The Dy,CIT.,(Exemp). Circle-1, Ahmedabad V. Naroda Enviro Projects Ltd., Ahmedabad

ITA 3678/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5841 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 31-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VASANT C TANNA
• Keywords: Benefit of exemption
• Section: 143(3); 80G; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 1, AHMEDABAD (APPELLANT) VS NARODA ENVIRO PROJECTS LTD. PLOT NO. 512 - 515, PHASE - 1, GIDC ESTATE, NARODA AHMEDABAD - 382330 PAN: AAFFN9138D (RESPONDENT) REVENUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: S H RI VASANT C. TANNA , A.R. DATE OF HEARING : 23 - 01 - 2 018 DATE OF PRONOUNCEMENT : 20 - 03 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - TH IS REVENUE S APPEAL FOR A.Y. 2012 - 13 , ARIS ES FROM ORDER OF THE CIT(A) - 9 , AHM EDABAD DATED 24 - 10 - 2015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING SUBSTANTIVE GROUND OF APPEAL: - I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN ALLOWING THE ASSESSEE'S APPEAL NEGATING THE FINDINGS OF ASSESSING OFFICER DENYING THE BENEFITS OF SECTION 11 OF THE I. T. ACT IN VIEW OF THE PROVISO 1&2 INSERTE D TO SECTION 2(15) OF THE I. T. ACT? 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. NIL WAS FILED ON 28 TH SEP, 2012. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 24 TH SEP, 2014. THE ASSESS EE COMPANY IS I T A NO . 3678 / A HD/20 1 5 A SSESSM ENT YEAR 2012 - 13 I.T.A NO. 3678 /AHD/20 15 A.Y. 2012 - 13 PAGE NO DCIT VS. NARODA ENVIRO PROJECTS LTD. 2 REGISTERED U/S. 25 OF THE ACT . I T IS ENGAGED IN THE ACTIVITIES OF MANAGEMENT OF LIQUID AND SOLID BASE IN NARODA INDUSTRIAL AREA. THE ASSESSEE COMPANY IS REGISTERED U/S. 12AA OF THE ACT AND IS ALSO APPROVED U/S. 80G OF THE ACT. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSES SSEE HAS CLAIMED EXEMPTION U/S. 11 & 12 OF THE ACT. THE ASSESSING OFFICER HA S NOTICED THAT DURING THE ASSESSMENT YEAR 2010 - 11 AND 2011 - 12 , THE ASSESSEE WAS NOT GRANTED EXEMPTION ON THE GROUND THAT THE ASSESEE HAS BEEN EARNING PROFIT IN THE NAME OF PROTECTION OF ENVIRONMENT AND HENCE ACTIVITIES UNDERTAKING BY THE COMPANY COU LD NOT BE TRE ATED AS PRESERVATION O F ENVIRONMENT BUT UNDER THE LIMB OF THE ADVANCEMENT TO GENERAL PUBLIC U TILITY. THE ASSESSING OFFICER HAS STATED THAT ASSESSEE HAS BEEN RENDERING THE SERVICES FOR A UNIFORM CESS OR FEES OR FOR ANY OTHER CONSIDERATION AND AGREED VALUE OF RECEIPTS ARE MORE THAN 25 LACS , THEREFORE , THE PROVISO 1 & 2 TO SECTION 2(15) ARE APPLICAB LE TO THE ASSESSEE COMPANY. THEREFORE , ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S. 11 OF THE ACT. CONSEQUENTLY , THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 5,36,97,650/ - AFTER ATTRACTING THE PROVISO TO SECTION 2(15) R.W.S. 13(8) OF THE ACT. 4. AGGRIEVED ASSESSEE FILED APPE AL BEFORE T H E LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSE SSEE STATING THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY HIS PREDECESSOR CIT(A) FOR ASSESSMENT YEAR 2010 - 11. THE RELEVANT PART OF THE DECIS ION OF THE LD. CIT(A) IS REPRODUCED AS UNDER: - 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. IT IS OBSERVED THAT ON SIMILAR ISSUE MY PREDECESSOR CIT(A) VIDE ORDER NO.CIT(A) - XXI/1166/2013 - 14 DATED 1.10.2014 FOR A.Y.2011 - 12 HA S DELIBERATED ON THIS ISSUE. FOR THE SAKE OF READY REFERENCE RELEVANT PORTION OF THE SAME IS REPRODUCED AS UNDER : - '4.