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

ITA 546/AHD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85575 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 01-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Benefit of exemption
• Section: 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI N. S. SAINI, ACCOUNTANT MEMBER. ITA.NO.546/AHD/2013 (ASSESSMENT YEAR:2009-10) DEPUTY DIRECTOR OF INCOME-TAX (EXEMPTION), AHMEDABAD. APPELLANT VS. NARODA ENVIRO PROJECTS LTD., PLOT NO. 512-515, PHASE-I, GIDC, NARODA, AHMEDABAD RESPONDENT PAN: AAFFN9138D /BY APPELLANT : SHRI DINESH SINGH, SR. D.R. /BY RESPONDENT : SHRI S. N. SOPARKAR, A.R. !'# /DATE OF HEARING : 09.01.2015 $%& !'# /DATE OF PRONOUNCEMENT : 29.01.2015 I.T.A. NO. 546/AHD/2013 A.Y. 2009-10 (DDIT VS. NARODA ENVIRO PROJECTS LTD.) PAGE 2 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXI, AHMEDABAD, DATED 13.12.2012 FOR A.Y. 2009-10 ON THE FOLLOWING GROUNDS: I). THE LD. COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSIN G OFFICER TO TREAT THE ACTIVITIES OF THE ASSESSEE AS CHARITABLE, AND THEREBY DELETING THE ADDITION OF RS.2,53,21,438/-. II. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSES SEE IS DOING CHARITABLE ACTIVITY AS PER SECTION 2(15) O F THE I.T. ACT, AND THEREFORE, THE BENEFIT OF SECTION 11 & 12 OF THE I.T. ACT SHOULD BE AVAILABLE TO IT. 2. ASSESSEE COMPANY IS ENGAGED IN THE ACTIVITY OF P ROVIDING POLLUTION CONTROL TREATMENT FOR DISPOSAL OF LIQUID AND SOLID INDUSTRIAL WASTE. ASSESSEE COMPANY OPERATES IN GID C, NARODA FOR VARIOUS INDUSTRIAL UNDERTAKINGS OPERATIONAL IN THAT AREA. ASSESSEE COMPANY IS RUNNING A COMMON EFFLUENT TREAT MENT PLANT AT NARODA. IT HAS TREATMENT STORAGE AND DISP OSAL FACILITY AT ODHAV, AHMEDABAD. ASSESSEE COMPANY WORKS FOR CONTROLLING POLLUTION. 2.1 ASSESSING OFFICER CONCLUDED THAT ASSESSEE COMPA NY IS NOT BEING CHARITABLE ACTIVITY AS PER MODIFIED SECTION 2 (15) OF I.T.A. NO. 546/AHD/2013 A.Y. 2009-10 (DDIT VS. NARODA ENVIRO PROJECTS LTD.) PAGE 3 INCOME-TAX ACT. ACCORDING TO ASSESSING OFFICER, SI NCE ASSESSEE COMPANY IS NOT DOING CHARITABLE ACTIVITY, IT IS NOT ENTITLED FOR EXEMPTION U/S. 11 & 12 OF INCOME-TAX ACT. ASSESSING OFFICER OBSERVED THAT MAIN OBJECT OF COMPANY, WHEN IT WAS INCORPORATED, IS AS UNDER: 'TO ENGAGE IN THE BUSINESS AS MANUFACTURERS, DEALER S, IMPORTERS, EXPORTERS, CONSIGNMENT AGENTS, ERECTORS, TRADERS, CONSULTANTS IN ALL KINDS OR POLLUTION TREATMENT PLANTS/EQUIPMENTS WHETHER WATER POLLUTION, AIR POLL UTION, NOISE POLLUTION WITHOUT LIMITING THE SCOPE THEREOF, ESTABLISHING THE POLLUTION TREATMENT PLANTS FOR IND USTRIES, GOVERNMENT INDUSTRIAL ESTATE IN COOPERATIVE SECTION ACTING AS CONSULTANTS FOR ENVIRONMENTAL AND POLLUTION PROB LEMS, CARRYING ON ALL ACTIVITIES, RELATING TO ABOVE INCLU DING PLANTATION FOR THE PURPOSE OF POLLUTION TREATMENT'. 