Paryavaran Edutech, Ahmedabad V. Dy.Commissioner of Income Tax,(Exem), Ahmedabad

ITA 3406/AHD/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7982 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 08-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Charitable institution; Opportunity of being heard; Principle of natural justice; Benefit of exemption
• Section: 143(3); 12AA; 12; 11

Judgement Text

ITA NO. 3406/AHD/2015 PARYAVARAN EDUTECH VS. DCIT (EXEM) ASSESSMENT YEAR: 2010-11 PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO.3406/AHD/2015 ASSESSMENT YEAR: 2010-11 PARYAVARAN EDUTECH .......... .. APPELLANT CENTRE FOR ENVIRONMENT EDUCATION, THALTEJ TEKRA, AHMEDABAD 380 054 [PAN: AACCP 0872 G] VS. THE DDIT (EXEM) ..................... RESPONDENT AHMEDABAD APPEARANCES BY SN DIVETIA, FOR THE APPELLANT SAURABH SINGH , FOR THE RESPONDENT HEARING CONCLUDED ON: 28.06.2018 ORDER PRONOUNCED ON : 25.09.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE LEARNED CIT(A)S ORDER DATED 20 TH OCTOBER 2015 IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2010-11. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S:- 1.1 THE ORDER PASSED U/S.250 ON 20.10.2015 FOR A. Y.2010-11 BY CIT(A)-4, ABAD, CONFIRMING THE REJECTION OF EXEMPTION U/S. 11 & 12 AND ASSESSING THE APPELLANT AS 'AOP' IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED I N LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE EXPLANATIONS FURNISHED AND THE EVIDENCE PRODUCED BY THE APPELLANT. 1.3 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN UPHOLDING THAT THE ACTIVITY OF MARKETING PRODUCTS, LITERATU RE AND OTHER MATERIAL RELATING TO ENVIRONMENT CARRIED OUT BY THE APPELLAN T COMPANY WERE NOT MAIN ACTIVITY BUT THE SUPPORTING, SECONDARY OR ANCI LLARY SO THAT DID NOT FALL UNDER THE LIMB 'PRESERVATION OF ENVIRONMENT'. 2.1 THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE ID. CIT(A) HAS GRIEVOUSLY ERRED IN NOT APPRECIATING IN RIGHT PERSPECTIVE THE ACTIVITIES OF THE APPELLANT AND UPHOLDING THAT IT DID NOT AMOUNT TO 'PRESERVATION OF ENVIRONMENT' U/S. 2(15). ITA NO. 3406/AHD/2015 PARYAVARAN EDUTECH VS. DCIT (EXEM) ASSESSMENT YEAR: 2010-11 PAGE 2 OF 10 3.1 WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT DISPOSING OFF THE GROUND OF THE APPELLANT THAT THE ACTIVITIES CARRIED OUT BY IT AMOUNTED TO 'ADVANCEME NT OF ANY OTHER OBJECT OF PUBLIC UTILITY'. 3.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AS WELL AS IN LAW, THE ID. CIT(A) HAS GRIEVOUSLY ERRED IN NOT DISPOSING OFF TH E GROUND OF THE APPELLANT THAT THE ACTIVITIES CARRIED OUT BY IT AMO UNTED TO 'ADVANCEMENT OF ANY OTHER OBJECT OF PUBLIC UTILITY'. 4.1 WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) HA S GRIEVOUSLY FAILED TO APPRECIATE THAT THE ACTIVITIES CARRIED OUT BY THE A PPELLANT TRUST WERE NOT COVERED UNDER THE PROVISO TO SECTION 2 (15). 5.1 THE ID. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND/OR ON FACTS IN DENYING THE EXEMPTION U/S. 11 & 12 OF THE ACT TO THE APPELLANT COMPANY AND NOT DISPOSING OFF THE GROUND RELATING TO THE STATUS OF 'AOP'. 6.1 THE ID. CIT(A) HAS GRIEVOUSLY ERRED IN ASSE SSING THE RECEIPTS AS BUSINESS RECEIPTS AND COMPUTING THE TOTAL INCOME ACCORDINGLY . 3. BRIEFLY STATED, RELEVANT MATERIAL FACTS ARE AS F OLLOWS. THE ASSESSEE BEFORE US IS A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIE S ACT, 1956. THE ASSESSEE IS ALSO GRANTED REGISTRATION UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE F ILED RETURN OF INCOME ON 17.09.2010 DECLARING ITS INCOME AT A DEFICIT OF RS. (-)3,34,520/- AFTER CLAIMING EXEMPTION TO THE EXTENT OF RS.49,87,439/-. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER INVOKED SECTION 13(8) OF THE INCOME-TAX ACT TO DECLINE THE EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. WHIL E DOING SO, THE ASSESSING OFFICER REASONED AS FOLLOWS:- 3.3 ON GOING THROUGH THE SUBMISSION MADE BY THE A SSESSEE DATED 19.02.2013 AND 18.03.2013 ARE CONSIDERED BUT NOT ACCEPTED FOR THE FOLLOWING REASONS: (1) IT IS SEEN THAT YOU ARE DOING MARKETING AND DI STRIBUTION FOR GEE WHICH DOES NOT FALLS UNDER THE CHARITABLE ACTIVITY ENVISAGED I N SECTION 2(15) OF THE I T ACT I.E. RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, PRES ERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PR ESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. UPON PERUSAL OF O BJECTS OF THE VIS-A-VIS THE OBJECTS DEFINED IN THE ACT, IT IS CONCLUDED THAT THE OBJECT OF THE TRUST IS 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY'. (2) THE ASSESSEE COMPANY IS DOING ACTIVITY OF GENER AL PUBLIC UTILITY AS THE ASSESSEE COMPANY IS DOING ACTIVITY OF MARKETING THE PRODUCTS, MATERIALS RELATING TO ENVIRONMENT. (3) IT IS RIGHTLY SAID THAT THIS COMPANY IS SECTION 25 COMPANY BUT ITS ACTIVITY DOES NOT FALLS UNDER THE LIMB OF PRESERVATION OF ENVIRON MENT AS ITS SUBMISSION REVEALS THAT THESE ARE TO IMPART KNOWLEDGE AND GENERATE AWA RENESS AND INTEREST AMONGST THE PUBLIC ABOUT ENVIRONMENT IN ALL RESPECT . BUT THIS COMPANY IS NOT DIRECTLY INVOLVED IN ACTIVITY OF PRESERVATION OF EN VIRONMENT . ITA NO. 3406/AHD/2015 PARYAVARAN EDUTECH VS. DCIT (EXEM) ASSESSMENT YEAR: 2010-11 PAGE 3 OF 10 (4) THE ASSESSEE ITSELF ACCEPTS THAT THEY ARE 'MEDI UM1 OR 'CHANNEL' THROUGH WHICH THE LITERATURE, PRODUCTS ETC. RELATING TO ENV IRONMENT REACHED TO PUBLIC. IN PARA 6 OF SUBMISSION DATED 18.03.2013, THE COMPANY IS DONG ACTIVITY FOR CREATING AWARENESS ABOUT ENVIRONMENT AND THE SALE OF LITERAT URE, PRODUCTS AND OTHER MATERIAL RELATING TO ENVIRONMENT WAS THE MODALITY O F CREATING SUCH AWARENESS AMONGST THE PUBLIC. (5) SECTION 2(15) OF THE ACT DEFINES 'CHARITABLE PU RPOSES'. 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. 10 LACS, IT SHALL BE CONSIDERED THAT OTHER OBJECTS IS NOT A CHARITABLE PURPOSE. IF SO, S UCH A TRUST IS NOT ELIGIBLE FOR THE EXEMPTION INASMUCH AS THE PRIMARY CONDITION OF BEING EXISTING FOR CHARITABLE PURPOSE IS NOT SATISFIED. (6) WITH THE INTRODUCTION OF SEC 13(8) OF THE ACT, W.E.F 1/04/2009 (FINANCE ACT 2012), IT IS CLEARLY EVIDENT THAT THE ASSESSEE WHOS E CASE IS SQUARELY COVERED BY THE PROVISO TO SEC 2(15) SHALL FORFEIT ALL THE EXEM PTIONS THAT ARE OTHERWISE AVAILABLE U/S 11 AND 12 OF THE ACT. THE RELEVANT PR OVISIONS ARE AS UNDER: '(8) NOTHING CONTAINED IN SECTION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE ANY INCOME FROM THE TOTAL INCOME OF THE PRE VIOUS YEAR OF THE PERSON IN RECEIPT THEREOF IF THE PROVISIONS OF THE FIRST PROVISO TO CLAUSE (15) OF SECTION 2 BECOME APPLICABLE IN THE CASE OF SUCH PERSON IN THE SAID PREVIOUS YEAR.' (7) THE NEW SUB-SECTION (8) PROVIDES THAT THE EXEMP TION UNDER SECTION 11 & 12 WILL NOT BE AVAILABLE TO A TRUST, IN A PREVIOUS YEA R, IN WHICH THE FIRST PROVISO TO SECTION 2(15) BECOMES APPLICABLE, FOR THAT PREVIOUS YEAR. THEREFORE, IN THE LIGHT OF THE PROVISIONS OF SEC 13 (8) OF THE ACT, THE ASSESSEE LOSES ALL THE EXEMPTIONS CLAIMED U/S 11 & 12 OF THE ACT. IT IS CLEAR FROM THE PLAIN READING OF THE SAID PROVISION THAT ONCE P ROVISO TO SEC 2(15) BECOMES APPLICABLE TO THE FACTS OF THE CASE, ALL THE EXEMPT IONS OTHERWISE ALLOWABLE U/S 11 AND 12 ARE NOT AVAILABLE TO THE ASSESSEE IN THAT PR EVIOUS YEAR. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE TO ANY OF THE EXEMPTION CL AIMED U/S 11 AND 12 OF THE ACT. WHEN SECTION 2(15) PROVISO 1 & 2 HIT THERE IS NO NE ED TO SEE WHETHER THIS ACTIVITY EARNS PROFIT OR NOT. 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE REASONING ADOPTED BY THE CIT(A) I S AS FOLLOWS:- 7. I HAVE GONE THROUGH CAREFULLY THE REASONS FO R MAKING ADDITION BY THE A.O. AND THE SUBMISSION OF THE APPELLANT. THE APPELLANT IS ENGAGED IN THE BUSINESS OF DISTRIBUTION OF BOOKLETS ETC, TO IMPART KNOWLEDGE O F AND GENERATE AWARENESS AND INTEREST AMONG THE PUBLIC ABOUT ENVIRONMENT. THE A. O. CONSIDERED THESE ACTIVITIES AS NOT CHARITABLE AND NOT COVERED BY THE ACTIVITIES CONTAINED U/S 2(15) OF THE ACT FOR THE REASONS MENTIONED IN DETAIL IN THE ASSESSMENT ORDER WHICH HAS BEEN REPRODUCED IN PARAS ABOVE. WHEREAS THE APPELLA NT CONTENDED THAT THE ACTIVITIES UNDERTAKEN BY THE APPELLANT FALL WELL WI THIN THE PARAMETERS LAID DOWN U/S 2(15) OF THE ACT. THEREFORE, IT SHOULD BE ELIGIBLE FOR EXEMPTION CLAIMED U/S 11 & 12 OF THE ACT. ITA NO. 3406/AHD/2015 PARYAVARAN EDUTECH VS. DCIT (EXEM) ASSESSMENT YEAR: 2010-11 PAGE 4 OF 10 7.1 AS THE APPELLANT IS ENGAGED IN THE ACTIVITIES RELATED TO MARKETING OF LITERATURE, PRODUCTS ETC. TO CREATE AWARENESS ABOU T THE, ENVIRONMENT AMONG THE PUBLIC, SUCH ACTIVITY CANNOT BE CONSIDERED AS ACTIV ITIES RELATED TO PRESERVATION OF ENVIRONMENT, AS THE APPELLANT IS NOT DIRECTLY ENGAG ED IN THE ACTIVITIES TO PRESERVE ENVIRONMENT. THE CLAIM OF THE APPELLANT IS SIMILAR TO THE CLAIM OF 'PRASAD MANUFACTURER' FOR TEMPLES, WHO MAY CLAIM THAT HIS A CTIVITIES ARE OF RELIGIOUS NATURE OR THE BOOK SELLER'S CLAIM THAT HIS ACTIVITI ES ARE TO BE CONSIDERED FOR IMPARTING EDUCATION TO PUBLIC. ANY SUPPORTING, SECO NDARY OR ANCILLARY ACTIVITIES RELATED TO THE MAIN ACTIVITY CANNOT BE CONSIDERED A S THE MAIN ACTIVITY. THE APPELLANT'S ACTIVITIES ARE OF SECONDARY OR ANCILLAR Y NATURE. WHICH MAY SUPPORT THE CAUSE INDIRECTLY BUT NOT DIRECTLY ENGAGED IN THE AC TIVITIES OF PRESERVATION OF ENVIRONMENT. KEEPING, IS VIEW THESE FACTS, THE CLAI MS OF THE APPELLANT, IS NOT FOUND ACCEPTABLE, THEREFORE, IT IS REJECTED. 7.2 REGARDING THE CASE LAWS CITED BY THE APPELLAN T IN SUPPORT OF ITS CLAIM, THE FACTS OF THESE CASE LAWS ARE DISTINGUISHABLE FROM T HE FACTS OF THE APPELLANT'S CASE; THEREFORE, THESE ARE NOT RELIED UPON. 7.3 LOOKING TO THESE FACTS, FINDINGS GIVEN BY THE A .O ARE CONFIRMED AND APPEAL OF THE APPELLANT IS DISMISSED. 5. THE ASSESSEE IS AGGRIEVED AND IS IN FURTHER APPE AL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 7. IN ORDER TO ADJUDICATE ON THIS APPEAL, IT IS NEC ESSARY TO TAKE A LOOK AT THE SCHEME OF THE ACT FIRST. LET US, THEREFORE, BEGIN WITH LOO KING AT THE PROVISIONS OF SECTION 2(15) AND 13(8) FIRST. THESE SECTIONS, AS THEY STOOD FOR THE RELEVANT POINT OF TIME, WERE AS FOLLOWS: SECTION 2 (15) CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION , MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CAR RYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIV ITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY: PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR; SECTION 13(8) [INTRODUCED BY THE FINANCE ACT 2012 WITH RETROSPECT IVE EFFECT FROM 1 ST APRIL 2009] ITA NO. 3406/AHD/2015 PARYAVARAN EDUTECH VS. DCIT (EXEM) ASSESSMENT YEAR: 