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. THE ISSUE WHETHER THE ACTIVITIES OF THE APPELLANT ARE IN THE NATURE OF PRESERVATION OF ENVIRONMENT OR IN THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS DEFINED IN SECTION 2(15) HAS COME UP IN THE APPELLANT'S CASE IN THE PRECEDING A.Y.2009 - 10 FOR THE FIRST TIME, IN WHICH THE ID.CIT(A) HAS HE LD AS UNDER : - '4. 4.4 AFTER EVALUATING THE RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THE ACTIVITIES OF THE APPELLANT COMPANY SQUARELY FALLS U/S.2(15) OF THE INCOME - TAX ACT. THE APPELLANT COMPANY IS CLEARLY ENGAGED IN PRESERVATION OF ENVIRONMENT BY CONTROLLI NG THE EXTENT OF POLLUTION CAUSED BY VARIOUS INDUSTRIAL UNITS IN AND AROUND ODHAV AND NARODA AREA. IT IS SETTLED PRINCIPLE THAT THE PROVISO TO SECTION 2(15) IS APPLICABLE TO OBJECTS OF GENERAL PUBLIC UTILITY. THE SAME WAS ALSO CLARIFIED VIDE I.T.A NO. 3678 /AHD/20 15 A.Y. 2012 - 13 PAGE NO DCIT VS. NARODA ENVIRO PROJECTS LTD. 3 CBDT CIRCULAR NO. 11 DATED 19.12.2008. SINCE THE APPELLANT COMPANY IS DIRECTLY ENGAGED IN PRESERVATION OF ENVIRONMENT AS PER SECTION 2(15), THE PROVISO AS POINTED BY THE AO IS NOT APPLICABLE IN THE INSTANT CASE. ACCORDINGLY, THE CONCLUSION OF THE AO THAT THE APPELLANT C OMPANY IS NOT DOING ANY CHARITABLE ACTIVITY IS NOT SUSTAINABLE, AS A RESULT OF WHICH THE CLAIM OF EXEMPTION U/S. 11 & 12 SHALL BE AVAILABLE TO THE APPELLANT. 4.4.5 WITH REGARD TO THE AO'S CONTENTION THAT THE APPELLANT IS CARRYING OUT BUSINESS ACTIVITY AND IS IN THE NATURE OF PROFIT MAKING, IT MAY BE POINTED OUT THAT THE BENEFIT OF EXEMPTION CANNOT BE DENIED TO A GROUND THAT IT HAD MADE SURPLUS/PROFITS AS LONG AS IT IS NOT MEANT FOR THE PRIVATE PROFIT OF THE SELLER. IT IS ALSO SEEN THAT PROFIT MAKING IS NOT THE PREDOMINANT OBJECT OF THE ACTIVITY. THE CONTENTION OF THE AO THAT THE APPELLANT COMPANY IS IN THE BUSINESS ACTIVITY IS THUS NOT CORRECT. 4.4.5 CONSIDERING THE ABOVE ARGUMENTS, I AM OF THE VIEW THAT THE GROUNDS RAISED BY THE APPELLANT ARE ALLOWABLE AND AS SUCH, AS THE APPELLANT IS DOING CHARITABLE ACTIVITY AS PER SECTION 2(15) OF THE INCOME - TAX ACT, THE BENEFIT OF SECTION 11 & 12 OF THE INCOME - TAX ACT AVAILABLE TO IT. THE A.O IS THEREFORE DIRECTED TO TREAT THE ACTIVITIES OF THE APPELLANT COMPANY AS CHARI TABLE AND IS THEREFORE DIRECTED TO DELETE THE ADDITION.' 4.4 I HAVE DECIDED THE APPEAL OF PRECEDING YEAR, IN WHICH EXACTLY ON THE SAME SET OF FACTS, HAVE HELD THAT THE APPELLANT COMPANY IS ENGAGED IN PRESERVATION OF ENVIRONMENT AND THEREFORE IS FOR THE CHA RITABLE PURPOSES. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 4.3 RESPECTFULLY AGREEING AND FOLLOWING THE DECISION OF MY PREDECESSOR FOR A.Y.2011 - 12 AS MENTIONED ABOVE, THE A.O. IS DIRECTED TO DELETE THE ADDITION OF 5,36,97 ,650/ - . ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. COUNSEL HAS CONTENDED THAT I TAT AHMEDABAD VIDE ITA NO. 546/AH D/20014 FOR ASSESSMENT YEAR 2009 - 10 AND ITA NO. 308/AHD/2014 FOR ASSESSMENT YEAR 2010 - 11 IN ASSESSEE S OWN CASE HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERI AL ON RECORD CAREFULLY. WE HAVE GONE THROUGH THE ORDER OF THE CO - ORDINATE BENCH AS MENTIONE D SUPRA AND NOTICED THAT IT IS HELD THAT ASSESSEE IS CHARITABLE ACTIVITIES AS PER SECTION 2(15) OF THE ACT AND IS ELIGIBLE FO R BENEFIT U/S. 11 AND 12 OF THE ACT. RELEVANT PART OF THE DECISION OF THE CO - ORDINATE BENCH IN ITA NO. 308/AHD/2014 FOR ASSESSMENT YEAR 2009 - 10 IS REPRODUCED AS UNDER: - 5. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE RECORDS PLACED BEFORE US. SOLE GRIEVANCE OF THE REVENUE IS AG AINST THE ORDER OF LD.CIT(A) DIRECTING THE LEARNED ASSESSING OFFICER ( IN SHORT LD.AO ) TO TREAT THE ACTIVITIES OF ASSESSE AS CHARITABLE IN I.T.A NO. 3678 /AHD/20 15 A.Y. 2012 - 13 PAGE NO DCIT VS. NARODA ENVIRO PROJECTS LTD. 4 NATURE U/S.2(15) OF THE ACT AND ALLOWING THE BENEFIT U/S.11 AND 12 OF THE ACT, THEREBY DELETING THE ADDITION OF RS .3,47,55,353/ - . WE OBSERVE THAT ASSESSEE IS A LIMITED COMPANY REGISTERED U/S.25 OF THE COMPANIES ACT. IT IS MAINLY ENGAGED IN THE ACTIVITIES OF PRESERVATION OF ENVIRONMENT WHEREBY LIQUID AND SOLID WASTES ARE ABATED. ASSESSEE S COMPANY IS REGISTERED U/S.12A A OF THE I.T. ACT VIDE ORDER NO.F.NO.DIT(E)/12AA/624/05 - 06 DATED 04/07/2007. IT IS ALSO APPROVED U/S.80G(5) OF THE I.T. ACT 1961. 6. THE SOLITARY ISSUE RAISED BY THE REVENUE IS WHETHER THE ACTIVITIES CARRIED ON BY THE ASSESSEE ARE CHARITABLE IN NATURE AN D ARE COVERED U/S.2(15) WHICH ENTITLES THE ASSESSEE TO BE ELIGIBLE FOR BENEFIT OF PROVISION OF SECTION 11 AND 12 OF THE ACT. WE OBSERVE THAT VERY SAME ISSUE CAME UP BEFORE THE CO - ORDINATE BENCH IN ASSESSEE S OWN CASE FOR A.Y.2009 - 10 AND TRIBUNAL DECIDED I N FAVOUR OF THE ASSESSEE L BY OBSERVING AS FOLLOWS: 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL 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, SOLID, ETC. GENERATED BY INDUSTRIAL UNITS IN AND AROUND VATVA AND ODHAV AREA OF AHMEDABAD. ACCORDINGLY, ASSESSING OFFICER HAS NOT DISPUTED THE FACT THAT ASSESSEE IS DOING BASIC ACTIVITY OF TR EATMENT OF VARIOUS POLLUTANTS GENERATED BY INDUSTRIAL UNITS. IT IS ALSO NOT DISPUTED BY ASSESSING OFFICER THAT SURPLUS GENERATED IS NOT DISTRIBUTED TO ITS MEMBERS/SHAREHOLDERS, ETC. THE ASSESSEE CANNOT LOOSE EXEMPTION MERELY ON THE GROUND THAT IT HAS MAD E SURPLUS AS LONG AS ASSESSEE IS NOT GENERATING SURPLUS FOR PRIVATE PROFIT OF THE SETTLER OR ANY OTHER PERSON. IN THIS SITUATION, ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT ASSESSEE WAS GENERATING SURPLUS OR PROFIT MAKING WAS THE PREDOMINANT OBJE CT OF