2.2 ASSESSING OFFICER FURTHER POINTED OUT THAT THE MAIN OBJECT OF THE COMPANY ON ITS CONVERSION AS A COMPANY U/S. 25 OF THE COMPANIES ACT IS AS UNDER: 'TO PROMOTE, AID, FOSTER AND ENGAGE IN THE AREA OF ENVIRONMENT PROTECTION, ABATEMENT OF POLLUTION OF V ARIOUS KINDS SUCH AS WATER, AIR, SOLID, NOISE, VEHICULAR E TC. WITHOUT LIMITING ITS SCOPE, TO RUN AND DEVELOP COMMON EFFLU ENT TREATMENT PLANT (CEPT), TOTAL SUSPENDED DISPOSAL FA CILITY (TSDF), CONSERVE THE NATURAL RESOURCES, UTILIZATION OF OTHER SELECTIVE RESOURCES TO REDUCE POLLUTION, TO MAKE AD OPT THE INDUSTRIES AND FAMILIARIZE THE CONCEPT OF 'CLEANER PRODUCTION', 'CLEANER TECHNOLOGIES' SUCH AS INCINER ATION, HYDROGENATION, AND, TO CARRY OUT RESEARCH AND DEVEL OPMENT AND, ACTIVITIES INCIDENTAL AND ANCILLARY THERETO AN D, TO MAKE AVAILABLE BENEFITS OF ITS A VIVIFIES AND FACILITIES TO THE PUBLIC AT LARGE WITHOUT ANY DISTINCTION OF RACE, RELIGION OR CASTE.' I.T.A. NO. 546/AHD/2013 A.Y. 2009-10 (DDIT VS. NARODA ENVIRO PROJECTS LTD.) PAGE 4 2.3 ACCORDING TO ASSESSING OFFICER, ASSESSEE HAS FA ILED TO BRING ON RECORD NECESSARY FACTS AND FIGURES THAT AFTER IT S INCORPORATION AS UNDER SECTION 25 OF COMPANY ACT, I T HAS STARTED CHARITABLE ACTIVITIES. APART FROM THIS, AS SESSING OFFICER FOUND CERTAIN DISCREPANCIES AS DISCUSSED IN PARA 4 AND CONCLUDED THAT ASSESSEE IS CARRYING OUT BUSINESS AC TIVITY UNDER PRETEXT OF CHARITABLE ACTIVITY. ASSESSING OFFICER POINTED OUT THAT THE OBJECT SPECIFIED IN MEMORANDUM OF ASSOCIAT ION IS IMPORTANT, BUT THE SAME WAS EVALUATED WITH REFERENC E TO REAL PRACTICE ADOPTED FOR RUNNING ACTIVITY WHICH IS NOT CHARITABLE. ASSESSING OFFICER ALSO POINTED OUT THAT ACTIVITY OF ASSESSEE COMPANY WAS CARRIED OUT FOR THE BENEFIT OF MEMBERS TO DISCHARGE THEIR ONUS OF TREATMENT OF CHEMICALS, ETC . WITH SUBSTANTIAL CHARGES WITH A SOLE INTENTION TO EARN P ROFIT UNDER SECTION 25 OF COMPANIES ACT. ASSESSING OFFICER CON CLUDED THAT ASSESSEE COMPANY IS RENDERING SERVICES OF POLLUTION CONTROL AS PER THE NORMS LAID DOWN BY THE GPCB OR ANY OTHER AU THORITY RESPONSIBLE FOR REGULATION OF POLLUTION CONTROL. SI NCE ASSESSEE COMPANY IS RENDERING SERVICES AND ITS AGGREGATE VAL UE OF SURPLUS ARE MORE THAN RS.10 LACS, THE PROVISO TO SE CTION2[15) ARE APPLICABLE AND THUS ACCORDING TO ASSESSING