NOT USED FOR CHARITABLE PURPOSE UNDER THE TERMS OF THE OBJECT AND THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO SPEND IT ON 'CHARITABLE PURPOSES' ONLY. THE ACTIVITIES CAN BE CONSIDERED AS TRADE, BUSINESS OR COMMERCIAL ACTIVIT Y BECAUSE PROVIDING WATER TREATMENT SERVICES AND EFFLUENT SERVICES TO ALL MEM BERS HAVING FACTORIES IN AND AROUND NANDESARI INDUSTRIAL AREA INVOLVES CHARGING OF SUCH FEES. ITA NO. 333/ AHD/2018 . A.Y. 2010-11 7 5.2 THE FACTS OF THE CASE ARE AS UNDER: I) ASSESSEE IS DOING WORK OF WATER TREATMENT AND EF FLUENT SERVICES FOR THE INDUSTRIES SITUATED IN THE NANDESARI AREA. S O ASSESSEE IS RENDERING SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS . II) ASSOCIATION IS CHARGING FEES FOR THE SE SERVICES FROM THE VARIOUS INDUSTRIES SO ASSESSEE IS PROVIDING SERVICES FOR A CESS OR FEES. III) THE TOTAL AMOUNT OF RECEIPTS COMING FROM VARIOUS INDUSTRIES BY CHARGING FEES IS FAR BEYOND THE 25 LAKHS. SO THE RECEIPT OF THE ASSESSEE IS EXCEEDING 25 LAKHS. IV) ASSESSEE IS CLAIMING THAT THEY ARE TRADE ASSOCI ATION AND ARE WORKING ON THE PRINCIPLE OF MUTUALITY, BUT THIS CONTENTION IS DISP ROVED IN THE DISCUSSION IN THE PARA 4 AS THEY ARE DEALING WITH THE NON-MEMBERS THA T IS TO SAY OUTSIDE THE GROUP, HENCE NEGATING THE PRINCIPLE OF MUTUALITY. THIS RESULTS INTO THE FACT THAT THEY FALL UNDER THE FIRST PROVISO OF SECTION2(15), V) THE FACT OF THE CASES ARE DIFFERENT FROM THE CAS E LAWS CITED BY THE ASSESSEE ABOVE STATED FACTS ARE PROVIDES SUFFICIENT GROUND T O TAKE THE OPINION THAT ASSESSEE IS HIT BY THE FIRST PROVISO OF THE SUBSECT ION 15 OF SECTION 2, WHICH WAS INTRODUCED BY THE FINANCE ACT, 2008 (W.E.F. 1.4.200 9), ACCORDING TO WHICH THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT, BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTI VITY 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 A NY OTHER CONSIDERATION BEYOND RS.25 LAKHS, IRRESPECTIVE OF THE USE OR APPL ICATION OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY AND THIS LED TO THE FORFE ITURE OF EXEMPTION U/S 13(8). 6. SECTION 2(15) OF THE ACT DEFINES 'CHARITABLE PUR POSES'. FIRST PROVISO, THERETO WITH EFFECT FROM ASSESSMENT YEAR 2009-10 LAID DOWN THAT, IF ANY TRUST ETC. (A) IS ENGAGED IN PURSUING OBJECTS OF GENERAL PUBLIC UTILI TY ('OTHER OBJECTS') AND (B) CARRIES ON ANY ACTIVITY IN THE NATURE OF TRADE, BUS INESS OR COMMERCE OR PROVIDES ANY SERVICES IN RELATION TO THE TRADE, COMMERCE SER VICES OR BUSINESS AND (C) AGGREGATE RECEIPTS THERE FROM EXCEED RS. 25 LACS, I T SHALL BE CONSIDERED THAT ADVANCEMENT OF OTHER OBJECTS IS NOT A CHARITABLE PU RPOSE. IF SO, SUCH A TRUST IS NOT ELIGIBLE FOR THE EXEMPTION INASMUCH AS THE PRIMARY CONDITION OF BEING EXISTING FOR CHARITABLE PURPOSE IS NOT SATISFIED. ITA NO. 333/ AHD/2018 . A.Y. 2010-11 8 6.1 DURING THE COURSE OF SCRUTINY ASSESSMENT, IT WA S ESTABLISHED THAT THE ASSESSEE WAS NOT DOING ANY 'CHARITABLE/EDUCATIONAL ACTIVITY' BUT THE MAIN PREDOMINANT PURPOSE OF ASSESSEE IS MAKING PROFIT, I T IS REAL OBJECT OF THE ASSESSEE AND ALSO THERE IS NO SPENDING OF THE INCOM E EXCLUSIVELY FOR THE PURPOSE OF CHARITABLE ACTIVITIES AND PROFITS OF THE ASSESSE E NOT USED FOR CHARITABLE PURPOSE UNDER THE TERMS OF THE OBJECT AND THERE IS NO OBLIG ATION ON THE PART OF THE ASSESSEE TO SPEND IT ON 'CHARITABLE PURPOSES' ONLY. HENCE, THE PROVISIONS OF SEC 2(15) READ WITH THE PROVISO 1 86 2 ARE SQUARELY APP LICABLE TO THE FACTS OF THE CASE, AND FORFEITED THE EXEMPTION U/S 13(8) OF THE I.T. ACT, 1961. 7. ON VERIFICATION OF SUBMISSION AS FILED BY THE AS SESSEE, THE EXPENDITURE OF RS. 4,87,76,924/- ON ACCOUNT OF EXPENDITURE ON OBJECTS OF THE TRUST UNDER SCHEDULE 3 INCLUDES AN AMOUNT OF RS. 2,85,05,353/- WHICH ARE A S UNDER: PARTICULARS AMOUNT (RS) INFRASTRUCTURE PROJECT MARGIN A/C PROVISION 2,05,00,000/- CONTRIBUTION FOR INFRASTRUCTURE PROJECT 34,00,000/- INFRASTRUCTURE OF PROJECT 3,49,377/- ECP CONTRIBUTION 42,55,976/- TOTAL 2,85,05,353/- IT CAN BE SEEN FROM THE ABOVE MENTIONED TABLE THE A BOVE EXPENDITURE CLAIMED BY THE ASSESS AS REVENUE EXPENDITURE, ARE IN FACT, IN FACT EXPENDITURE OF CAPITAL IN NATURE, AND HENCE, THE SAME ARE HEREBY DISALLOWED A ND ADDED IN THE TOTAL INCOME OF THE ASSESSEE. 3. AGAINST THE DISALLOWANCE OF RS. 2,85,05,353/-, ASSE SSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED THE APPEAL OF THE ASSESSEE. 4. NOW REVENUE HAS COME BEFORE US AGAINST THE ORDER OF THE LD. CIT(A). ITA NO. 333/ AHD/2018 . A.Y. 2010-11 9 5. AT THE OUTSET, LD. A.R. STATED THAT MATTER IS SQUAR ELY COVERED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1704/AHD/2014 WHEREIN REL IEF HAS BEEN GRANTED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND COPY OF THE SAID ORDER IS REPRODUCED HERE FOR THE SAKE OF CONVENIENCE: 1. LD. CIT(A) ERRED IN CONFIRMING THE DECISION OF L D. A.O. THAT THE SERVICES TO THE MEMBERS OF ASSOCIATION WERE ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AND VIOLATION OF AMENDED PROVISION OF FINANCE ACT, 2008, W.E.F. 01.04.2009 UN DER SECTION 2(15) R.W.S. 11 OF THE INCOME TAX ACT, 1961. 