2010-11 PAGE 5 OF 10 (8) NOTHING CONTAINED IN SECTION 11 OR SECTION 12 S HALL OPERATE SO AS TO EXCLUDE ANY INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YE AR OF THE PERSON IN RECEIPT THEREOF IF THE PROVISIONS OF THE FIRST PROVISO TO C LAUSE (15) OF SECTION 2 BECOME APPLICABLE IN THE CASE OF SUCH PERSON IN THE SAID P REVIOUS YEAR. 8. WHAT FOLLOWS THUS IS THAT NOTWITHSTANDING THE RE GISTRATION GRANTED TO AN ASSESSEE UNDER SECTION 12AA, WHEN FIRST PROVISO TO SECTION 2 (15) COMES INTO PLAY, I.E. WHEN IT IS HELD THAT THE ADVANCEMENT OF ANY OBJECT OF GENERAL UTILITY CEASES TO BE A CHARITABLE PURPOSE ON ACCOUNT OF THE ASSESSEE CARRYING OUT ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS FOR A CESS, FEES OR ANY OTHER CONSIDERATION, THE BENEFIT UNDER SECTION 11 AND 12 WILL NOT BE APPLICABLE. ESSENTIAL LY, THEREFORE, SECTION 13(8) CAN BE INVOKED ONLY WHEN AN ASSESSEE IS COVERED BY CHARITA BLE PURPOSES AS ADVANCEMENT OF ANY OTHER OBJECT OF PUBLIC UTILITY AND WHEN SUCH O BJECT CEASE TO BE APPLICABLE FOR THE REASON OF ASSESSEE BEING INVOLVED IN CARRYING OUT A N ACTIVITY IN THE NATURE OF BUSINESS, TRADE OR COMMERCE. AS A COROLLARY TO THIS LEGAL POS ITION, WHEN AN ASSESSEE IS INVOLVED IN A CHARITABLE ACTIVITY, OTHER THAN THE CHARITABLE AC TIVITY COVERED BY THIS RESIDUAL CLAUSE OF ADVANCEMENT OF ANY OTHER OBJECT OF PUBLIC UTILITY , I.E. RELIEF OF THE POOR, EDUCATION , MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLU DING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST, THE PROVISIONS OF SECTION 13(8) CANNOT BE INVOKED. 9. LET US NOW TURN TO THE FACTS OF THIS CASE. THE A SSESSEE BEFORE US IS A SECTION 25 COMPANY, I.E. A COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT, 1956, WITH THE MAIN OBJECTS AS FOLLOWS: 1. TO IMPART KNOWLEDGE AND GENERATE AWARENESS AND INTEREST AMONGST THE PUBLIC ABOUT ENVIRONMENT IN ALL ITS ASPECTS INCLUDI NG NATURE AND NATURAL RESOURCES, HISTORICAL AND CULTURAL HERITAGE LEADING TO SUSTAINABLE USE OF NATURE AND NATURAL RESOURCES, AND THE CONSERVATION OF HIST ORICAL AND CULTURAL HERITAGE; 2. TO IDENTIFY, ACQUIRE, DESIGN OR MODIFY, DEVELOP , MANUFACTURE, ASSEMBLE, REPRODUCE AND DISSEMINATE ALL TYPES OF ENVIRONMENT EDUCATIONAL THINGS AND MATERIALS IN WHATEVER FORM. 10. IT IS ON PERUSAL OF THIS MEMORANDUM OF ASSOCIAT ION, WHICH HAD ONLY THE ABOVE OBJECTS AS THE MAIN OBJECTS, THAT THE REGISTRATION UNDER SECTION 12AA WAS GRANTED TO THE ASSESSEE. BOTH OF THESE OBJECTS ARE IN RESPECT OF P RESERVATION OF ENVIRONMENT, AND, THEREFORE, THE REGISTRATION AS A CHARITABLE INSTITU TION IS GRANTED AS IN RESPECT OF THIS SPECIFIC INCLUSION CLAUSE IN THE DEFINITION AND NOT IN THE RESIDUARY CLAUSE. VIEWED THUS, THE PROVISIONS OF SECTION 13(8) COULD NOT HAVE BEEN INVOKED IN THIS CASE BECAUSE, AS WE HAVE NOTED EARLIER, SECTION 13(8) CAN BE PRESSED INTO SERVICE ONLY WHEN THE REGISTRATION IS GRANTED UNDER THE RESIDUARY CLAUSE I.E. IN RESPECT OF ANY OTHER OBJECT OF PUBLIC UTILITY. 11. WE HAVE NOTED THAT THE ASSESSING OFFICER HAS RE JECTED THE PLEA OF THE ASSESSEE TO THE EFFECT OF ITS BEING INVOLVED IN PRESERVATION OF ENVIRONMENT ON THE GROUND THAT THESE OBJECTS ARE TO IMPART KNOWLEDGE AND GENERATE AWARENESS AND INTEREST AMONGST THE PUBLIC ABOUT ENVIRONMENT IN ALL RESPECTS BUT.. (THE ASSESSEE) IS NOT DIRECTLY INVOLVED IN ACTIVITY OF PRESERVATION OF ENVIRONMEN T THE CIT(A) HAS, ON A SIMILAR NOTE, OBSERVED THAT THE AS THE APPELLANT IS ENGAGED IN THE ACTIVITIES RELATED TO MARKETING OF LITERATURE, PRODUCT ETC TO CREATE AWARENESS