OFFI CER, EXEMPTION U/S. 11 & 12 ARE NOT AVAILABLE TO ASSESSE E COMPANY. WITH THESE REMARKS, ASSESSING OFFICER BROUGHT TO TA X THE PROFIT OF RS.2,53,21,438/- DISCLOSED BY ASSESSEE AS THE TO TAL INCOME OF ASSESSEE. I.T.A. NO. 546/AHD/2013 A.Y. 2009-10 (DDIT VS. NARODA ENVIRO PROJECTS LTD.) PAGE 5 3. MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AU THORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED AND HAVING CONSIDERED THE SAME CIT(A) GRANTED RELIEF TO ASSESSEE ON THE I SSUE. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE INT ER ALIA SUBMITTED THAT CIT(A) WAS NOT JUSTIFIED IN DIRECTIN G THE ASSESSING OFFICER TO TREAT ACTIVITY OF ASSESSEE AS CHARITABLE AND WHETHER BY DELETING ADDITION OF RS.2,53,21,428/-. CIT(A) ERRED IN LAW AND FACT IN HOLDING THAT ASSESSEE IS DOING C HARITABLE ACTIVITY AS PER SECTION 2(15) OF INCOME TAX ACT AND THEREFORE, BENEFIT OF SECTION 11 & 12 OF THE ACT SHOULD BE AVA ILABLE TO IT. ACCORDINGLY, ORDER OF CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER ISSUE BE RESTORED. ON OTHER HAND LEARNED A UTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A). 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERI AL ON RECORD, WE FIND THAT MAIN OBJECT OF ASSESSEE COMPAN Y WAS CONVERTED AS PER SECTION 25 OF COMPANIES ACT CLARIF IES THAT ASSESSEE COMPANY IS IN AREA OF ENVIRONMENTAL PROTEC TION, ABETMENT OF POLLUTION OF WATER, AIR, SOLID, ETC. GE NERATED 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 T REATMENT OF VARIOUS POLLUTANTS GENERATED BY INDUSTRIAL UNITS. IT IS ALSO NOT DISPUTED BY ASSESSING OFFICER THAT SURPLUS GENERATE D IS NOT DISTRIBUTED TO 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 I.T.A. NO. 546/AHD/2013 A.Y. 2009-10 (DDIT VS. NARODA ENVIRO PROJECTS LTD.) PAGE 6 PRIVATE PROFIT OF THE SETTLER OR ANY OTHER PERSON. IN THIS SITUATION, ASSESSING OFFICER WAS NOT JUSTIFIED IN H OLDING THAT ASSESSEE WAS GENERATING SURPLUS OR PROFIT MAKING WA S THE PREDOMINANT OBJECT OF ASSESSEE. ASSESSEE COMPANY W AS INCORPORATED WITH A SOLE OBJECT TO COMPLY WITH DIRE CTIONS OF HON'BLE HIGH COURT OF GUJARAT IN A PIL FOR INDUSTRI ES OF NARODA GIDC FOR ESTABLISHMENT IN RUNNING OF COMMON EFFLU ENT TREATMENT PLANT AND ITS STORAGE AND DISPOSAL FACILI TY AT ODHAV, AHMEDABAD. THE PROJECT WAS SETUP UNDER THE DIRECTI ONS AND GUIDELINES OF HON'BLE HIGH COURT OF GUJARAT AND VAR IOUS 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 AS SESSEE COMPANY FOR MEETING THE POLLUTION CONTROL PARAMETER S LAID DOWN BY GPCB. THE AMOUNT COLLECTED FROM THE MEMBER S VARIED