2. LD. CIT(A) ERRED IN CONFIRMING THAT ACTIVITIES O F THE ASSOCIATION OF COLLECTION OF FEES FROM THE MEMBERS AND RENDERING SERVICES TO THEM WERE WITH TH E PROFIT MOTIVE AND NOT ELIGIBLE AS CHARITABLE ACTIVITY. 3. LD. CIT(A) AS WELL AS LD. A.O. ERRED IN FORFEITI NG THE EXEMPTION UNDER SECTION 13(8) OF THE INCOME TAX ACT, 1961. 4. LD. CIT(A) ERRED IN CONFIRMING THE DECISION OF L D. A.O. DISALLOWING THE REPAIRS AND MAINTENANCE EXPENSES OF RS. 6,09,100/-. '3. THE MATERIAL FACTS ARE NOT IN DISPUTE. THE ASSESSEE BEFORE US IS A TRUST LOOKING AFTER WELFARE AND WELL BEING OF INDUSTRIES SITUATED IN NANDESARI. THE TRUST IS ALSO PROVIDING INFRASTRUCTURE FACILITY TO INDUST RIES OF NANDESARI. DURING THE RELEVANT PREVIOUS YEAR THE TRUST HAS PROVIDED WATER TREATMENT SERVICES AND EFFLUENT SERVICES TO ALL MEMBERS HAVING FACTORIES I N AND AROUND NANDESARI INDUSTRIAL AREA. IN THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTED THAT THE WATER TREATMENT AND EFFLUENT SERVICE S PROVIDED TO THE TRUSTEES SITUATED IN NANDESARI WERE PROVIDED IN CONSIDERATIO N OF 'FEES OR CESS' AND THAT THE RECEIPTS, IN RESPECT OF THE SAME CROSSED THE LI MIT OF RS.25 LAKHS. IT WAS IN THIS BACKDROP THE ASSESSING OFFICER REQUIRED THE ASSESSE E TO SHOW CAUSE AS TO WHY HE SHOULD NOT BE TREATED AS ASSESSEE BEING COVERED BY FIST PROVISO TO SECTION 2(15) AND ACCORDINGLY DECLINED THE STATUS OF CHARITABLE I NSTITUTION. UPON CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSING OFFICER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE IS RENDERING SERVICES IN REL ATION TO TRADE, COMMERCE OR BUSINESS IN CONSIDERATION FOR A FEES THAT THE RECEI PTS OF THE ASSESSEE FROM SUCH SERVICES EXCEEDS THE THRESHOLD LIMIT OF RS.35 LAKHS AND ACCORDINGLY IN THE LIGHT OF PROVISO TO SECTION 2(15) READ WITH SECTION 13(8) NO TWITHSTANDING THE REGISTRATION GRANTED TO THE ASSESSEE AS CHARITABLE INSTITUTION T HE BENEFIT OF SECTION 11 & 12 ARE TO BE DECLINED TO THE ASSESSEE. WHILE COMPUTING SO, THE ASSESSING OFFICER OBSERVED AS FOLLOWS :- ITA NO. 333/ AHD/2018 . A.Y. 2010-11 10 6. FACTS OF THE CASE 1. ASSESSEE IS DOING WOK OF WATER TREATMENT AND EFF LUENT SERVICES FOR THE INDUSTRIES SITUATED IN THE NANDESARI AREA. SO ASSES SEE IS RENDERING SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS. 2 ASSOCIATION IS CHARGING FEES FOR THESE SERVICES F ROM THE VARIOUS INDUSTRIES. SO ASSESSEE IS PROVIDING SERVICES FOR A CESS OR FEES. 3. THE TOTAL AMOUNT OF RECEIPTS COMING FROM VARIOUS INDUSTRIES BY CHARGING FEES, IS FAR BEYOND THE 25 LAKHS. SO THE RECEIPTS OF THE ASSESSEE IS EXCEEDING 25 LAKHS. 4. ASSESSEE IS CLAIMING THAT THEY ARE TRADE ASSOCIA TION AND ARE WORKING ON THE PRINCIPLE OF MUTUALITY, BUT THIS CONTENTION IS DISP ROVED IN THE DISCUSSION IN THE PARA 4 AS THEY ARE DEALING WITH THE NON-MEMBERS THA T IS TO SAY OUTSIDE THE GROUP, HENCE NEGATING THE PRINCIPLE OF MUTUALITY. T HIS 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 SUBSECT ION 15 OF SECTION 2, WHICH WAS INTRODUCED BY THE FINANCE ACT, 2008 (W.E.F. 1.4.200 9), ACCORDING TO WHICH THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTI VITY 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 A NY 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 EX EMPTION 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 LEA RNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFIC ER. THERE IS NO DISPUTE THAT THE ASSESSEE IS RENDERING SERVICES TO ITS CLIENTS ( ENTREPRENEURS) WHICH IN TURN ENGAGE IN MANUFACTURING OR OTHER BUSINESS ACTIVITIE S AGAINST PAYMENT OF FEE. THE FEE COLLECTED BY THE ASSESSEE IS IN LIEU OF SERVICE S RENDERED TO THE INDUSTRIALISTS, WHICH BY NO STRETCH OF IMAGINATION CAN BE TERMED AS CHARITABLE ACTIVITY ESPECIALLY AFTER THE INSERTION OF PROVISO TO SECTION 2(15) WIT H EFFECT FROM 1.4.2009. THE ASSESSEE RELIED ON THE JUDGMENT OF ICAI ACCOUNTING RESEARCH FOUNDATION V. DGIT (EXEMPTIONS) [2009] 183 TAXMAN 462 (DELHI) BUT THE FACTS OF THAT CASE ARE ITA NO. 333/ AHD/2018 . A.Y. 2010-11 11 DIFFERENT. THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE AFORESAID CASE IS NOT APPLICABLE IN THE FACTS AND CIRCUMSTANC ES OF THE PRESENT CASE. 3.3.2. THE ACTIVITIES OF THE ASSESSEE ARE AIMED AT EARNING PROFIT AS IT IS CARRYING ON ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS. FURTHER, PROFIT MAKING BY THE ASSESSEE IS NOT MERE INCIDENTAL OR BYPRODUCT OF THE ACTIVITY OF THE ASSESSEE. THE MAIN PRE-DOMINANT PURPOSE OF ASSESSEE IS MAKING PROFIT, IT IS REAL OBJECT OF THE ASSESSEE AND ALSO THERE IS NO SPENDING OF THE I NCOME EXCLUSIVELY FOR THE PURPOSE OF CHARITABLE ACTIVITIES AND PROFITS OF THE ASSESSEE NOT USED FOR CHARITABLE PURPOSE UNDER THE TERMS OF THE OBJECT AND THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO SPEND IT ON 'CHARITABLE PURPOSES' O NLY. THE ACTIVITIES CAN BE CONSIDERED AS TRADE, BUSINESS OR COMMERCIAL ACTIVIT Y BECAUSE PROVIDING WATER TREATMENT SERVICES AND EFFLUENT SERVICES TO ALL MEM BERS HAVING FACTORIES IN AND AROUND NANDESARI INDUSTRIAL AREA INVOLVES CHARGING OF SUCH FEES. AS PER THE AMENDED DEFINITION OF CHARITABLE PURPOSE UNDER SECT ION 2(15) OF THE ACT, W.E.F. 01.04,2009, ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING O N OF ANY ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OF FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. 