ABOUT E NVIRONMENT AMONGST THE PUBLIC, SUCH ACTIVITIES CANNOT BE CONSIDERED AS ACTIVITIES RELAT ING TO PRESERVATION OF ENVIRONMENT AS ITA NO. 3406/AHD/2015 PARYAVARAN EDUTECH VS. DCIT (EXEM) ASSESSMENT YEAR: 2010-11 PAGE 6 OF 10 THE APPELLANT IS NOT DIRECTED ENGAGED IN ACTIVITIES TO PRESERVE THE ENVIRONMENT AND GOES ON TO SAY THAT THE CLAIM OF THE APPELLANT IS SIMILAR TO THAT OF PRASAD MANUFACTURER FOR TEMPLES WHO MAY CLAIM THAT HIS ACTIVITIES ARE O F CHARITABLE NATURE OR BOOKSELLERS CLAIM THAT HIS ACTIVITIES ARE TO BE CONSIDERED FOR IMPARTING EDUCATION TO PUBLIC. THIS APPROACH IS CLEARLY FALLACIOUS. JUST BECAUSE SOMEON E IS NOT INVOLVED IN AN ACTIVITY WHICH BY ITSELF DIRECTLY RESULTS IN PRESERVATION IN ENVIR ONMENT, BUT DOES SO THROUGH FOCUSSED ACTIVITIES TO SPREAD AWARENESS ABOUT IT, IT CANNOT BE SAID THAT HE IS NOT ENGAGED IN THE ACTIVITIES FOR PRESERVATION OF ENVIRONMENT. WHAT I S TO BE REALLY SEEN IS THE THRUST AND DOMINANT OBJECT OF THE ACTIVITY. WHAT IS MATERIAL I S THE INTENDED END RESULTS RATHER THAN THE MEANS EMPLOYED TO ACHIEVE SUCH RESULTS. WHEN A PRASAD SELLER MAKES THE PRASAD AND SELLS IT OUTSIDE A TEMPLE, HE DOES NOT DO SO TO SERVE THE CHARITABLE CAUSE BUT TO MAKE COMMERCIAL PROFITS. SIMILARLY, WHEN A BOOK SEL LER SELL BOOKS TO STUDENTS, THAT IS ALSO A COMMERCIAL ACTIVITY BECAUSE THAT IS THE DOMI NANT OBJECT. HOWEVER, WHEN PRASAD OR SOUVENIR IS GIVEN TO A DEVOTEE, FOR A CONSIDERAT ION, BY TIRUMALA TRUPATI DEVASTHANAM, SHRI MATA VAISHNO DEVI SHRINE BOARD OR BY SIDDHI VI NAYAK TEMPLE, IT DOES NOT BECOME A COMMERCIAL ACTIVITY. THESE ARE INTEGRAL PARTS OF THE CHARITABLE ACTIVITIES OF THE RESPECTIVE TRUSTS, AND THAT CHARACTER WILL NOT BE L OST EVEN WHEN SUCH AN ACTIVITY IS CARRIED OUT, ON A NON-COMMERCIAL BASIS, BY A SEPARA TE CHARITABLE TRUST, WITH THE SAME CHARITABLE PURPOSES AS SUCH ENTITIES. THE THRUST IS CHARITABLE ACTIVITY IN THOSE CASES AS WELL. SIMILARLY, EVERYONE PUBLISHING AND SELLING TH E BOOKS CANNOT BE SAID TO BE INVOLVED IN COMMERCIAL ACTIVITIES EITHER. THESE SWEEPING GEN ERALIZATIONS, NO MATTER HOW CONVINCING THEY APPEAR TO BE AT THE FIRST SIGHT, HA VE THEIR LIMITATIONS. PERHAPS GEETA PRESS GORAKHPUR HAS DONE MORE CHARITABLE WORK, BY P UBLISHING HINDU RELIGIOUS BOOKS AT SUCH LOW COSTS AND SPREADING THE MESSAGE OF HINDU R ELIGION SO FAR AND WIDE, THAN MANY RELIGIOUS INSTITUTIONS DIRECTLY ADMINISTERING THE T EMPLES AND SHRINES. CLEARLY, THEREFORE, THE TRUE TEST IS THE DOMINANT PURPOSE OF ACTIVITY A ND ACTUAL CHARACTER OF THE ACTIVITY. AS WE HAVE STATED BEFORE, WHAT IS TO BE REALLY SEEN IS AS TO WHAT IS THE DOMINANT OBJECTIVE OF THE ACTIVITIES. THE ILLUSTRATIONS PICKED UP BY T HE LEARNED CIT(A) ARE WHOLLY INAPPROPRIATE. IN OUR CONSIDERED VIEW, THIS ARTIFIC IAL DEMARCATION BETWEEN SPREADING AWARENESS ABOUT PRESERVATION OF ENVIRONMENT AND PRE SERVATION OF ENVIRONMENT IS UNCALLED FOR AND IRRELEVANT. ONCE IT IS NOT IN DIS PUTE, AS IS THE POSITION IN THIS CASE, THAT THE ASSESSEE IS ENGAGED IN SPREADING AWARENESS ABOU T ENVIRONMENT, IT CANNOT BE HELD THAT THE ASSESSEE IS NOT ENGAGED IN PRESERVATION OF ENVIRONMENT. THAT BEING THE FACTUAL POSITION, PROVISO TO SECTION 2(15) OR SECTION 13(8) HAVE NO RELEVANCE IN THE MATTER. 