DEPENDING UPON THE QUANTUM OF EFFLUENT, NATU RE OF EFFLUENT TO BE TREATED AS WELL AS OTHER FACTORS PER TAINING TO POLLUTANT OF DIFFERENT KIND COMING FROM THE INDUSTR IAL UNITS. THUS, ASSESSEE IS ENGAGED IN THE ACTIVITY OF PRESER VATION OF ENVIRONMENT BY ABETMENT AND CONTROLLING POLLUTION O F ENVIRONMENT I.E. LAND, WATER AND AIR. FOR THIS OBJE CTIVE, ASSESSEE IS PROVIDING POLLUTION CONTROL TREATMENT F OR DISPOSAL OF LIQUID AND SOLID INDUSTRIAL WASTE. IT IS UNDISPUTE D 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 I.T.A. NO. 546/AHD/2013 A.Y. 2009-10 (DDIT VS. NARODA ENVIRO PROJECTS LTD.) PAGE 7 DUE VERIFICATION BY CONCERN AUTHORITIES. ASSESSING OFFICER HAS IGNORED MODIFIED OBJECTS OF ASSESSEES MOU AFTER IT S CONVERSION AS COMPANY U/S. 25 OF THE COMPANIES ACT. THE PLAIN READING OF OBJECTS OF COMPANY REVEALS THAT MAIN OBJECT IS P ROTECTION OF ENVIRONMENT BY ABETMENT OF POLLUTION OF VARIOUS KIN DS LIKE WATER, AIR, SOIL, ETC. IN THIS BACKGROUND, ACTIVI TIES OF ASSESSEE COMPANY SQUARELY FALLS U/S. 2(15) OF THE INCOME-TAX ACT. THE PROVISO TO SECTION 2(15) IS APPLICABLE TO OBJECTS O F GENERAL PUBLIC UTILITY. THE SAME WAS ALSO CLARIFIED VIDE CB DT CIRCULAR NO. 11 DATED 19.12.2008. SINCE ASSESSEE COMPANY IS DIRECTLY ENGAGED IN PRESERVATION OF ENVIRONMENT AS PER SECTI ON 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 AN Y CHARITABLE ACTIVITY. WITH REGARDS TO ASSESSING OFFICERS CONT ENTION THAT ASSESSEE IS CARRYING OUT BUSINESS ACTIVITY AND IS I N THE NATURE OF PROFIT MAKING, WE FIND THAT BENEFIT OF EXEMPTION CANNOT BE DENIED ON THE GROUND THAT IT HAD MADE SURPLUS/PROFI TS AS LONG AS IT IS NOT MEANT FOR PRIVATE PROFIT OF SELLER. P ROFIT MAKING IS NOT PREDOMINANT OBJECT OF ACTIVITY. UNDER THE FAC TS AND CIRCUMSTANCES, CIT(A) WAS JUSTIFIED IN HOLDING THAT ASSESSEE IS DOING CHARITABLE ACTIVITY AS PER SECTION2(15) OF T HE INCOME-TAX ACT, BENEFIT OF SECTION 11 & 12 OF THE INCOME-TAX A CT 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 T HE ADDITION OF I.T.A. NO. 546/AHD/2013 A.Y. 2009-10 (DDIT VS. NARODA ENVIRO PROJECTS LTD.) PAGE 8 RS.2,53,21,438/-. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 5. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF JANUARY, 2015. SD/- SD/- (N. S. SAINI) (SHAILENDR A KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R TRUE COPY S.K.SINHA ' ' ' ' !( !( !( !( )(&! )(&! )(&! )(&! / COPY OF ORDER FORWARDED TO:- 1. ,- / REVENUE 2. / ASSESSEE 3. 00! 1 / CONCERNED CIT 4. 1- / CIT (A) 5. (56 !, , / DR, ITAT, AHMEDABAD 6. 69: ;< / GUARD FILE. BY ORDER / ' , =/ 0, , ?