3.3.3. AS DISCUSSED ABOVE, SINCE THE APPLICANT IS E NGAGED IN THE ACTIVITY IN THE NATURE OF TRADE, COMMERCE AND BUSINESS AND IS ENGAG ED IN THE TRADE OF REAL ESTATE BUSINESS PREDOMINANTLY WITH A PROFIT MOTIVE, ITS ENGAGEMENT IN ANY OF THE ACTIVITIES AS STATED ABOVE WILL NOT AFFECT ITS CHAR ACTER AS SUCH SINCE THE PROVISO PROVIDES THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE REGARDED AS CHARITABLE PURPOSE IF IT INVOLVE S IN CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDER ING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE O R ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY. ASSESSING OFFICER HAS DEALT IN DETAILS ALL OBJECTIO NS OF THE APPELLANT AND PASSED THE ORDER CONSIDERING VARIOUS CASE LAWS CITED BY HI M. THERE IS NO INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER AND THE SAME IS UPHE LD.' ITA NO. 333/ AHD/2018 . A.Y. 2010-11 12 5. ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE ME . WHEN THIS APPEAL WAS CALLED OUT FOR HEARING, MY ATTENTION WAS INVITED TO A DIVI SION BENCH ORDER OF THIS TRIBUNAL IN THE CASE OF DDIT VS. NARODA ENVIRO PROJ ECTS LTD. ITA NO.546/AHD/2013, ORDER DATED 29.01.2015, WHEREIN ON MATERIALLY IDENTICAL FACTS OF THE CASE, SIMILAR ACTION OF THE ASSESSING OFFICE R WAS HELD TO HAVE BEEN CORRECTLY REVERSED BY THE CIT(A) ON THE BASIS OF FO LLOWING REASONS: '4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT MAIN OBJECT OF ASSESSEE COMPANY WAS CONVERTED AS PE R SECTION 25 OF COMPANIES ACT CLARIFIES THAT ASSESSEE COMPANY IS IN AREA OF E NVIRONMENTAL PROTECTION, ABETMENT OF POLLUTION OF WATER, AIR, SOLID, ETC. GE NERATED BY INDUSTRIAL UNITS IN AND AROUND VATVA AND ODHAV AREA OF AHMEDABAD. ACCORDING LY, ASSESSING OFFICER HAS NOT DISPUTED THE FACT THAT ASSESSEE IS DOING BASIC ACTIVITY OF TREATMENT OF VARIOUS POLLUTANTS GENERATED BY INDUSTRIAL UNITS. IT IS ALS O NOT DISPUTED BY ASSESSING OFFICER THAT SURPLUS GENERATED IS NOT DISTRIBUTED T O ITS MEMBERS/SHAREHOLDERS, ETC. THE ASSESSEE CANNOT LOOSE EXEMPTION MERELY ON THE GROUND THAT IT HAS MADE SURPLUS AS LONG AS ASSESSEE IS NOT GENERATING SURPL US FOR PRIVATE PROFIT OF THE SETTLER OR ANY OTHER PERSON. IN THIS SITUATION, ASS ESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT ASSESSEE WAS GENERATING SURPLUS OR PRO FIT MAKING WAS THE PREDOMINANT OBJECT OF ASSESSEE. ASSESSEE COMPANY WA S INCORPORATED WITH A SOLE OBJECT TO COMPLY WITH DIRECTIONS OF HON'BLE HIGH CO URT OF GUJARAT IN A PIL FOR INDUSTRIES OF NARODA GIDC FOR ESTABLISHMENT IN RUNN ING OF COMMON EFFLUENT TREATMENT PLANT AND ITS STORAGE AND DISPOSAL FACILI TY AT ODHAV, AHMEDABAD. THE PROJECT WAS SETUP UNDER THE DIRECTIONS AND GUIDELIN ES OF HON'BLE HIGH COURT OF GUJARAT AND VARIOUS LOCAL AND STATE LEVEL AGENCIES VIZ. COLLECTOR, GIDC, AMC, GPCB, ETC. AS PER DIRECTIONS OF HON'BLE HIGH COURT OF GUJARAT, IT WAS SINE-QUA-NON FOR INDUSTRIAL UNITS TO BECOME MEMBER OF ASSESSEE C OMPANY FOR MEETING THE POLLUTION CONTROL PARAMETERS LAID DOWN BY GPCB. THE AMOUNT COLLECTED FROM THE MEMBERS VARIED DEPENDING UPON THE QUANTUM OF EFFLUE NT, NATURE OF EFFLUENT TO BE TREATED AS WELL AS OTHER FACTORS PERTAINING TO P OLLUTANT OF DIFFERENT KIND COMING FROM THE INDUSTRIAL UNITS. THUS, ASSESSEE IS ENGAGED IN THE ACTIVITY OF PRESERVATION OF ENVIRONMENT BY ABETMENT AND CONTROL LING POLLUTION OF ENVIRONMENT I.E. LAND, WATER AND AIR. FOR THIS OBJE CTIVE, ASSESSEE IS PROVIDING POLLUTION CONTROL TREATMENT FOR DISPOSAL OF LIQUID AND SOLID INDUSTRIAL WASTE. IT IS UNDISPUTED THAT ASSESSEE WAS INCORPORATED U/S. 25 O F THE COMPANIES ACT. ASSESSEE WAS DULY REGISTERED U/S. 12AA AND ALSO U/S . 80G(5) OF THE INCOME-TAX ACT. THE SAID CERTIFICATES WERE ISSUED AFTER DUE VE RIFICATION BY CONCERN AUTHORITIES. ASSESSING OFFICER HAS IGNORED MODIFIED OBJECTS OF ASSESSEE'S MOU ITA NO. 333/ AHD/2018 . A.Y. 2010-11 13 AFTER ITS CONVERSION AS COMPANY U/ S. 25 OF THE COM PANIES ACT. THE PLAIN READING OF OBJECTS OF COMPANY REVEALS THAT MAIN OBJECT IS P ROTECTION 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 OBJEC TS OF 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 NO T JUSTIFIED TO CONCLUDE THAT ASSESSEE IS NOT DOING ANY CHARITABLE ACTIVITY. WITH REGARDS TO ASSESSING OFFICER'S CONTENTION THAT ASSESSEE IS CARRYING OUT BUSINESS A CTIVITY AND IS IN THE NATURE OF PROFIT MAKING, WE FIND THAT BENEFIT OF EXEMPTION CA NNOT 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 HOLDING THAT ASSESSEE IS DOING CHARITABLE ACTIVITY AS PER SECTION2(15) OF THE INCOME-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 THE ACTIVITY OF ASSESSEE COMPANY AS CHARITABLE AND FURTHER RIGHTLY DIRECTED TO DELETE THE ADDITION OF RS.2,53,21,438. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SI DE. WE UPHOLD THE SAME.' 6. I HAVE ALSO NOTED THAT ON SOMEWHAT SIMILAR MATER IAL FACTS, IN CASE OF A REGULATORY BODY I.E. HIMACHAL PRADESH ENVIRONMENT P ROTECTION & POLLUTION CONTROL BOARD VS. CIT, 9 ITR (TRIB) 604, CHANDIGARH 'B' BENCH OF THE TRIBUNAL HELD AS FOLLOWS:- '8. WE HAVE NOTED THAT THE LEARNED COMMISSIONER HAS PROCEEDED ON THE ASSUMPTION THAT THE SCOPE AND CONNOTATIONS OF 'REGUL ATORY FUNCTION' AND 'CHARITABLE PURPOSES UNDER THE INCOME-TAX ACT' ARE M UTUALLY EXCLUSIVE. WHILE HOLDING THAT THE ASSESSEE WAS NOT ENGAGED IN AN ACT IVITY FOR CHARITABLE PURPOSES, THE LEARNED COMMISSIONER HAS HELD THAT SINCE THE AS SESSEE WAS ENGAGED IN A REGULATORY FUNCTION, IT COULD NOT BE SAID THAT THE ASSESSEE WAS ENGAGED IN AN ACTIVITY WHICH COULD BE SAID TO BE FOR CHARITABLE P URPOSES. WE MUST, THEREFORE, CONSIDER WHETHER OR NOT MERELY BECAUSE AN ASSESSEE IS ENGAGED IN A REGULATORY ACTIVITY, COULD IT BE SAID THAT THE ASSESSEE IS NOT INVOLVED IN ACTIVITY FOR CHARITABLE PURPOSES. 9. WE ARE UNABLE TO SEE ANY CONFLICT IN AN ASSESSEE BEING A REGULATORY BODY AND ITS PURSUING AN 'OBJECT OF GENERAL PUBLIC UTILITY' WH ICH QUALIFIES TO BE A CHARITABLE ACTIVITY UNDER SECTION 2(15) OF THE ACT. THE SCOPE OF EXPRESSION 'ANY OTHER OBJECT ITA NO. 333/ AHD/2018 . A.Y. 2010-11 14 OF GENERAL PUBLIC UTILITY' IS INDEED VERY WIDE, THOU GH IT WOULD INDEED EXCLUDE THE OBJECT OF PRIVATE GAIN SUCH AS AN UNDERTAKING FOR C OMMERCIAL PROFIT EVEN AS THE UNDERTAKING MAY SUB SERVE GENERAL PUBLIC UTILITY. T HE HON'BLE COURTS HAVE TAKEN A VERY BROAD VIEW OF THE CONNOTATIONS OF 'OBJECTS OF G ENERAL PUBLIC UTILITY'. IN THE CASE OF CIT V. BAR COUNCIL OF MAHARASHTRA [1981] 13 0 ITR 28 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT A STATE BAR COUNCIL, WH ICH IS CLEARLY A REGULATORY BODY UNDER THE ADVOCATES ACT, IS PRIMARILY AND PRED OMINANTLY FOR THE PURPOSES OF 'ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY WITHIN THE MEANING OF SECTION 2(15)'. IT IS NOT APPROPRIATE TO PROCEED ON THE BASI S, AS THE LEARNED COMMISSIONER HAS CHOSEN TO PROCEED, THAT REGULATORY FUNCTIONS AR E NOT ACTIVITIES FOR CHARITABLE PURPOSES, FOR THE ELEMENTARY REASON THAT THE EXPRES SION '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, M ANY OF THESE REGULATORY FUNCTIONS ARE ENTRUSTED TO THE BODIES INDEPENDENT O F THE GOVERNMENT AND THE OBJECT OF THE BODIES SO ENTRUSTED WITH THE REGULATO RY FUNCTIONS ARE, IN OUR HUMBLE UNDERSTANDING, CLEARLY PURSUING OBJECTS OF GENERAL PUBLIC UTILITY. WE MUST EMPHASIZE ONCE AGAIN THAT THE CONNOTATIONS OF 'CHAR ITABLE PURPOSES', IN VIEW OF SPECIFIC PROVISIONS OF THE ACT, ARE SIGNIFICANTLY W IDER THAN CONNOTATIONS OF THIS EXPRESSION IN COMMON PARLANCE.' 7. LD. DEPARTMENTAL REPRESENTATIVE'S MAIN CONTENTIO N IS (1) THAT SO FAR AS THE DECISION IN THE CASE OF HIMACHAL PRADESH ENVIRONMEN T PROTECTION & POLLUTION CONTROL BOARD (SUPRA) IS CONCERNED, IT IS IN THE CA SE OF A REGULATORY BODY WHEREAS THE CASE BEFORE ME IS OF A VOLUNTARY ASSOCIATION IN DUSTRIES AND; SECONDLY THAT IF THE SAME ACTIVITY WAS TO BE CARRIED OUT BY A COMMER CIAL UNIT, IT WOULD HAVE BEEN RESULTED IN TAXABLE INCOME AND, THEREFORE, JUST BEC AUSE SEVERAL ENTITIES ARE DOING IT TOGETHER, IT CANNOT RESULT IN TAX EXEMPT INCOME. NONE OF THESE CONTENTIONS, HOWEVER, MERIT ACCEPTANCE. AS FOR THE FIRST POINT M ADE BY THE LD. DEPARTMENTAL REPRESENTATIVE, IT IS NOT THE FACT OF A REGULATORY BODY, WHICH IS DECISIVE TO HOLD WHETHER OR NOT THE PROVISO TO SECTION 15 ARE SATISF IED ON THE NATURE OF ACTIVITIES WHICH ARE CARRIED OUT GOVERN THAT. THERE IS NO DISP UTE, THAT THE NATURE OF ACTIVITIES IS EXCLUSIVELY THE SAME AS CARRIED OUT B Y THE REGULATORY BODY. THE LIMITED ISSUE BEFORE ME IS WHETHER IN SUCH A SITUAT ION THE PROVISO TO SECTION 2(15) WILL COME INTO PLAY OR NOT. I, THEREFORE, SEE NO RE ASONS TO COME TO A DIFFERENT CONCLUSION IN THE CASE OF THIS ASSESSEE JUST BECAUS E IT IS NOT A GOVERNMENT OR REGULATORY BODY BECAUSE OF THE FACT WHICH ARE MATER IAL. THE QUESTION BEFORE ME IS PARI MATRIA. ITA NO. 333/ AHD/2018 . A.Y. 2010-11 15 8. AS REGARDS THE SECOND POINT BY THE LD. DEPARTMEN TAL REPRESENTATIVE, ONCE AGAIN IT IS IMPORTANT TO BEAR IN MIND THAT UNDISPUT EDLY THE ASSESSEE TRUST BEFORE ME IS HAVING COMMON CAUSE AND IT IS NOT EVEN THE CA SE OF THE ASSESSING OFFICER THAT IT INVOLVES ANY COMMERCIAL VENTURE. THE LIMITE D OBJECTION OF THE ASSESSING OFFICER WHICH HAS BEEN UPHELD BY THE LD. CIT(A) IS THAT PROVISO TO SECTION 2(15) IS HIT IN THE PRESENT CASE. THAT ASPECT OF THE MATTER, AS I HAVE NOTED EARLIER, HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TWO D IVISION BENCH DECISIONS OF THIS TRIBUNAL. HON'BLE TELANGANA AND ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT (EXEMPTIONS) VS. WATER LAND MANAGEMENT TRAINING AND RESEARCH INSTITUTE [2017] 398 ITR 283 (T&AP) HAS ALSO HELD SO IN THE C ONTEXT OF PROVISO TO SECTION 2(15) OF THE ACT. 9. IN THE LIGHT OF THE ABOVE DISCUSSIONS AND RESPEC TFULLY FOLLOWING THE BINDING JUDICIAL PRECEDENTS OF THE DIVISION BENCH AS ALSO O F THE HON'BLE TELANGANA AND ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT (EXEMP TIONS) VS. WATER LAND MANAGEMENT TRAINING AND RESEARCH INSTITUTE (SUPRA), I UPHOLD THE PLEA OF THE ASSESSEE AND CONCLUDE THAT IT WAS INDEED NOT A FIT CASE FOR INVOKING PROVISO TO SECTION 2(15) MERELY BECAUSE THE ASSESSEE WAS CHARG ING THE FEE FOR THE SERVICES RENDERED TO THE INDUSTRIAL UNIT. 10. IN THE RESULT, APPEAL IS ALLOWED IN THE TERMS I NDICATED ABOVE. 