ASSESSEE. ASSESSEE COMPANY WAS INCORPORATED WITH A SOLE OBJECT TO COMPLY WITH DIRECTIONS OF HON'BLE HIGH COURT OF GUJARAT IN A PIL FOR INDUSTRIES OF NARODA GIDC FOR ESTABLISHMENT IN RUNNING OF COMMON EFFLUENT TREATMENT PLANT AND ITS STORAGE AND DI SPOSAL FACILITY AT ODHAV, AHMEDABAD. THE PROJECT 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, GPCB, ETC. AS PER DIRECTIONS OF HON'BLE HIGH COURT OF G UJARAT, IT WAS SINE - QUA - NON FOR INDUSTRIAL UNITS TO BECOME MEMBER OF ASSESSEE COMPANY FOR MEETING THE POLLUTION CONTROL PARAMETERS LAID DOWN BY GPCB. THE AMOUNT COLLECTED FROM THE MEMBERS VARIED DEPENDING UPON THE QUANTUM OF EFFLUENT, NATURE OF EFFLUENT T O BE TREATED AS WELL AS OTHER FACTORS PERTAINING TO POLLUTANT OF DIFFERENT KIND COMING FROM THE INDUSTRIAL UNITS. THUS, ASSESSEE IS ENGAGED IN THE ACTIVITY OF PRESERVATION OF ENVIRONMENT BY ABETMENT AND CONTROLLING POLLUTION OF ENVIRONMENT I.E. LAND, WAT ER AND AIR. FOR THIS OBJECTIVE, ASSESSEE IS PROVIDING POLLUTION CONTROL TREATMENT FOR DISPOSAL OF LIQUID AND SOLID INDUSTRIAL WASTE. IT IS UNDISPUTED THAT ASSESSEE WAS INCORPORATED U/S. 25 OF 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 VERIFICATION BY CONCERN AUTHORITIES. ASSESSING OFFICER HAS IGNORED MODIFIED OBJECTS OF ASSESSEE S MOU AFTER ITS CONVERSION AS COMPANY U/S. 25 OF THE COMPANIES ACT. THE P LAIN READING OF OBJECTS OF COMPANY REVEALS THAT MAIN OBJECT IS PROTECTION 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 OBJECTS OF GENERAL PUBLIC UTILITY. THE SAME WAS ALSO CLARIFIED VIDE CBDT CIRCULAR NO. 11 DATED 19.12.2008. SINCE ASSESSEE COMPANY IS DIRECTLY ENGAGED IN PRESERVATION 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 I.T.A NO. 3678 /AHD/20 15 A.Y. 2012 - 13 PAGE NO DCIT VS. NARODA ENVIRO PROJECTS LTD. 5 REGARDS TO ASSESSING OFFICER S CONTENTION THAT ASSES SEE IS CARRYING OUT BUSINESS ACTIVITY AND IS IN THE NATURE OF PROFIT MAKING, WE FIND THAT BENEFIT OF EXEMPTION 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 PR EDOMINANT 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 OU R SIDE. WE UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMISSED. 7. AS THE ISSUES RAISED IN THIS APPEAL ARE SIMILAR TO THE ISSUES ADJUDICATED BY THE TRIBUNAL IN ASSESSEE S OWN CASE AND REVENUE BEING UNABLE TO DISTINGUISH THE FACTS, WE RESPECTFULLY FOLLOWING THE DECISION OF CO - ORDINATE BENCH, HOLD THAT ASSESSE IS DOING CHARITABLE ACTIVITIES AS PER SECTION 2(15) OF THE ACT AND IS ELIGIBLE FOR BENEFIT U/S.11 AND 12 OF THE ACT. WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF LD.CIT(A). 8 . IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED 7. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE ITA T, WE DO NOT FIND ANY ERROR IN T H E DECISION OF THE LD. CIT(A) , THEREFORE, THE APPEAL OF REVENUE IS DISMISSED. 8. IN THE R ESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 20 - 03 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 20 /03 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,