12. IN ANY EVENT, EVEN IF ONE PROCEEDS ON THE BASIS THAT THE REGISTRATION GRANTED TO THE ASSESSEE WAS UNDER THE RESIDUARY CLAUSE, SECTIO N 13(8) CAN BE INVOKED WHEN IT IS FOUND THAT ASSESSEE IS CARRYING OUT ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS FOR A CESS, FEES OR ANY OTHER CONSIDERATIO N. WHAT IS TO BE THUS SEEN IS THAT WHETHER THE ASSESSEE WAS CARRYING OUT AN ACTIVITY I N THE NATURE OF BUSINESS ACTIVITY. ON THIS ASPECT, WE FIND THAT THE ISSUE TO BE ADJUDICAT ED BY US, IN THAT CASE, WILL BE WHETHER THE ASSESSEE WAS ACTUALLY ENGAGED A BUSINESS ACTIVI TY OR NOT. AS WE DO SO, WE MUST BEAR IN MIND THAT THE ASSESSEE BEFORE US IS A SECTI ON 25 COMPANY WHICH IS ESSENTIALLY A NON PROFIT ORGANISATION AND WHICH IS SPECIFICALLY P ROHIBITED FROM DECLARING ANY DIVIDENDS TO ITS MEMBERS. THESE COMPANIES, NOW COVERED BY SE CTION 8 OF THE COMPANIES ACT, 2013, WHICH IS IN PARI MATERIA WITH SECTION 25 IN T HE OLD ACT, CAN ONLY USE ITS PROFIT AND INCOME FOR PROMOTING ITS OBJECTS. SECTION 8, FOR R EADY REFERENCE, IS REPRODUCED BELOW:- FORMATION OF COMPANIES WITH CHARITABLE OBJECTS, ET C. 8. (1) WHERE IT IS PROVED TO THE SATISFACTION OF TH E CENTRAL GOVERNMENT THAT A PERSON OR AN ASSOCIATION OF PERSONS PROPOSED TO BE REGISTERED UNDER THIS ACT AS A LIMITED COMPANY ITA NO. 3406/AHD/2015 PARYAVARAN EDUTECH VS. DCIT (EXEM) ASSESSMENT YEAR: 2010-11 PAGE 7 OF 10 (A) HAS IN ITS OBJECTS THE PROMOTION OF COMMERCE, ART, SCIENCE, SPORTS, EDUCATION, RESEARCH, SOCIAL WELFARE, RELIGION, CHAR ITY, PROTECTION OF ENVIRONMENT OR ANY SUCH OTHER OBJECT; (B) INTENDS TO APPLY ITS PROFITS, IF ANY, OR OTHER INCO ME IN PROMOTING ITS OBJECTS; AND (C) INTENDS TO PROHIBIT THE PAYMENT OF ANY DIVIDEND TO ITS MEMBERS, THE CENTRAL GOVERNMENT MAY, BY LICENCE ISSUED IN SU CH MANNER AS MAY BE PRESCRIBED, AND ON SUCH CONDITIONS AS IT DEEMS FIT, ALLOW THAT PERSON OR ASSOCIATION OF PERSONS TO BE REGISTERED AS A LIMITE D COMPANY UNDER THIS SECTION WITHOUT THE ADDITION TO ITS NAME OF THE WORD 'LIMIT ED', OR AS THE CASE MAY BE, THE WORDS 'PRIVATE LIMITED' , AND THEREUPON THE REGISTR AR SHALL, ON APPLICATION, IN THE PRESCRIBED FORM, REGISTER SUCH PERSON OR ASSOCIATIO N OF PERSONS AS A COMPANY UNDER THIS SECTION. (2) THE COMPANY REGISTERED UNDER THIS SECTION SHALL ENJOY ALL THE PRIVILEGES AND BE SUBJECT TO ALL THE OBLIGATIONS OF LIMITED COMPAN IES. (3) A FIRM MAY BE A MEMBER OF THE COMPANY REGISTERE D UNDER THIS SECTION. (4) (I) A COMPANY REGISTERED UNDER THIS SECTION SHA LL NOT ALTER THE PROVISIONS OF ITS MEMORANDUM OR ARTICLES EXCEPT WITH THE PREVIOUS APP ROVAL OF THE CENTRAL GOVERNMENT. (II) A COMPANY REGISTERED UNDER THIS SECTION MAY CO NVERT ITSELF INTO COMPANY OF ANY OTHER KIND ONLY AFTER COMPLYING WITH SUCH CO NDITIONS AS MAY BE PRESCRIBED. (5) WHERE IT IS PROVED TO THE SATISFACTION OF THE C ENTRAL GOVERNMENT THAT A LIMITED COMPANY REGISTERED UNDER THIS ACT OR UNDER ANY PREV IOUS COMPANY LAW HAS BEEN FORMED WITH ANY OF THE OBJECTS SPECIFIED IN CLAUSE (A) OF SUB-SECTION (1) AND WITH THE RESTRICTIONS AND PROHIBITIONS AS MENTIONED RESP ECTIVELY IN CLAUSES (B) AND (C) OF THAT SUB-SECTION, IT MAY, BY LICENCE, ALLOW THE COMPANY TO BE REGISTERED UNDER THIS SECTION SUBJECT TO SUCH CONDITIONS AS THE CENT RAL GOVERNMENT DEEMS FIT AND TO CHANGE ITS NAME BY OMITTING THE WORD 'LIMITED', OR AS THE CASE MAY BE, THE WORDS 'PRIVATE LIMITED' FROM ITS NAME AND THEREUPON THE REGISTRAR SHALL, ON APPLICATION, IN THE PRESCRIBED FORM, REGISTER SUCH COMPANY UNDER THIS SECTION AND ALL THE PROVISIONS OF THIS SECTION SHALL APPLY TO T HAT COMPANY. (6) THE CENTRAL GOVERNMENT MAY, BY ORDER, REVOKE TH E LICENCE GRANTED TO A COMPANY REGISTERED UNDER THIS SECTION IF THE COMPAN Y CONTRAVENES ANY OF THE REQUIREMENTS OF THIS SECTION OR ANY OF THE CONDITIO NS SUBJECT TO WHICH A LICENCE IS ISSUED OR THE AFFAIRS