6. AND ALSO CITED ANOTHER ORDER OF CO-ORDINATE BENCH W HEREIN IN SIMILAR FACTS AND CIRCUMSTANCES APPEAL OF THE REVENUE WAS DISMISSED B Y THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 171 & 174/AHD/201 8FOR ASSESSMENT YEAR 2013-14 & 2014-15 AND FOR THE SAKE OF CONVENIENCE R ELEVANT PORTION OF THE SAID CO-ORDINATE BENCH ORDER IS REPRODUCED: 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 GEN ERATED BY INDUSTRIAL UNITS AROUND NANDESARI AREA, WHO ARE MEMBERS OF THE APPEL LANT TRUST. THE ASSESSEE HAS FILED RETURN OF INCOME ON 7.8.2014 DECLARING NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT BY ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT. DURING THE ASSESSM ENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE-TRUST HAS CLAIMED APPLICA TION 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 ITA NO. 333/ AHD/2018 . A.Y. 2010-11 16 DISALLOWABLE ON THE GROUND THAT PREDOMINANT OBJECT OF THE ASSESSEE-TRUST IS TO MAKE PROFIT; THERE WAS NO SPENDING OF THE INCOME EX CLUSIVELY FOR THE PURPOSE OF CHARITABLE ACTIVITIES NOR ANY OBLIGATION ON THE PAR T OF THE ASSESSEE TO SPENT INCOME OR PROFIT ON CHARITABLE PURPOSE ONLY; THAT T HE ACTIVITIES CARRIED OUT BY THE ASSESSEE WAS IN THE NATURE OF TRADE, BUSINESS OR CO MMERCIAL ACTIVITY, AND FOR SUCH ACTIVITIES OR SERVICES RENDERED BY THE ASSESSEE, TH E MEMBERS HAVE PAID ASSESSEE IN THE FORM OF FEES, CESS AND CHARGES. THEREFORE, THE CLAIM OF THE ASSESSEE WAS HIT BY PROVISIONS OF SECTION 2(15) OF THE ACT AND T HE ASSESSEE WAS NOT ELIGIBLE FOR THE BENEFIT UNDER SECTION 11 OF THE ACT. SIMILARLY, ASSESSEE HAS CLAIMED EXPENDITURE OF RS.90,45,483/- TOWARDS ECP CONTRIB UTION AS REVENUE EXPENDITURE. HOWEVER, THE LD.AO DENIED THE CLAIM OF THE ASSESSEE AND TREATED THE SAME TO BE CAPITAL EXPENDITURE, AND ADDED TO THE INCOME OF THE ASSESSEE. HOWEVER, IN THE APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY, BO TH THE DISALLOWANCES WERE DELETED. NOW THE REVENUE IS BEFORE THE TRIBUNAL. 5. BEFORE US, BOTH THE PARTIES SUPPORTED THE RE SPECTIVE ORDERS OF THE REVENUE AUTHORITIES. THE LD.COUSNEL FOR THE ASSESSEE FURTH ER RELIED UPON THE ORDER OF THE TRIBUNAL PASSED IN THE ASSESSEE OWN CASE FOR THE AS STT.YEAR 2010-11, WHEREIN TRIBUNAL HAS ALLOWED SIMILAR CLAIM OF THE ASSESSEE. HE PLACED ON RECORD A COPY OF THE ORDER OF THE TRIBUNAL PASSED IN ITA NO.1704/AHD /2014 DATED 28.11.2017 IN THE CASE OF THE ASSESSEE. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GON E THROUGH THE RECORD CAREFULLY, AND ALSO ORDER OF THE TRIBUNAL PASSED IN THE ASSESS EE'S OWN CASE ON SIMILAR ISSUE IN THE ASSTT.YEAR 2010-11. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS TRUST REGISTERED UNDER SECTION 12AA OF THE ACT WHICH FORM ED BY MEMBERS OF NANDESARI INDUSTRIES. THE ASSESSEE TRUST IS ENGAGED IN THE AC TIVITY OF PRESERVATION OF ENVIRONMENT BY TREATING AND CONTROLLING POLLUTION O F ENVIRONMENT I.E. LAND AND WATER. AS A PART OF ITS ACTIVITIES, TRUST IS RUNNIN G A COMMON EFFLUENT TREATMENT PLANT FOR TREATMENT OF EFFLUENT AND WASTEWATER GENE RATED AND DISCHARGED BY THE INDUSTRIAL UNITS SITUATED IN AND AROUND NANDESARI I NDUSTRIAL UNITS, WHO ARE MEMBERS OF THE ASSESSEE TRUST. THIS IS IN ACCORDANCE WITH THE REQUIREMENT OF ENVIRONMENT PROTECT ACT AND VARIOUS NOTIFICATION S AND GUIDELINES ISSUES BY THE CENTRAL, STATE GOVERNMENTS, AND POLLUTION CONTROL BOARDS. ASSESSEE IS CHARGING FEES FROM MEMBERS FOR MEETING OPERATING COSTS. THIS FACTUAL POSITION HAS NOT BEEN DISPUTED BY THE AO. HOWEVER, ACCORDING TO THE AO PROVISION OF SECTION 2(15) OF THE ACT IS APPLICABLE TO THE ASSES SEE-TRUST, BECAUSE THE PREDOMINANT OBJECT OF THE ASSESSEE IS IN THE NATURE OF TRADE, BUSINESS OR COMMERCIAL ACTIVITIES AND TO MAKE PROFIT, AND THERE FORE, THERE IS NO EXCLUSIVE USAGE OF INCOME OR PROFIT FOR THE CHARITABLE PURPOS E AS DEFINED IN SECTION 2(15) OF THE ACT, AND THEREFORE, THE ASSESSEE IS NOT ENTITLE D FOR BENEFIT UNDER SECTION 11 OF THE ACT. THE LD.CIT(A) HAS CONSIDERED BOTH THE ISSU ES 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 ELI GIBLE 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 ITA NO. 333/ AHD/2018 . A.Y. 2010-11 17 TREATED ECP CONTRIBUTION OF RS.90,45,483/- AS PART OF APPLICATION OF INCOME, AND ACCORDINGLY DISALLOWANCE TO THIS EXTENT ALSO DELETE D. 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 T HE ASSESSEE VIDE ORDER DATED 28.11.2017. THE RELEVANT PART OF ORDER OF THE TRIBU NAL READS AS UNDER: '3. THE MATERIAL FACTS ARE NOT IN DISPUTE. T HE ASSESSEE BEFORE US IS A TRUST LOOKING AFTER WELFARE AND WELL BEING OF INDUSTRIES SITUATED IN NANDESARI. THE TRUST IS ALSO PROVIDING INFRASTRUCTURE FACILITY TO INDUST RIES OF NANDESARI. DURING THE RELEVANT PREVIOUS YEAR THE TRUST HAS PROVIDED WATER TREATMENT SERVICES AND EFFLUENT SERVICES TO ALL MEMBERS HAVING FACTORIES I N AND AROUND NANDESARI INDUSTRIAL AREA. IN THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTED THAT THE WATER TREATMENT AND EFFLUENT SERVICE S PROVIDED TO THE TRUSTEES SITUATED IN NANDESARI WERE PROVIDED IN CONSIDERATIO N OF 'FEES OR CESS' AND THAT THE RECEIPTS, IN RESPECT OF THE SAME CROSSED THE LI MIT OF RS.25 LAKHS. IT WAS IN THIS BACKDROP THE ASSESSING OFFICER REQUIRED THE ASSESSE E TO SHOW CAUSE AS TO WHY HE SHOULD NOT BE TREATED AS ASSESSEE BEING COVERED BY FIST PROVISO TO SECTION 2(15) AND ACCORDINGLY DECLINED THE STATUS OF CHARITABLE I NSTITUTION. UPON CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSING OFFICER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE IS RENDERING SERVICES IN REL ATION TO TRADE, COMMERCE OR BUSINESS IN CONSIDERATION FOR A FEES THAT THE RECEI PTS OF THE ASSESSEE FROM SUCH SERVICES EXCEEDS THE THRESHOLD LIMIT OF RS.35 LAKHS AND ACCORDINGLY IN THE LIGHT OF PROVISO TO SECTION 2(15) READ WITH SECTION 13(8) NO TWITHSTANDING THE REGISTRATION GRANTED TO THE ASSESSEE AS CHARITABLE INSTITUTION T HE BENEFIT OF SECTION 11 & 12 ARE TO BE DECLINED TO THE ASSESSEE. WHILE COMPUTING SO, THE ASSESSING OFFICER OBSERVED AS FOLLOWS :- 6. FACTS OF THE CASE 1. ASSESSEE IS DOING WOK OF WATER TREATMENT AND EFF LUENT SERVICES FOR THE INDUSTRIES SITUATED IN THE NANDESARI AREA. SO ASSES SEE IS RENDERING SERVICES IN RELATION TO TRADE, COMMERCE OR BUSINESS. 2 ASSOCIATION IS CHARGING FEES FOR THESE SERVICES F ROM THE VARIOUS INDUSTRIES. SO ASSESSEE IS PROVIDING SERVICES FOR A CESS OR FEES. 3. THE TOTAL AMOUNT OF RECEIPTS COMING FROM VARIOUS INDUSTRIES BY CHARGING FEES, IS FAR BEYOND THE 25 LAKHS. SO THE RECEIPTS OF THE ASSESSEE IS EXCEEDING 25 LAKHS. 4. ASSESSEE IS CLAIMING THAT THEY ARE TRADE ASSOCIA TION AND ARE WORKING ON THE PRINCIPLE OF MUTUALITY, BUT THIS CONTENTION IS DISP ROVED IN THE DISCUSSION IN THE PARA 4 AS THEY ARE DEALING WITH THE NON-MEMBERS THA T IS TO SAY OUTSIDE THE GROUP, HENCE NEGATING THE PRINCIPLE OF MUTUALITY. T HIS 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 SUBSECT ION 15 OF SECTION 2, WHICH WAS ITA NO. 333/ AHD/2018 . A.Y. 2010-11 18 INTRODUCED BY THE FINANCE ACT, 2008 (W.E.F. 1.4.200 9), ACCORDING TO WHICH THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTI VITY 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 A NY 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 EX EMPTION 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 LEA RNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFIC ER. THERE IS NO DISPUTE THAT THE ASSESSEE IS RENDERING SERVICES TO ITS CLIENTS ( ENTREPRENEURS) WHICH IN TURN ENGAGE IN MANUFACTURING OR OTHER BUSINESS ACTIVITIE S AGAINST PAYMENT OF FEE. THE FEE COLLECTED BY THE ASSESSEE IS IN LIEU OF SERVICE S RENDERED TO THE INDUSTRIALISTS, WHICH BY NO STRETCH OF IMAGINATION CAN BE TERMED AS CHARITABLE ACTIVITY ESPECIALLY AFTER THE INSERTION OF PROVISO TO SECTION 2(15) WIT H EFFECT FROM 1.4.2009. THE ASSESSEE RELIED ON THE JUDGMENT OF ICAI ACCOUNTING RESEARCH FOUNDATION V. DGIT (EXEMPTIONS) [2009] 183 TAXMAN 462 (DELHI) BUT THE FACTS OF THAT CASE ARE DIFFERENT. THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN THE AFORESAID CASE IS NOT APPLICABLE IN THE FACTS AND CIRCUMSTANC ES OF THE PRESENT CASE. 3.3.2. THE ACTIVITIES OF THE ASSESSEE ARE AIMED AT EARNING PROFIT AS IT IS CARRYING ON ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS. FURTHER, PROFIT MAKING BY THE ASSESSEE IS NOT MERE INCIDENTAL OR BYPRODUCT OF THE ACTIVITY OF THE ASSESSEE. THE MAIN PRE-DOMINANT PURPOSE OF ASSESSEE IS MAKING PROFIT, IT IS REAL OBJECT OF THE ASSESSEE AND ALSO THERE IS NO SPENDING OF THE I NCOME EXCLUSIVELY FOR THE PURPOSE OF CHARITABLE ACTIVITIES AND PROFITS OF THE ASSESSEE NOT USED FOR CHARITABLE PURPOSE UNDER THE TERMS OF THE OBJECT AND THERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO SPEND IT ON 'CHARITABLE PURPOSES' O NLY. THE ACTIVITIES CAN BE CONSIDERED AS TRADE, BUSINESS OR COMMERCIAL ACTIVIT Y BECAUSE PROVIDING WATER TREATMENT SERVICES AND EFFLUENT SERVICES TO ALL MEM BERS HAVING FACTORIES IN AND AROUND NANDESARI INDUSTRIAL AREA INVOLVES CHARGING OF SUCH FEES. AS PER THE AMENDED DEFINITION OF CHARITABLE PURPOSE UNDER SECT ION 2(15) OF THE ACT, W.E.F. 01.04,2009, ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING O N OF ANY ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OF FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. 3.3.3. AS DISCUSSED ABOVE, SINCE THE APPLICANT IS E NGAGED IN THE ACTIVITY IN THE NATURE OF TRADE, COMMERCE AND BUSINESS AND IS ENGAG ED IN THE TRADE OF REAL ITA NO. 333/ AHD/2018 . A.Y. 2010-11 19 ESTATE BUSINESS PREDOMINANTLY WITH A PROFIT MOTIVE, ITS ENGAGEMENT IN ANY OF THE ACTIVITIES AS STATED ABOVE WILL NOT AFFECT ITS CHAR ACTER AS SUCH SINCE THE PROVISO PROVIDES THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE REGARDED AS CHARITABLE PURPOSE IF IT INVOLVE S IN CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDER ING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE O R ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY. ASSESSING OFFICER HAS DEALT IN DETAILS ALL OBJECTIO NS OF THE APPELLANT AND PASSED THE ORDER CONSIDERING VARIOUS CASE LAWS CITED BY HI M. THERE IS NO INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER AND THE SAME IS UPHE LD.' 5. ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE ME . WHEN THIS APPEAL WAS CALLED OUT FOR HEARING, MY ATTENTION WAS INVITED TO A DIVI SION BENCH ORDER OF THIS TRIBUNAL IN THE CASE OF DDIT VS. NARODA ENVIRO PROJ ECTS LTD. ITA NO.546/AHD/2013, ORDER DATED 29.01.2015, WHEREIN ON MATERIALLY IDENTICAL FACTS OF THE CASE, SIMILAR ACTION OF THE ASSESSING OFFICE R WAS HELD TO HAVE BEEN CORRECTLY REVERSED BY THE CIT(A) ON THE BASIS OF FO LLOWING REASONS: '4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT MAIN OBJECT OF ASSESSEE COMPANY WAS CONVERTED AS PE R SECTION 25 OF COMPANIES ACT CLARIFIES THAT ASSESSEE COMPANY IS IN AREA OF E NVIRONMENTAL PROTECTION, ABETMENT OF POLLUTION OF WATER, AIR, SOLID, ETC. GE NERATED BY INDUSTRIAL UNITS IN AND AROUND VATVA AND ODHAV AREA OF AHMEDABAD. ACCORDING LY, ASSESSING OFFICER HAS NOT DISPUTED THE FACT THAT ASSESSEE IS DOING BASIC ACTIVITY OF TREATMENT OF VARIOUS POLLUTANTS GENERATED BY INDUSTRIAL UNITS. IT IS ALS O NOT DISPUTED BY ASSESSING OFFICER THAT SURPLUS GENERATED IS NOT DISTRIBUTED T O ITS MEMBERS/SHAREHOLDERS, ETC. THE ASSESSEE CANNOT LOOSE EXEMPTION MERELY ON THE GROUND THAT IT HAS MADE SURPLUS AS LONG AS ASSESSEE IS NOT GENERATING SURPL US FOR PRIVATE PROFIT OF THE SETTLER OR ANY OTHER PERSON. IN THIS SITUATION, ASS ESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT ASSESSEE WAS GENERATING SURPLUS OR PRO FIT MAKING WAS THE PREDOMINANT OBJECT OF ASSESSEE. ASSESSEE COMPANY WA S INCORPORATED WITH A SOLE OBJECT TO COMPLY WITH DIRECTIONS OF HON'BLE HIGH CO URT OF GUJARAT IN A PIL FOR INDUSTRIES OF NARODA GIDC FOR ESTABLISHMENT IN RUNN ING OF COMMON EFFLUENT TREATMENT PLANT AND ITS STORAGE AND DISPOSAL FACILI TY AT ODHAV, AHMEDABAD. THE PROJECT WAS SETUP UNDER THE DIRECTIONS AND GUIDELIN ES OF HON'BLE HIGH COURT OF GUJARAT AND VARIOUS LOCAL AND STATE LEVEL AGENCIES VIZ. COLLECTOR, GIDC, AMC, GPCB, ETC. AS PER DIRECTIONS OF HON'BLE HIGH COURT OF GUJARAT, IT WAS SINE-QUA-NON FOR INDUSTRIAL UNITS TO BECOME MEMBER OF ASSESSEE C OMPANY FOR MEETING THE POLLUTION CONTROL PARAMETERS LAID DOWN BY GPCB. THE AMOUNT COLLECTED FROM THE MEMBERS VARIED DEPENDING UPON THE QUANTUM OF EFFLUE NT, NATURE OF EFFLUENT TO BE TREATED AS WELL AS OTHER FACTORS PERTAINING TO P OLLUTANT OF DIFFERENT KIND COMING FROM THE INDUSTRIAL UNITS. THUS, ASSESSEE IS ENGAGED IN THE ACTIVITY OF ITA NO. 333/ AHD/2018 . A.Y. 2010-11 20 PRESERVATION OF ENVIRONMENT BY ABETMENT AND CONTROL LING POLLUTION OF ENVIRONMENT I.E. LAND, WATER AND AIR. FOR THIS OBJE CTIVE, ASSESSEE IS PROVIDING POLLUTION CONTROL TREATMENT FOR DISPOSAL OF LIQUID AND SOLID INDUSTRIAL WASTE. IT IS UNDISPUTED THAT ASSESSEE WAS INCORPORATED U/S. 25 O F THE COMPANIES ACT. ASSESSEE WAS DULY REGISTERED U/S. 12AA AND ALSO U/S . 80G(5) OF THE INCOME-TAX ACT. THE SAID CERTIFICATES WERE ISSUED AFTER DUE VE RIFICATION BY CONCERN AUTHORITIES. ASSESSING OFFICER HAS IGNORED MODIFIED OBJECTS OF ASSESSEE'S MOU AFTER ITS CONVERSION AS COMPANY U/ S. 25 OF THE COM PANIES ACT. THE PLAIN READING OF OBJECTS OF COMPANY REVEALS THAT MAIN OBJECT IS P ROTECTION 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 OBJEC TS OF 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 NO T JUSTIFIED TO CONCLUDE THAT ASSESSEE IS NOT DOING ANY CHARITABLE ACTIVITY. WITH REGARDS TO ASSESSING OFFICER'S CONTENTION THAT ASSESSEE IS CARRYING OUT BUSINESS A CTIVITY AND IS IN THE NATURE OF PROFIT MAKING, WE FIND THAT BENEFIT OF EXEMPTION CA NNOT 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 HOLDING THAT ASSESSEE IS DOING CHARITABLE ACTIVITY AS PER SECTION2(15) OF THE INCOME-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 THE ACTIVITY OF ASSESSEE COMPANY AS CHARITABLE AND FURTHER RIGHTLY DIRECTED TO DELETE THE ADDITION OF RS.2,53,21,438. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SI DE. WE UPHOLD THE SAME.' 6. I HAVE ALSO NOTED THAT ON SOMEWHAT SIMILAR MATER IAL FACTS, IN CASE OF A REGULATORY BODY I.E. HIMACHAL PRADESH ENVIRONMENT P ROTECTION & POLLUTION CONTROL BOARD VS. CIT, 9 ITR (TRIB) 604, CHANDIGARH 'B' BENCH OF THE TRIBUNAL HELD AS FOLLOWS:- '8. WE HAVE NOTED THAT THE LEARNED COMMISSIONER HAS PROCEEDED ON THE ASSUMPTION THAT THE SCOPE AND CONNOTATIONS OF 'REGUL ATORY FUNCTION' AND 'CHARITABLE PURPOSES UNDER THE INCOME-TAX ACT' ARE M UTUALLY EXCLUSIVE. WHILE HOLDING THAT THE ASSESSEE WAS NOT ENGAGED IN AN ACT IVITY FOR CHARITABLE PURPOSES, THE LEARNED COMMISSIONER HAS HELD THAT SINCE THE AS SESSEE WAS ENGAGED IN A REGULATORY FUNCTION, IT COULD NOT BE SAID THAT THE ASSESSEE WAS ENGAGED IN AN ACTIVITY WHICH COULD BE SAID TO BE FOR CHARITABLE P URPOSES. WE MUST, THEREFORE, CONSIDER WHETHER OR NOT MERELY BECAUSE AN ASSESSEE IS ENGAGED IN A REGULATORY ACTIVITY, COULD IT BE SAID THAT THE ASSESSEE IS NOT INVOLVED IN ACTIVITY FOR CHARITABLE PURPOSES. 