OF THE COMPANY ARE CONDUCTED FRAUDULENTLY OR IN A MANNER VIOLATIVE OF THE OBJECTS OF THE COMPANY OR PREJUDIC IAL TO PUBLIC INTEREST, AND WITHOUT PREJUDICE TO ANY OTHER ACTION AGAINST THE C OMPANY UNDER THIS ACT, DIRECT THE COMPANY TO CONVERT ITS STATUS AND CHANGE ITS NA ME TO ADD THE WORD 'LIMITED' OR THE WORDS 'PRIVATE LIMITED', AS THE CASE MAY BE, TO ITS NAME AND THEREUPON THE REGISTRAR SHALL, WITHOUT PREJUDICE TO ANY ACTIO N THAT MAY BE TAKEN UNDER SUB- SECTION (7), ON APPLICATION, IN THE PRESCRIBED FORM , REGISTER THE COMPANY ACCORDINGLY: PROVIDED THAT NO SUCH ORDER SHALL BE MADE UNLESS TH E COMPANY IS GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD: PROVIDED FURTHER THAT A COPY OF EVERY SUCH ORDER SH ALL BE GIVEN TO THE REGISTRAR. (7) WHERE A LICENCE IS REVOKED UNDER SUB-SECTION (6 ), THE CENTRAL GOVERNMENT MAY, BY ORDER, IF IT IS SATISFIED THAT IT IS ESSENT IAL IN THE PUBLIC INTEREST, DIRECT THAT ITA NO. 3406/AHD/2015 PARYAVARAN EDUTECH VS. DCIT (EXEM) ASSESSMENT YEAR: 2010-11 PAGE 8 OF 10 THE COMPANY BE WOUND UP UNDER THIS ACT OR AMALGAMAT ED WITH ANOTHER COMPANY REGISTERED UNDER THIS SECTION: PROVIDED THAT NO SUCH ORDER SHALL BE MADE UNLESS TH E COMPANY IS GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. (8) WHERE A LICENCE IS REVOKED UNDER SUB-SECTION (6 ) AND WHERE THE CENTRAL GOVERNMENT IS SATISFIED THAT IT IS ESSENTIAL IN THE PUBLIC INTEREST THAT THE COMPANY REGISTERED UNDER THIS SECTION SHOULD BE AMALGAMATED WITH ANOTHER COMPANY REGISTERED UNDER THIS SECTION AND HAVING SIMILAR OB JECTS, THEN, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS ACT, THE CENTRAL GOVERNMENT MAY, BY ORDER, PROVIDE FOR SUCH AMALGAMATION TO FORM A SING LE COMPANY WITH SUCH CONSTITUTION, PROPERTIES, POWERS, RIGHTS, INTEREST, AUTHORITIES AND PRIVILEGES AND WITH SUCH LIABILITIES, DUTIES AND OBLIGATIONS AS MA Y BE SPECIFIED IN THE ORDER. (9) IF ON THE WINDING UP OR DISSOLUTION OF A COMPAN Y REGISTERED UNDER THIS SECTION, THERE REMAINS, AFTER THE SATISFACTION OF ITS DEBTS AND LIABILITIES, ANY ASSET, THEY MAY BE TRANSFERRED TO ANOTHER COMPANY REGISTERED UN DER THIS SECTION AND HAVING SIMILAR OBJECTS, SUBJECT TO SUCH CONDITIONS AS THE TRIBUNAL MAY IMPOSE, OR MAY BE SOLD AND PROCEEDS THEREOF CREDITED TO [INSOLVENC Y AND BANKRUPTCY FUND FORMED UNDER SECTION 224 OF THE INSOLVENCY AND BANK RUPTCY CODE, 2016]. (10) A COMPANY REGISTERED UNDER THIS SECTION SHALL AMALGAMATE ONLY WITH ANOTHER COMPANY REGISTERED UNDER THIS SECTION AND H AVING SIMILAR OBJECTS. (11) IF A COMPANY MAKES ANY DEFAULT IN COMPLYING WI TH ANY OF THE REQUIREMENTS LAID DOWN IN THIS SECTION, THE COMPANY SHALL, WITHO UT PREJUDICE TO ANY OTHER ACTION UNDER THE PROVISIONS OF THIS SECTION, BE PUNISHABLE WITH FINE WHICH SHALL NOT BE LESS THAN TEN LAKH RUPEES BUT WHICH MAY EXTEND TO O NE CRORE RUPEES AND THE DIRECTORS AND EVERY OFFICER OF THE COMPANY WHO IS I N DEFAULT SHALL BE PUNISHABLE WITH IMPRISONMENT FOR A TERM WHICH MAY EXTEND TO TH REE YEARS OR WITH FINE WHICH SHALL NOT BE LESS THAN TWENTY-FIVE THOUSAND RUPEES BUT WHICH MAY EXTEND TO TWENTY-FIVE LAKH RUPEES, OR WITH BOTH: PROVIDED THAT WHEN IT IS PROVED THAT THE AFFAIRS OF THE COMPANY WERE CONDUCTED FRAUDULENTLY, EVERY OFFICER IN DEFAULT SHALL BE LIA BLE FOR ACTION UNDER SECTION 447. 13. CLEARLY, THEREFORE, IT IS A NORMAL PRESUMPTION THAT PROFIT EARNING CANNOT BE A DOMINANT OR CORE OBJECTIVE OF A NON PROFIT COMPANY REGISTERED UNDER SECTION 25 OF THE COMPANIES ACT, 1956 OR SECTION 8 OF THE COMPANIES A CT, 2013. OF COURSE, WHEN THERE IS MATERIAL TO DISLODGE THIS PRESUMPTION, EVEN SUCH COMPANIES, IN APPROPRIATE CASE, BE TREATED DIFFERENTLY. 