9. WE ARE UNABLE TO SEE ANY CONFLICT IN AN ASSESSEE BEING A REGULATORY BODY AND ITS PURSUING AN 'OBJECT OF GENERAL PUBLIC UTILITY' WH ICH QUALIFIES TO BE A CHARITABLE ITA NO. 333/ AHD/2018 . A.Y. 2010-11 21 ACTIVITY UNDER SECTION 2(15) OF THE ACT. THE SCOPE OF EXPRESSION 'ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' IS INDEED VERY WIDE, THOU GH IT WOULD INDEED EXCLUDE THE OBJECT OF PRIVATE GAIN SUCH AS AN UNDERTAKING FOR C OMMERCIAL PROFIT EVEN AS THE UNDERTAKING MAY SUB SERVE GENERAL PUBLIC UTILITY. T HE HON'BLE COURTS HAVE TAKEN A VERY BROAD VIEW OF THE CONNOTATIONS OF 'OBJECTS OF G ENERAL PUBLIC UTILITY'. IN THE CASE OF CIT V. BAR COUNCIL OF MAHARASHTRA [1981] 13 0 ITR 28 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT A STATE BAR COUNCIL, WH ICH IS CLEARLY A REGULATORY BODY UNDER THE ADVOCATES ACT, IS PRIMARILY AND PRED OMINANTLY FOR THE PURPOSES OF 'ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY WITHIN THE MEANING OF SECTION 2(15)'. IT IS NOT APPROPRIATE TO PROCEED ON THE BASI S, AS THE LEARNED COMMISSIONER HAS CHOSEN TO PROCEED, THAT REGULATORY FUNCTIONS AR E NOT ACTIVITIES FOR CHARITABLE PURPOSES, FOR THE ELEMENTARY REASON THAT THE EXPRES SION '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, M ANY OF THESE REGULATORY FUNCTIONS ARE ENTRUSTED TO THE BODIES INDEPENDENT O F THE GOVERNMENT AND THE OBJECT OF THE BODIES SO ENTRUSTED WITH THE REGULATO RY FUNCTIONS ARE, IN OUR HUMBLE UNDERSTANDING, CLEARLY PURSUING OBJECTS OF GENERAL PUBLIC UTILITY. WE MUST EMPHASIZE ONCE AGAIN THAT THE CONNOTATIONS OF 'CHAR ITABLE PURPOSES', IN VIEW OF SPECIFIC PROVISIONS OF THE ACT, ARE SIGNIFICANTLY W IDER THAN CONNOTATIONS OF THIS EXPRESSION IN COMMON PARLANCE.' 7. LD. DEPARTMENTAL REPRESENTATIVE'S MAIN CONTENTIO N IS (1) THAT SO FAR AS THE DECISION IN THE CASE OF HIMACHAL PRADESH ENVIRONMEN T PROTECTION & POLLUTION CONTROL BOARD (SUPRA) IS CONCERNED, IT IS IN THE CA SE OF A REGULATORY BODY WHEREAS THE CASE BEFORE ME IS OF A VOLUNTARY ASSOCIATION IN DUSTRIES AND; SECONDLY THAT IF THE SAME ACTIVITY WAS TO BE CARRIED OUT BY A COMMER CIAL UNIT, IT WOULD HAVE BEEN RESULTED IN TAXABLE INCOME AND, THEREFORE, JUST BEC AUSE SEVERAL ENTITIES ARE DOING IT TOGETHER, IT CANNOT RESULT IN TAX EXEMPT INCOME. NONE OF THESE CONTENTIONS, HOWEVER, MERIT ACCEPTANCE. AS FOR THE FIRST POINT M ADE BY THE LD. DEPARTMENTAL REPRESENTATIVE, IT IS NOT THE FACT OF A REGULATORY BODY, WHICH IS DECISIVE TO HOLD WHETHER OR NOT THE PROVISO TO SECTION 15 ARE SATISF IED ON THE NATURE OF ACTIVITIES WHICH ARE CARRIED OUT GOVERN THAT. THERE IS NO DISP UTE, THAT THE NATURE OF ACTIVITIES IS EXCLUSIVELY THE SAME AS CARRIED OUT B Y THE REGULATORY BODY. THE LIMITED ISSUE BEFORE ME IS WHETHER IN SUCH A SITUAT ION THE PROVISO TO SECTION 2(15) WILL COME INTO PLAY OR NOT. I, THEREFORE, SEE NO RE ASONS TO COME TO A DIFFERENT CONCLUSION IN THE CASE OF THIS ASSESSEE JUST BECAUS E IT IS NOT A GOVERNMENT OR REGULATORY BODY BECAUSE OF THE FACT WHICH ARE MATER IAL. THE QUESTION BEFORE ME IS PARI MATRIA. 8. AS REGARDS THE SECOND POINT BY THE LD. DEPARTMEN TAL REPRESENTATIVE, ONCE AGAIN IT IS IMPORTANT TO BEAR IN MIND THAT UNDISPUT EDLY THE ASSESSEE TRUST BEFORE ME IS HAVING COMMON CAUSE AND IT IS NOT EVEN THE CA SE OF THE ASSESSING OFFICER THAT IT INVOLVES ANY COMMERCIAL VENTURE. THE LIMITE D OBJECTION OF THE ASSESSING OFFICER WHICH HAS BEEN UPHELD BY THE LD. CIT(A) IS THAT PROVISO TO SECTION 2(15) IS ITA NO. 333/ AHD/2018 . A.Y. 2010-11 22 HIT IN THE PRESENT CASE. THAT ASPECT OF THE MATTER, AS I HAVE NOTED EARLIER, HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TWO D IVISION BENCH DECISIONS OF THIS TRIBUNAL. HON'BLE TELANGANA AND ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT (EXEMPTIONS) VS. WATER LAND MANAGEMENT TRAINING AND RESEARCH INSTITUTE [2017] 398 ITR 283 (T&AP) HAS ALSO HELD SO IN THE C ONTEXT OF PROVISO TO SECTION 2(15) OF THE ACT. 9. IN THE LIGHT OF THE ABOVE DISCUSSIONS AND RESPEC TFULLY FOLLOWING THE BINDING JUDICIAL PRECEDENTS OF THE DIVISION BENCH AS ALSO O F THE HON'BLE TELANGANA AND ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT (EXEMP TIONS) VS. WATER LAND MANAGEMENT TRAINING AND RESEARCH INSTITUTE (SUPRA), I UPHOLD THE PLEA OF THE ASSESSEE AND CONCLUDE THAT IT WAS INDEED NOT A FIT CASE FOR INVOKING PROVISO TO SECTION 2(15) MERELY BECAUSE THE ASSESSEE WAS CHARG ING THE FEE FOR THE SERVICES RENDERED TO THE INDUSTRIAL UNIT.' 8. ON DUE CONSIDERATION OF THE FACTS OF THE CASE, F INDING OF THE LD.CIT(A) IN BOTH THE YEARS, AND ALSO CONSIDERING ORDER OF THE ITAT I N THE CASE OF THE ASSESSEE ON SIMILAR ISSUES EXTRACTED (SUPRA), WE DO NOT FIND AN Y REASON TO INTERFERE IN THE ORDERS OF THE LD.CIT(A) FOR BOTH THE ASSESSMENT YEA RS, WHICH WE UPHOLD AND GROUNDS OF APPEAL OF THE REVENUE IN BOTH THE YEARS ARE REJECTED. 9. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMIS SED. 7. SINCE MATTER HAS BEEN DECIDED IN ASSESSEES OWN CAS E IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE AND MATTER HAS GOT FINALITY, TH EREFORE, WE ARE NOT INCLINED TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A). IN OUR CONSIDERED OPINION, LD. CIT(A) HAS PASSED DETAILED AND REASONED ORDER AFTER CONSIDERING THE JUDICIAL PRECEDENTS. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 14- 10- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY SJUDICIAL MEMBER AHMEDABAD: DATED 14/10/2019