14. THE QUESTION NOW TO BE CONSIDERED IS WHETHER T HE ASSESSEE CAN BE SAID TO BE IN A BUSINESS ACTIVITY WHICH IS A SINE QUA NON FOR DENIAL OF ITS BEING TREATED AS CARRYING ON CHARITABLE PURPOSES IN THE NATURE OF ADVANCEMENT O F ANY OTHER OBJECT OF PUBLIC UTILITY. HERE IS A SECTION 25 COMPANY WHICH CANNOT DECLARE D IVIDENDS, WHICH IS PROMOTED BY THE CENTRE FOR ENVIRONMENT EDUCATION, A CENTRE OF E XCELLENCE UNDER THE MINISTRY OF ENVIRONMENT & FORESTS, GOVERNMENT OF INDIA. IT DOES NOT PAY ANY SITTING FEES TO DIRECTORS OR SALARY TO THE MANAGING DIRECTOR. IT I S PROMOTED BY EMINENT AND WELL PLACED CITIZENS WHO ARE DOING THIS PUBLIC SPIRITED WORK, W ITHOUT ANY MONETARY GAINS OR PROFIT MOTIVE, FOR LARGER PUBLIC GOOD. IT IS TRUE THAT TH E LITERATURE ON ENVIRONMENTAL AWARENESS AND THE GREETING CARDS ARE SOLD BY THE ASSESSEE AND ARE NOT DISTRIBUTED FREE OF COST BUT THE PREDOMINANT PURPOSE FOR THIS ACTIVITY IS NOT EA RNING OF PROFITS BUT SPREADING THE ENVIRONMENTAL AWARENESS. THE ASSESSEE IS DEALING I N THESE ENVIRONMENTAL AWARENESS PRODUCTS ONLY AND IT DOES NOT DEAL IN ANY OTHER KIN D OF PRODUCTS. WE HAVE PERUSED THE ITA NO. 3406/AHD/2015 PARYAVARAN EDUTECH VS. DCIT (EXEM) ASSESSMENT YEAR: 2010-11 PAGE 9 OF 10 CATALOGUE OF PRODUCTS SOLD BY THE ASSESSEE AND WE F IND THAT THE UNDERLYING THRUST ON THIS ASPECT IS UNAMBIGUOUS AND IN THE NATURE OF SPR EADING AWARENESS ABOUT ENVIRONMENT. AS HELD BY HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE OF AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS. ACIT [(2017) 396 IT R 323 (GUJ)] WHAT IS IMPORTANT IS THE ELEMENT OF PROFITEERING OR THE ACTIVITY BEING IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THE COLLECTION OF FEES BY ITSELF CANNOT RENDER A NON-PROFIT ACTIVITY INTO A BUSINESS, TRADE OR COMMERCE; IT HAS TO BE IN THE NA TURE OF COMMERCIAL, TRADE OR BUSINESS ACTIVITY AS WELL. GIVEN THE ABOVE FACTUAL POSITION , IN OUR CONSIDERED VIEW, THE ASSESSEE CANNOT BE SAID TO BE ENGAGED IN BUSINESS, TRADE OR COMMERCE. THE ACTIVITY OF SELLING THESE PRODUCTS, FOR A CONSIDERATION, SPREADING AWAR ENESS ABOUT THE ENVIRONMENT CANNOT BE SAID TO BE IN THE NATURE OF COMMERCIAL ACTIVITIE S, AS, GIVEN THE FACTS OF THIS CASE, THE SALE WAS NOT WITH A VIEW TO MAKE PROFITS BUT TO SPR EAD AWARENESS ABOUT THE ENVIRONMENT AND THE NEED OF ITS PRESERVATION- WHICH WAS CLEARLY A DOMINANT PURPOSE IN THE PRESENT CASE. BY NO STRETCH OF LOGIC, IN OUR CO NSIDERED VIEW, THE SALE OF PRODUCTS WAS COMMERCIAL IN CHARACTER. 15. IN VIEW OF THE ABOVE DISCUSSIONS, IN OUR CONSID ERED VIEW THE ASSESSEE WAS ENGAGED IN PURSUING ITS OBJECT FOR PRESERVATION OF ENVIRONMENT, AND, IN ANY CASE, THE ASSESSEE WAS NOT ENGAGED, ON THE FACTS OF THIS PECU LIAR CASE, ANY COMMERCIAL ACTIVITY. 16. TO CONCLUDE, NEITHER SECTION 13(8) COULD HAVE B EEN INVOKED ON THE FACTS OF THE PRESENT CASE TO DENY THE EXEMPTION UNDER SECTION 11 AND 12, NOR, EVEN ON MERITS, THE BENEFIT OF EXEMPTION COULD HAVE BEEN DECLINED. FOR ALL THESE REASONS, WE UPHOLD THE PLEA OF THE ASSESSEE. THE IMPUGNED ADDITION OF RS 4 9,87,439, BY DECLINING THE EXEMPTION UNDER SECTION 11, IS THUS DELETED. 17. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCE D IN THE OPEN COURT TODAY ON THE 25 TH SEPTEMBER, 2018 SD/- SD/- MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEM BER) DATED: 25 TH SEPTEMBER, 2018 BT* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD