Dy. Commissioner of Income Tax (Exemption), Lucknow V. M/s U.P Forest Corporation, Lucknow

ITA 574/LKW/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5454 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 04-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAMITA PANDEY
• Assessee Lawyers: D. D. CHOPRA
• Keywords: Charitable institution; Question of law; Condonation of delay; Capital expenditure
• Section: 12; 11; 43B; 143(3); 260A; 12A; 12AA; 13; 22; 20

Judgement Text

I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 DY.C.I.T. (EXEMPTION), LUCKNOW. VS. M/S U.P. FOREST CORPORATION, 21/475, INDIRA NAGAR, LUCKNOW. PAN:AAATU3944K (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(A) DATED 16/07/2019 PERTAINING TO ASSESSMENT YE AR 2016-2017. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED I N LAW AND FACTS BY ALLOWING THE APPEAL OF THE ASSESSEE IG NORING THE FACT THAT THE ACTIVITIES OF THE ASSESSEE DO NOT FAL L WITHIN 'PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FOREST AND WILDLIFE)' AS INSERTED IN SECTION 2(15) OF THE ACT W.E.F. 01.04.2009; 2. LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND FACTS BY ALLOWING THE APPEAL OF THE ASSESSEE IG NORING THE FACT THAT THE ACTIVITIES OF THE ASSESSEE ARE COMMER CIAL AND IN THE NATURE OF TRADE, COMMERCE OR BUSINESS WHICH QUA LIFIES APPELLANT BY SMT. NAMITA PANDEY, CIT, D.R. RESPONDENT BY SHRI D. D. CHOPRA, D.R. DATE OF HEARING 08/09/2021 DATE OF PRONOUNCEMENT 22 /0 9 /20 21 I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 2 UNDER THE ADVANCEMENT OF AN ACT OF GENERAL PUBLIC U TILITY, THEREFORE THE OBJECT OF THE ASSESSEE DOES NOT FALL WITHIN 'CHARITABLE PURPOSE' AS DEFINED IN SECTION 2(15) OF THE ACT; 3. LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND FACTS BY ALLOWING THE APPEAL OF THE ASSESSEE IG NORING THE FACT THAT THE REGISTRATION U/S 12A OF THE I.T. ACT, 1961 TO THE ASSESSEE WAS GRANTED FOR 'PRESERVATION, SUPERVISION AND DEVELOPMENT OF FOREST' AND NOT FOR THE EXPLOITATION OF FOREST PRODUCE; 4. LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND FACTS BY DELETING THE ADDITION/DISALLOWANCE MAD E BY THE AO ON DISALLOWANCE OF CAPITAL EXPENDITURE AMOUNTING TO RS.5,16,73,527/- AND DISALLOWANCE OF REPAYMENT OF L OANS AMOUNTING TO RS.16,99,99,664/. 5. LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND FACTS BY ALLOWING EXEMPTION U/S 11 OF THE I.T. ACT, 1961 IGNORING THE FACT THAT THE ASSESSEE IS INVOLVED IN THE ACTIVITIES OF TRADE/COMMERCE/BUSINESS AND IS AS SUCH HIT BY TH E PROVISIONS OF THE FIRST PROVISO TO SECTION 2(15) OF THE I.T. ACT, 1961; 6. LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND FACTS BY HOLDING THAT ASSESSEE HAD INCURRED EXP ENSES FOR THE OBJECTS BY WHICH IT WAS CREATED, IGNORING THE F ACTS THAT THE ASSESSEE IS INVOLVED IN THE ACTIVITIES OF TRADE / COMMERCE /BUSINESS AND IS AS SUCH HIT BY THE PROVISIONS OF T HE FIRST PROVISO TO SECTION 2(15) OF THE I.T. ACT, 1961; 7. THE ORDER OF LD. CIT(A) BE CANCELLED AND THE ORD ER OF THE A.O. BE RESTORED. 2. LEARNED D. R., AT THE OUTSET, SUBMITTED THAT ASS ESSING OFFICER HAD RIGHTLY DISALLOWED THE EXEMPTION U/S 11 AND HAD RIG HTLY MADE THE ADDITION AND IN THIS RESPECT RELIED ON THE ORDER OF THE ASSE SSING OFFICER. 3. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, SUBMITTED THAT THE ISSUE HAS BEEN SETTLED VIDE VARIOUS ORDERS OF T HE TRIBUNAL IN FAVOUR OF I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 3 THE ASSESSEE AND IN THIS RESPECT OUR SPECIFIC ATTEN TION WAS INVITED TO THE COPY OF THE TRIBUNAL ORDER DATED 26/07/2019 AT PAGE S 1 TO 28 WHEREIN THE TRIBUNAL, RELYING ON THE EARLIER YEARS ORDER, HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT LEARNED CIT(A) HAS ALSO RELIED ON THE ORDERS OF THE TRIBUNA L AND HAS RIGHTLY ALLOWED RELIEF TO THE ASSESSEE. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ISSUE RAISED BY THE REVENUE ARE ALREADY COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISI ONS OF THE TRIBUNAL. THE TRIBUNAL, IN ASSESSMENT YEAR 2015-16 VIDE ORDER DAT ED 26/07/2019 RELYING ON EARLIER ORDERS OF THE TRIBUNAL, HAS ALREADY DISM ISSED THE APPEAL OF THE REVENUE AND LEARNED CIT(A) HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE RELYING ON THE ORDERS OF THE TRIBUNAL. FOR THE SAK E OF COMPLETENESS, THE FINDINGS OF THE TRIBUNAL IN I.T.A. NO.649/LKW/2019 DATED 26/07/2019 ARE REPRODUCED BELOW: 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT VIDE I TS ORDER DATED 29/03/2019 IN I.T.A. NOS.357 TO 360/LKW/2017 FOR ASSESSMENT YEAR 2009-10 TO 11-12 & 13-14, I.T.A. NO.282/LKW/2017 FOR ASSESSMENT YEAR 2012-13 AND I.T .A. NO.556/LKW/2018 FOR ASSESSMENT YEAR 2014-15, THIS B ENCH OF THE TRIBUNAL, HAS DISMISSED THE APPEALS OF THE REV ENUE UNDER SIMILAR FACTS AND CIRCUMSTANCES. DURING THOSE YEA RS THE ASSESSEE HAD CLAIMED EXEMPTION UNDER THE SPECIFIC H EAD PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS , FOREST AND WILDLIFE) AS THIS SPECIFIC HEAD HAS BEEN INCLUD ED IN THE DEFINITION OF SECTION 2(15) W.E.F. 01/04/2009. THE ACTIVITIES OF THE ASSESSEE REMAINED SAME AND THE ACTIVITIES BEING CARRIED OUT BY THE ASSESSEE HAS ALREADY BEEN HELD CHARITABL E IN NATURE. LEARNED CIT(A), WHILE ALLOWING RELIEF TO TH E ASSESSEE, HAD HELD THAT IF THE ASSESSEE FALLS INTO A SPECIFIC CATEGORY THEN SPECIFIC CATEGORY WILL HAVE PRECEDENT OVER THE GENE RAL CATEGORY. THE TRIBUNAL, WHILE DISMISSING THE APPEA LS OF THE I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 4 REVENUE VIDE ITS ORDER DATED 29/03/2019 IN I.T.A. N OS.357 TO 360/LKW/2017 FOR ASSESSMENT YEAR 2009-10 TO 11-12 & 13-14, I.T.A. NO.282/LKW/2017 FOR ASSESSMENT YEAR 2012-13 AND I.T.A. NO.556/LKW/2018 FOR ASSESSMENT YEAR 2014-15, HAS HELD AS UNDER: 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THA T VIDE ORDER DATED 13/12/2018 THE TRIBUNAL HAS DISMISSED T HE APPEALS OF THE REVENUE FOR ASSESSMENT YEAR 2002-03 TO 2008-09 ON SIMILAR GROUNDS THOUGH IN THOSE YEARS TH E ASSESSEE HAD CLAIMED EXEMPTION UNDER THE HEAD OBJECTS OF GE NERAL PUBLIC UTILITY. HOWEVER, DURING THE YEAR UNDER CO NSIDERATION THE ASSESSEE HAD CLAIMED EXEMPTION UNDER THE SPECIF IC HEAD PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS , FOREST AND WILDLIFE) AS THIS SPECIFIC HEAD HAS BEEN INCLUDED I N THE DEFINITION OF SECTION 2(15) W.E.F. 01/04/2009. THE ACTIVITIES OF THE ASSESSEE REMAINED SAME AND THE ACTIVITIES BEING CAR RIED OUT BY THE ASSESSEE HAS ALREADY BEEN HELD CHARITABLE IN NA TURE. LEARNED CIT(A), WHILE ALLOWING RELIEF TO THE ASSESS EE, HAS HELD THAT IF THE ASSESSEE FALLS INTO A SPECIFIC CATEGORY THEN SPECIFIC CATEGORY WILL HAVE PRECEDENT OVER THE GENERAL CATEG ORY. THE MATTER REGARDING REGISTRATION HAS ATTAINED FINALITY WHEN HON'BLE SUPREME COURT DISMISSED THE APPEAL OF THE REVENUE. THE FACTS REGARDING GRANT OF REGISTRATION U/S 12AA HAS BEEN R EPRODUCED BY TRIBUNAL IN ITS ORDER DATED 13/12/2018FOR ASSESS MENT YEAR 02-03 TO 08-09, WHICH FOR THE SAKE OF CONVENIENCE A RE REPRODUCED BELOW: 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSES SEE WAS INITIALLY DENIED REGISTRATION U/S 12AA OF THE ACT A ND LATER ON THE APPLICATION OF THE ASSESSEE FOR REGISTRATION U/S 12 A WAS GRANTED AS THE ASSESSEE WAS HELD TO BE DOING CHARITABLE ACT IVITY. THE MATTER REGARDING REGISTRATION HAS ATTAINED FINALITY WHEN HON'BLE SUPREME COURT DISMISSED THE APPEAL OF REVENUE. THE SE FACTS HAVE BEEN NOTED BY LEARNED CIT(A) IN HIS ORDER. FO R THE SAKE OF COMPLETENESS, WE REPRODUCE THESE FACTS FROM THE ORDER OF LEARNED CIT(A) AS UNDER: (I) THE APPELLANT FURNISHED AN APPLICATION UNDER S ECTION 12AA OF THE ACT WITH THE OFFICE OF THE COMMISSIONER OF I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 5 INCOME-TAX, LUCKNOW ON 11-07-1988 FOR SEEKING REGISTRATION UNDER SECTION 12A OF THE ACT. THE REGI STRATION TO THE APPELLANT WAS DENIED VIDE ORDER DATED 18.03. 1997 PRIMARILY ON THE FINDINGS BY THE COMMISSIONER OF IN COME- TAX, LUCKNOW THAT THE APPELLANT HAS REQUESTED FOR G RANT OF REGISTRATION AFTER A GAP OF 14 YEARS AND THE APP LICATION WAS NOT IN PRESCRIBED FORM 10-A AS SPECIFIED IN THE RULES. (II) THE APPELLANT PREFERRED APPEAL AGAINST THE ORD ER OF THE CIT, LUCKNOW DATED 18.03.1997 REGARDING REFUSAL OF REGISTRATION BEFORE THE HON'BLE ALLAHABAD HIGH COUR T WHEREIN THE HON'BLE COURT VIDE ORDER DATED 26-11-20 02 IN CIVIL MISC WRIT PETITION NO 173 (MB) OF 1998 HAS QU ASHED THE ORDER OF THE CIT, LUCKNOW DATED 18.03.1997 WITH THE OBSERVATION THAT NECESSARY OPPORTUNITY OF BEING HEA RD WAS NOT AFFORDED TO THE APPELLANT AND THE CIT, LUCK NOW WAS DIRECTED TO DECIDE THE APPLICATION FOR GRANT OF REGISTRATION AFRESH ON MERITS. (III) THE CIT, LUCKNOW VIDE ITS ORDER 13-06-2007 IN COMPLIANCE TO THE TERMS OF THE DIRECTIONS OF THE HO N'BLE ALLAHABAD HIGH COURT IN CIVIL MISC WRIT PETITION NO 173 (MB) OF 1998 RECONSIDERED THE MERITS FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT. THE CIT, LUCKNOW PROCEEDED TO DENY REGISTRATION ON THE FINDI NGS THAT THE APPELLANTS ACTIVITIES DO NOT QUALIFY TO BE IN THE NATURE OF CHARITABLE ACTIVITIES AND RELIANCE WAS AL SO PLACED ON THE JUDGMENT OF THE HON'BLE ALLAHABAD HIG H COURT IN APPELLANTS OWN CASE REPORTED IN (129 TAXMA N 527) WHEREIN THE HON'BLE COURT HAS OBSERVED THAT TH E 'EXPLOITATION OF FOREST' IS A COMMERCIAL ACTIVITY. (IV) THE ORDER OF THE CIT LUCKNOW DATED 13-06-2007 DENYING REGISTRATION UNDER SECTION 12A OF TO THE ACT TO THE APPELLANT WAS AGAIN CHALLENGED BEFORE THE HON'BLE I TAT, LUCKNOW IN ITAT APPEAL NO I.T.A NO 512/LLIC/2007. (V) IN THE INTERIM, THE APPELLANT ALSO FILED A SPEC IAL LEAVE PETITION (SLP) BEFORE THE HON'BLE SUPREME COURT AGA INST THE ORDER DATED 26-11-2002 AS PASSED BY THE HON'BLE ALLAHABAD HIGH COURT, FOR REMANDING THE CASE BACK T O CIT, LUCKNOW TO DECIDE THE GRANT OF REGISTRATION AF RESH. WHILE DECIDING THE SAID SLP THE HON'BLE SUPREME COU RT I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 6 VIDE ITS ORDER DATED 27-11-2007 REPORTED UNDER CITA TION NO (165 TAXMAN 533 ) HELD THAT THE PRIMARY CONDITIO N FOR GRANT OF EXEMPTION UNDER SECTION 11 IS TO HAVE A REGISTRATION UNDER SECTION 12A OF THE ACT AND THE S AME BEING PENDING FOR DISPOSAL BEFORE THE HON'BLE TRIBU NAL. THE HON'BLE TRIBUNAL WAS DIRECTED TO DECIDE THE GRA NT OF REGISTRATION AGAINST THE ORDER PASSED BY THE COMMISSIONER REJECTING THE APPLICATION FILED UNDER SECTION 12A OF THE ACT WITHOUT BEING INFLUENCED BY ANY OF T HE FINDINGS RECORDED BY THE HON'BLE HIGH COURT IN THE IMPUGNED ORDER. (VI) IN PURSUANCE OF THE DIRECTIONS OF THE HON'BLE SUPREME COURT IN CASE REPORTED UNDER CITATION NO 165 TAXMAN 533, THE HON'BLE INCOME-TAX APPELLATE TRIBUNAL AT LUCKNOW IN I.T.A NO 512/LUC/2007 VIDE ORDER DATED 1 6- 01-2009 HAS PROCEEDED TO GRANT THE REGISTRATION UND ER SECTION 12A OF THE ACT WITH ITS FINDINGS THAT APPEL LANT IS DOING A CHARITABLE ACTIVITY WHICH ENCOMPASSES THE 'OBJECT OF GENERAL PUBLIC UTILITY. IT IS IMPORTANT TO POINT OUT HERE THAT THE SUBJECT ORDER / FINDING OF THE-HO N'BLE ITAT IS AFTER TAKING INTO ACCOUNT THAT THE HON'BLE TRIBUNAL IS NOT REQUIRED TO BE INFLUENCED BY THE FINDINGS OF THE HON'BLE HIGH COURT AT ALLAHABAD. THE ORDER OF THE H ON'BLE ITAT GRANTING REGISTRATION HAS ATTAINED FINALITY PU RSUANT TO DISMISSAL OF THE APPEAL PREFERRED BY THE DEPARTM ENT BOTH AT HON'BLE JURISDICTIONAL ALLAHABAD HIGH COURT IN CASE NO ITA NO 70 OF 2009 BEARING DATE 12-05-2010 A ND HON'BLE SUPREME COURT IN SLP NO CC 2590/2011 BEARIN G DATE 12-05-2011. (VI) ACCORDINGLY AS ON DATE, THE REGISTRATION AS DU LY GRANTED BY THE HON'BLE ITAT LUCKNOW IN ITA NO 512/LUC/2007 AND AS DULY ATTAINED FINALITY PURSUANT TO DISMISSAL OF THE APPEAL PREFERRED BY THE DEPARTMENT BOTH BY AT HON'B LE JURISDICTIONAL ALLAHABAD HIGH COURT IN CASE NO ITA NO 70 OF 2009 BEARING DATE 12-05-2010 AND HON'BLE SUPREME COURT IN SLP NO CC 2590/2011 BEARING DATE 12-05-201 1 STANDS VALID. THE CIT, LUCKNOW VIDE ORDER DATED 17- 12- 2012 READ WITH ORDER DATED 18.04.2011 HAS DULY GRAN TED THE REGISTRATION UNDER SECTION 12A OF THE ACT HOLDI NG APPELLANT ELIGIBLE FOR CLAIMING EXEMPTION UNDER SEC TION 11 I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 7 OF THE ACT. THE SAID REGISTRATION IS RETROSPECTIVE WITH EFFECT FROM 25-11-1974, BEING THE DATE WHEN APPELLA NT WAS INCORPORATED. 4.1 THE REASONING OF THE ASSESSING OFFICER THAT ACT IVITY OF THE ASSESSEE DO NOT QUALIFY UNDER HEAD PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FOREST AND WILD LIFE) HAS ALSO BEEN DECIDED BY THE TRIBUNAL FOR ASSESSMENT YE AR 02-03 TO 08-09 IN FAVOUR OF THE ASSESSEE, WHICH FINDINGS FOR THE SAKE OF COMPLETENESS, ARE REPRODUCED BELOW: AS REGARDS THE CONTENTION OF REVENUE THAT ACTIVITI ES OF THE ASSESSEE DO NOT FALL WITHIN THE DEFINITION OF PRESE RVATION OF ENVIRONMENT, WE FIND THAT LEARNED CIT(A), AFTER REL YING ON THE DECISION OF HON'BLE I.T.A.T., AS UPHELD BY HON'BLE SUPREME COURT, HAS HELD THAT THE ACTIVITIES OF THE ASSESSEE ARE CHARITABLE IN NATURE. THE LEARNED CIT(A) HAS NOTED THESE FACT S IN HIS ORDER AND THE RELEVANT FINDINGS OF LEARNED CIT(A) A RE REPRODUCED BELOW: GROUND OF APPEAL NO. 5 & 6 (A) THIS GROUND OF APPEAL RELATES TO THE INFERENCE DRAWN BY THE AO BY PLACING RELIANCE ON THE JUDGMENT OF THE H ON'BLE ALLAHABAD HIGH COURT DECIDED ON 26.11.2002 AND REPO RTED UNDER 129 TAXMAN 527 WHEREIN IT EXPLOITATION OF FOREST WA S HELD TO BE COMMERCIAL ACTIVITY AND THE AO NOT OBSERVING THE DI RECTIONS OF THE HON'BLE SUPREME COURT AS GIVEN -IN JUDGMENT REP ORTED IN (165 TAXMAN 533). (B) THE APPELLANT VIDE ITS SUBMISSIONS HAS ALSO RE BUTTED THE FINDING OF THE AO WHO RELIED ON THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT IN APPELLANTS CASE DATED 26-11 -2002 CITED UNDER CITATION (129 TAXMAN 527) WHEREIN THE HON'BLE COURT HAS HELD THAT THE EXPLOITATION OF FOREST IS A COMMERCIA L ACTIVITY. (C) IN THIS REGARD, I HAVE GONE THROUGH THE SUBMIS SION OF THE APPELLANT AND THE BACKGROUND IN WHICH THE HON'BLE C OURT HAS PRONOUNCED ITS RULING DATED 26/11/2002 CITED UNDER CITATION (129 TAXMAN 527). THE SUBJECT RULING WAS PRONOUNCED BY T HE HON'BLE ALLAHABAD HIGH COURT WITH RESPECT TO THE AP PELLANTS CONTENTION THAT ITS INCOME IS ELIGIBLE FOR EXEMPTIO N UNDER SECTION I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 8 11 OF THE ACT IF THE BENEFIT OF SECTION 10(20) OF T HE ACT IS NOT AVAILABLE TO IT. IN THE COURSE OF DECIDING THE MATT ER THE HON'BLE HIGH COURT HAS STATED THAT THE EXPLOITATION OF FORE ST IS TO BE SAID CONSIDERED AS A COMMERCIAL IN NATURE. IT IS UNDISP UTED FACT THAT FOR THE SAID YEAR IN APPEAL BEFORE THE HON'BLE HIGH COURT THE APPELLANT WAS NOT HAVING A REGISTRATION UNDER 12A O F THE ACT. IN APPEAL, THE HON'BLE SUPREME COURT ALSO IN THE APPEL LANTS OWN CASE REPORTED UNDER (165 TAXMAN 533) HAS THAT FOR A VAILING THE BENEFITS OF SECTION 11 OF THE ACT THAT THE REGISTRA TION UNDER SECTION 12A IS THE PREREQUISITE. THIS APPEAL BEFORE THE HON'BLE SUPREME COURT WAS IN FORM OF AN SLP PREFERRED BY TH E APPELLANT AGAINST ORDER OF THE HON'BLE ALLAHABAD HIGH COURT D ATED 26.11.2002. SINCE THE APPEAL FOR DECIDING THE GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT WAS PENDI NG BEFORE THE TRIBUNAL, THE HON'BLE SUPREME COURT HAS FURTHER HELD THAT TRIBUNAL IS REQUIRED TO CONSIDER APPEAL WITHOUT GET TING INFLUENCED BY THE DECISION OF THE HON'BLE HIGH COUR T. THE RELEVANT CLAUSE OF THE JUDGMENT IS REPRODUCED BELOW : '14. IN VIEW OF THE DISMISSAL OF THESE APPEALS, THE APPEALS FILED BY THE REVENUE ALSO STAND DISMISSED. HOWEVER, IN ORDER TO PROTECT THE INTEREST OF THE ASSESSEE AS WE LL AS THE REVENUE, WE DIRECT THE TRIBUNAL, BEFORE WHOM THE AP PEALS ARE PENDING AGAINST THE ORDER PASSED BY THE COMMISSIONER REJECTING THE APPLICATION FILED UNDER SECTION 12A OF THE ACT, TO TAKE UP THE MATTER ON PRIORITY B ASIS AND DECIDE THE SAME AS EXPEDITIOUSLY AS POSSIBLE WITHOU T BEING INFLUENCED BY ANY OF THE FINDINGS RECORDED BY THE HIGH COURT IN THE IMPUGNED ORDER.' (D) IN THIS CONTEXT THE HON'BLE TRIBUNAL AT LUCKNOW VIDE ITS ORDER DATED 16.01.2003 WHILE GRANTING EXEMPTION TO THE APPELLANT UNDER SECTION 12A HAS CATEGORICALLY GAVE ITS FINDINGS AS SUMMARISED AND REPRODUCED IN THE PARAGRAPH 5.1(D ) OF THIS ORDER THAT THE ACTIVITIES OF THE APPELLANT ARE CHAR ITABLE AND NOT BEING CONDUCTED ON ANY COMMERCIAL LINES WITH RESPEC T TO EXPLOITATION OF FORESTS. THE SUBJECT FINDING OF THE HON'BLE ITAT VIDE ITS ORDER DATED 16.01.2009 HAS ATTAINED FINALI TY PURSUANT TO DISMISSAL OF THE APPEAL PREFERRED BY THE DEPARTMENT BOTH BY AT HON'BLE JURISDICTIONAL ALLAHABAD HIGH COURT IN CASE NO ITA NO 70 OF 2009 BEARING DATE 12-05-2010 AND HON'BLE SUPREME COURT IN SLP NO CC 2590/2011 BEARING DATE 12-05-2011 (REFER TO THE I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 9 CONTENTS OF THE ORDERS AS REPRODUCED ABOVE IN PARA 5.1(E) OF THIS ORDER). THE AO CANNOT TRAVEL BEYOND HIS POWERS TO OPEN AN ISSUE WHICH HAS BEEN DULY DECIDED IN FAVOUR OF THE APPELLANT AND WITH THE FACTS REMAINING IDENTICAL AT THE TIME OF P RONOUNCEMENT BY HON'BLE ITAT AS WELL AS THE TIME OF ASSESSMENT P ROCEEDINGS. CONSEQUENT TO THE FINDINGS OF THE HON'BLE ITAT LUCK NOW AND ITS EXAMINATION OF THE FACT THAT THE APPELLANT IS NOT D OING COMMERCIAL ACTIVITY AND WHICH IS UPHELD BY THE HON' BLE HIGHER JUDICIARY AT A LATER DATE (IN THIS CASE AFTER THE H ON'BLE HIGH COURTS ORDER DATED 26-11-2002), THE SAID FINDINGS O F HON'BLE ITAT AS DULY ATTAINED FINALITY WOULD PREVAIL. (E) I FIND MERITS IN THE ARGUMENTS OF THE APPELLANT ON THE BASIS OF THE JUDGMENT OF THE HON'BLE HIGH COURT OF MADRAS IN SESHASAYEE PAPER & BOARDS LTD. V. INSPECTING ASSIST ANT COMMISSIONER (24 TAXMAN 604) AND THE DECISION OF TH E HON'BLE MUMBAI HIGH COURT IN THE CASE OF MURLIDHAR BHAGWAND AS V. COMMISSIONER OF INCOME-TAX (284 ITR 548). THE SAME HAS BEEN DISCUSSED IN DETAIL IN GROUND 3 ABOVE. (F) IN VIEW OF THE ABOVE DISCUSSION AND JUDGMENTS O F THE HON'BLE COURTS AS ELABORATED ABOVE, I HOLD THAT THE AO HAS ERRED IN NOT APPLYING THE FINDINGS OF ORDER OF HON' BLE SUPREME COURT (REPORTED IN 165 TAX MANN533). THE AO HAS SIM PLY PROCEEDED TO RELY UPON THE ORDER OF HON'BLE HIGH CO URT DATED 26.11.2002 AND DENIED THE EXEMPTION CLAIMED U/S 11 OF THE ACT. THE ORDER OF HON'BLE ITAT IN APPELLANTS CASE WAS P ASSED ON 16.01.2009 (I.E. MUCH AFTER THE HON'BLE HIGH COURTS ORDER DATED 26.11.2002). THE HON'BLE ITAT VIDE THE SAID ORDER H ELD THAT THE ACTIVITIES OF THE APPELLANT ARE CHARITABLE IN NATUR E. THE SAID ORDER WAS PASSED BY HON'BLE ITAT ON DIRECTION OF HON'BLE APEX COURT THAT APPLICATION FILED U/S 12A BE TAKEN UP ON PRIOR ITY AND BE DECIDED EXPEDITIOUSLY WITHOUT BEING INFLUENCED BY A NY OF THE FINDINGS RECORDED BY THE HON'BLE HIGH COURT IN THE IMPUGNED ORDER. IN VIEW OF THESE FACTS AND JUDGMENTS, THE GR OUNDS OF APPEAL NO. 5 AND 6 ARE ALLOWED. THE SAID FINDINGS OF LEARNED CIT(A) ARE CRYSTAL CLE AR AND DO NOT REQUIRE ANY INTERFERENCE. THEREFORE, GROUND NO. 1 & 2 OF THE REVENUES APPEAL ARE DISMISSED. I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 10 7. NOW COMING TO GROUND NO. 3 & 5 OF THE APPEAL BY WHICH THE REVENUE HAS AGITATED THAT THE ASSESSEE WAS GRAN TED 12A REGISTRATION FOR PRESERVATION, SUPERVISION AND DEVE LOPMENT OF FOREST AND NOT FOR THE EXPLOITATION OF FOREST PRODU CE. WE FIND THAT LEARNED CIT(A) HAS DEALT THIS ISSUE IN PARA 5. 1 OF HIS ORDER AND HAS HELD AS UNDER: 5.1 AFTER EXAMINING THE ASSESSMENT ORDER AND THE W RITTEN SUBMISSIONS OF THE APPELLANT THE GROUNDS OF APPEAL ARE DISCUSSED AND DECIDED AS UNDER:- GROUNDS OF APPEAL NO. 1 A) THE GROUND 1 RELATES TO FINDINGS OF THE AO THAT THE ACTIVITIES OF THE APPELLANT PARTLY CLASSIFY AS CHARITABLE AND PARTLY AS COMMERCIAL AND DO NOT FALL WITHIN THE EXPRESSION 'C HARITABLE PURPOSE'. B) IN LIGHT OF THE FINDINGS OF THE AO, IT BECOMES IMPERATIVE TO UNDERSTAND THAT WORKING OF THE APPELLANT AND WHETHE R THE SAME CLASSIFIES TO BE CHARITABLE IN NATURE FOR THE PURPO SES OF SECTION 2(15) OF THE ACT. THE APPELLANT HAS PLACED BEFORE M E THE COPY OF THE ENACTMENT UNDER WHICH IT WAS INCORPORATED. S ECTION 14 OF THE SAID ENACTMENT PROVIDES THE FOLLOWING: 'SECTION 14.: FUNCTION OF THE CORPORATION SUBJECT TO THE PROVISIONS OF THIS ACT, -AND TO ANY GENERAL OR SPECIAL DIRECTIONS OF THE STATE GOVERNMENT, THE FUN CTIONS OF THE CORPORATION SHALL BE FOLLOWING, NAMELY: (A)TO UNDERTAKE REMOVAL AND DISPOSAL OF TREES AND EXPLOITATION OF FOREST RESOURCES ENTRUSTED TO IT BY THE STATE GOVERNMENT; (B)TO PREPARE PROJECTS RELATING TO FORESTRY WITHIN THE STATE; (C)TO UNDERTAKE RESEARCH PROGRAMMES RELATING TO FOR EST AND FOREST PRODUCTS AND RENDER TECHNICAL ADVICE TO STATE GOVERNMENT MATTERS RELATING TO FORESTRY; (D)TO MANAGE, MAINTAIN AND DEVELOP SUCH FORESTS AS ARE TRANSFERRED OR ENTRUSTED TO IT BY THE STATE GOVERNM ENT; (E)TO PERFORM SUCH FUNCTIONS AS THE STATE GOVERNMEN T MAY FROM TIME TO TIME REQUIRE. I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 11 C) ON PERUSAL OF THE SECTION FOR WHICH THE APPEL LANT WAS INCORPORATED, IT IS SEEN THAT THE VERY PRIMARY PURP OSE FOR ITS INCORPORATION WAS 'TO UNDERTAKE REMOVAL AND DISPOSA L OF TREES AND EXPLOITATION OF FOREST RESOURCES ENTRUSTED TO I T BY THE STATE GOVERNMENT'. THE MODUS OPERANDI BEING ADOPTED FOR R EMOVAL TREES AND THE EXPLOITATION OF PRODUCE HAS BEEN DIAGRAMMATICALLY EXPLAINED BY THE APPELLANT IN HIS SUBMISSIONS PUT FORTH BEFORE ME. IT IS ALSO TO BE SEEN THAT THE ACTIVITIES OF THE APPELLANT ARE BEING DONE UNDER A DEFINED WORKIN G PLAN OF THE CENTRAL GOVERNMENT AND THE STATE GOVERNMENT WHI CH IS DULY MONITORED. THE ACTIVITIES UNDERTAKEN BY THE AP PELLANT ARE ALSO IN LINE WITH THE FINDINGS OF THE HON'BLE SUPRE ME COURT IN THE CASE OF VIJAY BAHADUR (2 SCC 365) DECIDED ON 23 -03-1982, (AS REPRODUCED ABOVE) AND THE SAME CANNOT BE SAID T O BE ON COMMERCIAL LINES AS THE SAME IS BANNED BY THE HON'B LE SUPREME COURT. THE ACTIVITIES UNDER TAKEN BY THE AP PELLANT ARE MOREOVER GUIDED BY THE FOREST POLICY AND CAN BE SAI D TO BE FOR THE PRESERVATION OF THE ENVIRONMENT. THE BOOKS OF A CCOUNTS OF THE APPELLANT ARE PLACED BEFORE THE STATE LEGISLATU RE AS WELL AS AUDITED BY THE CAG WHERE IN NO SUCH QUALIFICATION H AS BEEN BROUGHT OUT THAT THE APPELLANT IS ENGAGED IN ANY SO RT OF ACTIVITY WHICH CAN BE CONSTRUED TO BE AGAINST ITS OBJECTS AS WELL AS CONDUCTED ON COMMERCIAL LINES D) I ALSO FIND MUCH FORCE IN THE ARGUMENTS PLACED BEFORE ME IN HOLDING OUT THAT THE ACTIVITIES AS UNDERTAKEN BY TH E APPELLANT PERTAINING TO REMOVAL AND DISPOSAL OF TREES AND EXP LOITATION OF FOREST RESOURCES HAS BEEN HELD TO BE IN THE NATURE OF PRESERVATION OF ENVIRONMENT BY THE HON'BLE ITAT LUC KNOW IN APPELLANTS OWN CASE VIDE FINDINGS CONTAINED UNDER P ARA NO 24 TO PARA 29 OF ITS ORDER IN I.T.A NO 512 /LUC/2007 D ECIDED ON 16-01.2009 IN THE COURSE OF GRANTING REGISTRATION U NDER 12A OF THE ACT. THE EXTRACTS OF THE SAID PARA'S ARE REPROD UCED BELOW : ' 24. HEARING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE APPEAL OF THE ASSESSEE IS TO BE ALLOWED. F ROM THE ARGUMENTS ADVANCED AND ALSO FROM THE OBJECTS OF THE ASSESSEE, IT IS CLEAR THAT CORPORATION WAS CONSTITU TED BY THE LEGISLATIVE MANDATE OF THE STATE OF BY U.P. FOR EST CORPORATION ACT 1974 AND THE STATE HAS ENTRUSTED FO REST RESOURCES TO U.P. FOREST CORPORATION AS PER SECTION 14(A) I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 12 WITH REFERENCE TO THE OBJECTS ENSHRINED IN THE PREA MBLE 'FOR BETTER PRESERVATION, SUPERVISION AND DEVELOPME NT OF FORESTS AND BETTER EXPLOITATION OF FOREST PRODUCE W ITHIN THE STATE AND FOR MATTERS CONNECTED THEREWITH'. IN THE DECISION RELIED UPON BY THE ASSESSEE IN THE CASE OF M.C. MEHTA VS KAMAL NATH (SUPRA), IT WAS HELD THAT STATE IS THE TRUSTEE OF ALL THE NATURAL RESOURCES WHICH ARE MEANT FOR PUBLIC USE AND ENJOYMENT. THE STATE AS A TRUSTE E IS A UNDER A LEGAL OBLIGATION TO PROTECT THE NATURAL RES OURCES WHICH INCLUDES FOREST. THE STATE IS NOT MERELY INTE RESTED IN REALIZING REVENUE BUT IS EQUALLY INTERESTED IN PRESERVATION AND DEVELOPMENT OF FORESTS. IT CANNOT KNOWINGLY ENTER INTO CONTRACTS WITH BIDDERS WHO MUS T HAVE AT THE BACK OF THEIR MINDS THE OPPORTUNITY OF GAMBLE OF ILLICIT FELLING OF TREES. IN THE SECOND PLACE, T HE CORPORATION IS A WHOLLY GOVERNMENT OWNED CORPORATIO N DEDICATED TO THE BETTER PRESERVATION AND DEVELOPMEN T OF FORESTS AND BETTER EXPLOITATION AFFOREST PRODUCE. T HE PROFITS OF THE CORPORATION ARE IN TRUTH THE PROFIT OF THE STATE ITSELF. THE STATE BY ESTABLISHING THIS CORPOR ATION DOES NOT INTEND TO ENTER INTO A COMMERCIAL ACTIVITY . THE ACTIVITY IS ONLY FURTHERANCE OF THE OBJECT OF THE ESTABLISHMENT OF THE CORPORATION ITSELF. THE PRIME AIM OF ESTABLISHMENT OF THE CORPORATION IS ENVIRONMENT STA BILITY AND MAINTENANCE OF ECOLOGICAL BALANCE. THE REVISION OF ECONOMICAL BENEFIT, IF ANY, IS ONLY SUPPORTING TO T HE PRINCIPLES OF THE ABOVE AIM. IT IS NOT THE PRIME OB JECT AND THEREFORE IT IS DIFFICULT TO HOLD THAT ASSESSEE'S A CTIVITIES ARE FOR COMMERCIAL EXPLOITATION OF FOREST WHICH WILL DI SENTITLE THE ASSESSEE TO OBTAIN REGISTRATION. ASSESSEE IS NO T TREATING FOREST JUST AS A SOURCE OF REVENUE. 25. THE SUBMISSION OF THE ASSESSEE TO THE EFFE CT THAT NATIONAL COMMISSION ON AGRICULTURE BOUGHT OUT ITS I NTERIM REPORT ON PRODUCE OF VARIOUS TRESS IN AUGUST 1972 I N WHICH IT RECOMMENDED ESTABLISHMENT OF FOREST CORPORATION FOR THE PURPOSE OF ATTRACTING INSTITUTI ONAL FINANCE FOR THE DEVELOPMENT SCHEMES OF FORESTRY AND IN PURSUANCE OF THESE RECOMMENDATIONS 11 STATES FORMED FOREST CORPORATION AND IN PURSUANCE TO THE ABOVE RE PORT, U.P. FOREST CORPORATION WAS CONSTITUTED THROUGH ORDINANCE ON 25.11.1974 CANNOT BE OVERRULED. THIS I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 13 CORPORATION IS ALMOST SIMILAR TO THE ONE ESTABLISHE D BY THE ANDHRA PRADESH FOREST DEVELOPMENT CORPORATION LIMITED. WE HAVE ALREADY NOTED HEREINABOVE THAT THE CORPORATION WAS ESTABLISHED FOR BETTER PRESERVATION , SUPERVISION AND DEVELOPMENT OF FORESTS AND BETTER EXPLOITATION OF FOREST PRODUCE WITHIN THE STATE AND FOR MATTERS WITH IT AND NOT FOR ANY COMMERCIAL ACTIVITY TRUE AND SIMPLE IF AT ALL. CLAUSE 17 DEALS WITH FINANCE, ACCOUNTS AND AUDIT OF THE CORPORATION READS AS UNDE R MAKES IT CLEAR THAT THE FUNDS COULD ONLY BE UTILISE D BY THE CORPORATION IN THE DISCHARGING OF ITS FUNCTION AND NOT FOR ANY OTHER PURPOSES: 17.(1). THE CORPORATION SHALL HAVE ITS OWN FUND WHICH SHALL BE A LOCAL FUND AND TO WHICH SHALL BE CREDITED ALL MONEY RECEIVED BY OR ON BEHALF OF THE CORPORATION. (2). THE FUND SHALL BE APPLIED TOWARDS MEETING EXPENSE INCURRED BY THE CORPORATION IN THE DISCHARGE OF ITS FUNCTIONS UNDER THIS ACT AND FOR N O OTHER PURPOSES. (3). THE MONEY OF THE FUND SHALL BE KEPT IN THE STATE BANK OF INDIA OR IN THE UTTAR PRADESH CO- OPERATIVE BANK OR NAY SCHEDULED BANK.' 26. THE ABOVE MAKES IT CLEAR THAT ONE OF THE OBJECT IONS OF THE C.I.T. THAT DISCRETION IS GIVEN TO UTILISE F UNDS FOR COMMERCIAL PURPOSE CANNOT BE HELD AS ENTIRELY CORRE CT. THE ACCOUNTS ARE TO BE AUDITED BY THE GOVT. AGENT A ND THE REPORTS ARE TO BE EACH YEAR TABLED BEFORE EACH HOUSE OF LEGISLATURE 27. IT IS ALSO CLEAR THAT THE CORPORATION WAS ASKED BY THE STATE GOVT. TO CHECK ILLEGAL FELLING OF THE TREES A ND PROVIDE GAINFUL EMPLOYMENT TO THE TRIBALS LIVING IN AND AROUND FOREST. THE EXPLOITATION OF THE FOREST WAS C ONFINED TO REMOVAL AND DISPOSAL OF FALLEN, DRIED AND DISEAS ED TREES. THE FELLING OF GROWING TREES, IT IS STATED I S STRICTLY PROHIBITED. 'COMMERCIAL EXPLOITATION' WHICH WAS ONE OF THE REASONS CITED BY THE C.I.T. NOT TO GRANT REGIST RATION, APPEARS TO BE SUPERFLUOUS. THE ROLE AND STATUS OF T HE CORPORATION IS GIVEN AT PAGE 6 OF THE PAPER BOOK-L, VIDE I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 14 WHICH THE ASSESSEE EXPLAIN THE SYNOPSIS OF THE CHAR ITABLE PURPOSES OF THE CORPORATION. SI NO 8 AT PAGE 6 OF T HE PAPER BOOK-L MAKES IT CLEAR THAT THERE WAS A PROTRA CTED LITIGATION IN THE A CASE IN THE YEAR 1980 BETWEEN T HE STATE OF U.P. AND PRIVATE CONTRACTORS WHO WAS HIGHE ST BIDDER NOT GETTING THE AWARD OF CONTRACT DUE TO APPREHENSION OF THE WORK BEING DETRIMENTAL OF THE FORESTRY. ULTIMATELY THE ISSUES WAS DECIDED IN FAVO UR' OF THE GOVT BY THE HON'BLE SUPREME COURT OF INDIA. IT SAYS THAT THE CASE REPORTED IN 2 SCC 365 IN THE CASE OF STATE OF U.P. V VIJAY BAHADUR SINGH, THE HON'BLE SUPREME COURT OF INDIA HELD AS UNDER:- 'IN THE FIRST PLACE....... THE STATE IS NOT MERELY INTERESTED IN REALIZING REVENUE BUT IS EQUALLY INTERESTED IN THE PRESERVATION AND DEVELOPMENT OF FORESTS. IT CANNOT KNOWINGLY ENTER INTO CONTRACTS WITH BIDDERS WHO MUST HAVE, AT THE BACK OF THEIR MINDS THE OPPORTUNITY OR THE GAMBLE OF ILLICIT FELL ING OF TREES. IN THE SECOND PLACE THE CORPORATION IS A WHOLLY GOVERNMENT OWNED CORPORATION DEDICATED TO THE BETTER PRESERVATION AND DEVELOPMENT AFFORESTS AND THE BETTER EXPLOITATION OF FOREST PRODUCE. THE PROFITS OF THE CORPORATION ARE IN TRUT H THE PROFITS OF THE SLATE ITSELF.' THE HON'BLE COURT UPHELD THE CONTENTION OF THE STATE FOR ALLOWING THE EXPLOITATION OF THE PRIVATE CONTRACTORS TO THE DETRIMENT OF NATIONAL INTEREST IN PRESERVATION OF FORESTS' 28 THE EXTRACT FROM THE ANNUAL REPORT FOR THE PERIO D 1.10.1975 TO 30.09.1976 RELEVANT FOR ASSESSMENT YEA R 1977-78 HAS BEEN RECORDED AT PAGE 7 OF THE PAPER BO OK-L WHICH READS AS UNDER: 'NOTE: '5. PROFIT, HOWEVER, IS NOT THE ONLY CRITERI ON BY WHICH THE PERFORMANCE OF A PUBLIC SECTOR UNDERTAKIN G HAS TO BE JUDGED. A VERY IMPORTANT YARDSTICK IS THE FUL FILLMENT OF THE SOCIAL OBLIGATIONS CAST UPON IT WITHIN THE B ROAD PERSPECTIVE OF THE COUNTRY'S PLANNING POLICY AND OBJECTIVES. THE CORPORATION IS ENGAGED IN TAKING OV ER PROGRESSIVELY THE FELLING AND TRANSPORT OPERATION O F TRESS I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 15 FROM PRIVATE CONTRACTORS. THE LABOUR ENGAGED BY THE BIGGER CONTRACTORS, THE SO CALLED 'MALDARS', IN THE HILLS HAS BEEN HELD IN BONDAGE FOR YEARS AND GROSSLY EXPL OITED IN A VARIETY OF WAYS. THEY HAD A STRONGHOLD ON THEM AND IN THE INITIAL PHASES OF THE CORPORATION'S WORKING IN THE HILLS, IT WAS DIFFICULT TO LOOSEN THESE BONDS OF SL AVERY. IT IS TO THE CREDIT OF SOME OF THE DEDICATED SOCIAL WORKE RS OF THE AREAS AND THE STAFF OF THE CORPORATION THAT THE FETTERS ARE BREAKING DOWN AND FREED LABOUR ARE COMING OVER TO THE CORPORATION IN EVER INCREASING NUMBERS. THE CORPORATION HAS ENSURED MINIMUM WAGES, WHOLESOME RATIONS, MEDICAL FACILITIES, RECREATION AND ADULT L ITERACY CLASSES TO THE LABOUR ENGAGED BY IT. STRESS IS BEIN G LAID ON THE FORMATION OF LABOUR COOPERATIVES AND ENCOURA GING THEM IN EVERYWAY POSSIBLE. LOCAL YOUTH IS BEING REC RUITED AND TRAINED IN MODERN LOGGING METHODS, USE OF IMPRO VED HAND TOOLS, MECHANICAL HAND SAWS, SO THAT GRADUALLY A REVOLUTION COULD BE USHERED IN THE METHODS OF FELLI NG, EXTRACTION AND TRANSPORT, AS HAS BEEN PRACTICED BY THEIR FATHERS AND FOREFATHERS FOR WELL OVER A CENTURY.' ( EXTRACTS FROM ANNUAL REPORT OF THE PERIOD 1.10.1975 -30.09.1 976 RELEVANT TO ASSESSMENT YEAR 1977-78)' 29. THE READING OF THE ABOVE MAKES IT CLEAR THAT EXPLOITATION OF THE FOREST IS NOT FOR ANY COMMERCIA L PURPOSE BUT FOR PRESERVATION. HENCE, WE ARE OF THE VIEW THAT THE OBJECTIONS GIVEN BY THE C.I.T. TO OVERLOOK THE CLAIM OF THE REGISTRATION IS INCORRECT' E) FURTHER THE OBSERVATIONS / DECISIONS OF THE ABOV E HON'BLE ITAT ORDER IN ITA 512/LUC/ 2007 HAS ATTAINED FINALI TY PURSUANT TO DISMISSAL OF THE APPEAL PREFERRED BY THE DEPARTM ENT BOTH BY HON'BLE JURISDICTIONAL ALLAHABAD HIGH COURT IN ITA NO 70 OF 2009 BEARING DATE 12-05-2010 AND HON'BLE SUPREME CO URT IN SLP NO CC 2590/2011 BEARING DATE 12-05-2011. THE OR DERS OF THE HIGHER JUDICIAL AUTHORITIES ARE REPRODUCED BELO W: HON'BLE JURISDICTIONAL ALLAHABAD HIGH COURT IN CASE NO ITA NO 70 OF 2009 BEARING DATE 12-05-2010 'PRESENT APPEAL UNDER SECTION 260A OF THE INCOME-TA X ACT HAS BEEN PREFERRED RAISING O QUESTION WHETHER U.P. FORE ST IS LIABLE I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 16 FOR GRANT OF CERTIFICATE UNDER SECTION 12-A OF THE INCOME-TAX ACT 1961 ? IT IS HAS BEEN ADMITTED AT BAR THAT HON'BLE SUPREME COURT WHILE DEALING WITH THE SAME ISSUE IN A CASE REPORTED IN ( 2008) 297 ITR 1 U.P. FOREST CORPORATION VS. DEPUTY COMMISSION ER OF INCOME-LAX, SETTLED THAT U.P. FOREST CORPORATION IS ELIGIBLE FOR GRANT OF CERTIFICATE UNDER SECTION 12-A OF THE INCO ME-TAX ACT, 1961. IN VIEW OF THE LAW SETTLED BY THE HON'BLE SUPREME C OURT THERE APPEARS TO BE NO JUSTIFICATION TO ADMIT THE APPEAL ON THE SAME ISSUE. SO FAR AS CONDONATION OF DELAY IS CONCERNED ONCE DELAY HAS BEEN CONDONED THERE APPEARS TO BE MORE JUSTIFIC ATION TO ADMIT THE APPEAL ON THE SAME ISSUE, BEING CONCLUDED BY FINDING OF FACT NO SUBSTANTIAL QUESTION OF LAW INVOLVED TO ENTERTAIN THE APPEAL UNDER SECTION 260 A OF THE INCOME TAX ACT. ACCORDINGLY, APPEAL IS DISMISSED IN LIMINE.' HON'BLE SUPREME COURT IN SLP NO CC 2590/2011 BEARIN G DATE 12-05-2011 'THIS PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEARING COUNSEL, THE COURT MADE THE FOLLOWING ORDER DELAY CONDONED. THE SPECIAL LEAVE PETITION IS DISMI SSED' F) FURTHER MY ATTENTION HAS ALSO BEEN DRAWN TOWAR DS THE FINDING OF THE HON'BLE ITAT, LUCKNOW IN APPELLANTS OWN CASE REPORTED UNDER ITA NO.785/LUC/05 AND DECIDED ON MAR CH 6, 2009 WHEREIN THE HON'BLE ITAT HAS ALLOWED THE EXEMP TION TO THE APPELLANT FOR AY 2002-03 AFTER RECORDING ITS FI NDINGS UNDER PARA 5 OF THE RULING. THE SAME IS REPRODUCED BELOW: 'AFTER HEARING THE LD. AR AND THE ID DR AND RESPECT FULLY FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE HOLD THAT ASSESSEE IS A CHARITABLE INSTITUTE ENTITLED TO REGI STRATION U/S 12A AS WELL AS EXEMPTION IN ACCORDANCE WITH SEC TION 11 AND 13. THEREFORE, THIS ISSUE IS DECIDED IN FAVO UR OF THE ASSESSEE' I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 17 G) IT WAS ALSO BROUGHT TO MY KNOWLEDGE THAT THE SUB JECT ORDER OF THE ITAT ON THIS FINDING HAS NOT BEEN CHALLENGED BEFORE THE HON'BLE ALLAHABAD HIGH COURT AND THE SAME THEREFORE HAS BEEN ACCEPTED BY THE DEPARTMENT AND ATTAINS FINALITY TO THIS EXTENT. H) IT WOULD BE RIGHT TO HOLD THAT THE ACTIVITIES UN DERTAKEN BY THE APPELLANT ARE IN THE NATURE OF PRESERVATION OF ENVIRONMENT. THE ABOVE STATED ORDER OF THE HON'BLE ITAT DATED 16 .01.2009 AS OUTLINED IN PARA 5.1(D) AS DULY UPHELD BY THE HI GHER JUDICIAL AUTHORITIES IS BINDING ON THE AUTHORITIES BELOW AS HELD BY THE HON'BLE JURISDICTIONAL ALLAHABAD HIGH COURT IN THE CASE OF N. N. AGARWAL V. CIT [1991] 189 ITR 769 WHEREIN IT HAS BE EN HELD THAT 'INDEED, THE ORDERS OF THE TRIBUNAL AND THE HI GH COURT ARE BINDING UPON THE ASSESSING OFFICER AND SINCE HE ACT S IN A QUASI JUDICIAL CAPACITY, THE DISCIPLINE OF SUCH FUNCTIONI NG DEMANDS THAT HE SHOULD FOLLOW THE DECISION OF THE TRIBUNAL OR THE HIGH COURT, AS THE CASE MAY BE. HE CANNOT IGNORE MERELY ON THE GROUND THAT THE TRIBUNAL'S ORDER IS THE SUBJECT MAT TER OF REVISION IN THE HIGH COURT OR THE HIGH COURT'S DECI SION IS UNDER APPEAL BEFORE THE SUPREME COURT. PERMITTING HIM TO TAKE SUCH A VIEW WOULD INTRODUCE JUDICIAL INDISCIPLINE, WHICH I S NOT CALLED FOR EVEN IN SUCH CASES. IT WOULD LEAD TO A CHAOTIC SITU ATION'. SIMILARLY THE ORDER OF HON'BLE ITAT DATED 06.03.200 9 FOR A.Y. 2002-03 IN APPELLANTS CASE TOO HAS ATTAINED FINALIT Y. I)ACCORDINGLY I HOLD THAT ONCE THE ACTIVITIES OF AP PELLANT ARE HELD TO BE IN THE NATURE OF 'PRESERVATION OF ENVIRONMENT ' THEREFORE THESE ACTIVITIES ARE HELD TO BE CHARITABLE IN NATUR E AND THE SAME CANNOT BE CATEGORIZED PARTLY AS CHARITABLE AND PARTLY AS NON-CHARITABLE AS THEY ARE COVERED WITHIN THE OBJEC TS FOR WHICH IT WAS INCORPORATED AND IS FUNCTIONING ON THOSE LIN ES. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNE D CIT(A), THEREFORE, GROUND NO. 3 & 5 ARE ALSO DISMISSED. 4.2 THE ACTIVITIES OF THE ASSESSEE REMAINED SAME AN D THERE IS NO CHANGE AND THEREFORE, FOLLOWING THE JUDICIAL PRE CEDENT IN THE CASE OF THE ASSESSEE ITSELF, THE ACTIVITIES BEING U NDERTAKEN BY THE ASSESSEE ARE HELD TO BE CHARITABLE IN NATURE. AS REGARDS THE ARGUMENTS OF LEARNED D. R. THAT IN EARLIER YEARS TH E ASSESSEE HAD CLAIMED EXEMPTION UNDER THE HEAD OBJECTS OF GE NERAL PUBLIC UTILITY WHEREAS IN THE YEARS UNDER CONSIDER ATION THE ASSESSEE HAD CLAIMED EXEMPTION UNDER THE HEAD PRES ERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FOREST AND W ILDLIFE) WE FIND THAT THE SPECIFIC CLAUSE WOULD ALWAYS PREVAIL OVER THE GENERAL CLAUSE. THE AMENDMENT TO SECTION 2(15) WAS MADE I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 18 WITH EFFECT FROM 01/04/2009 WHEREBY PRESERVATION OF ENVIRONMENT WAS INCLUDED AS A SPECIFIC OBJECT U/S 2 (15) OF THE ACT AND SINCE THE ACTIVITIES OF THE ASSESSEE FELL I N THE SPECIFIC CATEGORY THEREFORE, LEARNED CIT(A) HAS RIGHTLY CONS IDERED THE SAME. THE FINDINGS OF LEARNED CIT(A) IN THIS RESPE CT ARE CONTAINED IN PARA K TO R, WHICH FOR THE SAKE OF COM PLETENESS ARE REPRODUCED BELOW: K) FURTHER THE AOS CONTENTIONS WITH RESPECT TO TH E EARLIER CLAIM OF EXEMPTION UNDER THE EXPRESSION ADVANCEMENT OF A NY OTHER GENERAL PUBLIC UTILITY WHEREAS PRESENTLY UNDER THE EXPRESSION PRESERVATION OF ENVIRONMENT, IT IS A SETTLED JURI SPRUDENCE THAT THE SPECIFIC CLAUSE WOULD ALWAYS PREVAIL OVER THE GENERAL CLAUSES. IT IS TO BE SEEN THAT BY WAY OF AMENDMENT TO SECTION 2(15) THE LEGISLATURE INCORPORATED TWO MAJOR CHANGE S, AT THE ONE HAND IT INCLUDED PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AS ONE OF THE C HARITABLE ACTIVITY AND ON THE OTHER HAND DENIED BENEFIT OF EX EMPTION TO THOSE WHO ARE DOING COMMERCIAL ACTIVITIES IN THE NA TURE OF TRADE, BUSINESS OF COMMERCE BUY VIRTUE OF FALLING U NDER THE EXPRESSION ADVANCEMENT OF ANY OTHER GENERAL PUBLIC UTILITY GENERAL. POST AMENDMENT OF SECTION 2(150 AND THE I NCLUSION OF THE SPECIFIC CLAUSE PRESERVATION OF ENVIRONMENT (I NCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AS A CHARITABLE ACTIVITY MAKES THE APPELLANT GOVERN BY THE SPECIFIC CLAUSE OF PRE SERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS FORESTS AND WILD LIFE) AND NOT ADVANCEMENT OF ANY OTHER GENERAL PUBLIC UTILITY. I) THE ABOVE FINDING ALSO HOLD GOOD IN LIGHT OF THE FINDINGS OF THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE O F J. K. COTTON SPINNING & WEAVING VS THE STATE OF UTTAR PRA DESH & ORS ON 12 DECEMBER, 1960 (1961 AIR 1170) WHICH HAS BEEN RELIED BY THE APPELLANT AND THE SAME IS BEING REPRODUCED B ELOW: THE RULE THAT GENERAL PROVISIONS SHOULD YIELD TO SPECIFIC PROVISIONS IS NOT AN ARBITRARY PRINCIPLE MADE BY LA WYERS AND JUDGES BUT SPRINGS FORM THE COMMON UNDERSTANDING OF MEN AND WOMEN THAT WHEN THE SAME PERSON GIVES TWO DIRECTION S ONE COVERING A LARGE NUMBER OF MATTERS IN GENERAL AND A NOTHER TO ONLY SOME OF THEM HIS INTENTION IS THAT THESE LATTE R DIRECTIONS SHOULD PREVAIL AS REGARDS THESE WHILE AS REGARDS AL L THE REST THE EARLIER DIRECTION SHOULD HAVE EFFECT. IN PRETTY V. SOLLY (1) (QUOTED IN CRAIES ON STATUTE LAW AT P. 205, 5 TH EDITION) ROMILLY, I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 19 M.R. MENTIONED THE RULE THUS: THE RULE IS, THAT WH ENEVER THERE IS A PARTICULAR ENACTMENT AND A GENERAL ENACTMENT I N THE SAME STATUTE AND THE LATTER, TAKEN IN ITS MOST COMPREHEN SIVE SENSE, WOULD OVERRULE THE FORMER, THE PARTICULAR ENACTMENT (1) (1859) 26 BEAV. 606, 610.MUST BE OPERATIVE, AND THE GENERA L ENACTMENT MUST BE TAKEN TO AFFECT ONLY THE OTHER PA RTS OF THE STATUTE TO WHICH IT MAY PROPERLY APPLY. THE RULE H AS BEEN APPLIED AS BETWEEN DIFFERENT PROVISIONS OF THE SAME STATUTE IN NUMEROUS CASES SOME OF WHICH ONLY NEED BE MENTIONED : DE WINTON V. BRECON (1), CHURCHILL V. CREASE (2), UNIT ED STATES V. CHASE (3) AND CARROL V. GREENWICH INS. CO. (4). APPLYING THIS RULE OF CONSTRUCTION THAT IN CASES OF CONFLICT BETWEEN A SPECIFIC PROVISION AND A GENERAL PROVISIO N THE SPECIFIC PROVISION PREVAILS OVER THE GENERAL PROVISION AND T HE GENERA PROVISION APPLIES ONLY TO SUCH CASES WHICH ARE NOT COVERED BY THE SPECIAL PROVISION, WE MUST HOLD THAT CASE LAWS. 5(A) HAS NO APPLICATION IN A CASE WHERE THE SPECIAL PROVISIONS OF CASE LAWS. 23 ARE APPLICABLE M) EVEN THE ABOVE CONTENTION OF APPELLANT THAT SPE CIFIC CLAUSE PREVAILS OVER THE GENERAL CLAUSE IS ALSO SUPPORTED BY THE HON'BLE SUPREME COURT IN THE CASE OF COMMERCIAL TAX OFFICER VS BINANI CEMENT LTD. & ANR ( CIVIL APPEAL NO. 336 OF 2003) PRONOUNCED ON 19 FEBRUARY, 2014 AND THE SAME IS EXT RACTED BELOW: 42. HAVING NOTICED THE AFORESAID, IT COULD BE CONCL UDED THAT THE RULE OF STATUTORY CONSTRUCTION THAT THE SPECIFI C GOVERNS THE GENERAL IS NOT AN ABSOLUTE RULE BUT IS MERELY A STR ONG INDICATION OF STATUTORY MEANING THAT CAN BE OVERCOME BY TEXTUA L INDICATIONS THAT POINT IN THE OTHER DIRECTION. THI S RULE IS PARTICULARLY APPLICABLE WHERE THE LEGISLATURE HAS E NACTED COMPREHENSIVE SCHEME AND HAS DELIBERATELY TARGETED SPECIFIC PROBLEMS WITH SPECIFIC SOLUTIONS. A SUBJECT SPECIF IC PROVISION RELATING TO A SPECIFIC, DEFINED AND DESCRIPTABLE SU BJECT IS REGARDED AS AN EXCEPTION TO AND WOULD PREVAIL OVER A GENERAL PROVISION RELATING TO A BOARD SUBJECT. N) FURTHER, EVEN IF FOR THE SAKE OF ARGUMENT IT IS HELD THAT APPELLANT IS UNDER THE EXPRESSION GENERAL PUBLIC U TILITY AS HELD BY THE ASSESSING OFFICER, THEN IN SUCH A SCENARIO T HE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF THE TRIB UNE [I.T. I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 20 ACT 62-2015] HAS INTERPRETED THE CONCEPT OF GENERAL PUBLIC UTILITY POST AMENDMENT IN SECTION 2(15) OF THE ACT IN THE YEAR 2009. IN THE INSTANT CASE THE TRIBUNE WAS HELD TO BE CONDUCTING A CHARITABLE ACTIVITY BY WAY OF PRINTING NEWSPAPER AND THE SAME WAS HELD TO BE AN ACTIVITY IN THE NATU RE OF GENERAL PUBLIC UTILITY BY THE PRIVY COUNCIL. HOWEVER POST AMENDMENT, ASSESSING OFFICER QUESTIONED THE CLAIM OF EXEMPTION ON THE PRETEXT THAT THE TRIBUNE IS DOING A COMMERCIAL ACTI VITY BY WAY OF SELLING NEWSPAPER. IN THE INSTANT CASE THE HON' BLE COURT OF PUNJAB & HARYANA HAS HELD THE FOLLOWING: 38. THE QUESTION IN THIS APPEAL WHICH PERTAINS TO THE ASSESSMENT YEAR 2009-10 IS THE EFFECT OF THE AMENDM ENT OT SECTION 2 (15) INTRODUCED ON 19.12.2008 WHICH CAME INTO FORCE WITH EFFECT FROM THE FINANCIAL YEAR 01.04.2009. 39. IT IS NECESSARY TO COMPARE SECTION 2(15) AS IT STOOD UNDER THE 1961 ACT AND AS INTERPRETED BY THE SUPREME COUR T IN SURAT ART SILKS CASE ((SUPRA)), ON THE ONE HAND AND SECT ION 2 (15) AS IT WAS AMENDED WITH EFFECT FROM 01.04.2009 ON THE O THER. AS WE OBSERVED EARLIER THE SUPREME COURT HELD THAT THE CONCLUDING THE CRUCIAL WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT GO WITH THE WORDS OBJECT OF PUBLIC UTI LITY AND NOT WITH ADVANCEMENT. IN OUR VIEW THE PROVISO INTRODU CED BY THE 2009 AMENDMENT DOES NOT CHANGE THIS POSITION. THE O PENING WORDS OF THE PROVISO PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY WERE ALSO A PART OF SECTION 2(15) AS IT ORIGINALLY STOOD. THE WORDS THAT FOLLOW IN THE PROVISO SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS..ETC. REPLACED THE WORDS IN THE ORIGINAL SECTION 2(15) NOT INVOLVING THE CARRYING ON OF ANY ACTIVIT Y FOR PROFIT. ON A PARITY OF THE REASONING IN SURAT ART SILK CASE , THE WORDS IN THE PROVISO THAT FOLLOW THE OPENING WORDS PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY EQUALLY APPLY TO THE OBJECT OF GENERAL PUBLIC UTIL ITY AND NOT TO THE WORD ADVANCEMENT. THE PLAIN LANGUAGE OF THE PROVISO DOES NOT CONVEY A N INTENTION TO THE CONTRARY. IN FACT, THE LEGISLATURE COULD HAV E CONTINUED THE OPENING PART OF THE AMENDED SECTION 2(15) WITH THE WORDS NOT INVOLVING INSTEAD OF THE WORDS PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NO BE A I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 21 CHARITABLE PURPOSE IF IT INVOLVES IN THE PROVISO. EITHER WAY THE AMENDMENT WOULD HAVE BEEN THE SAME. IN THAT EVENT T HERE COULD HAVE BEEN NO DOUBT WHATSOEVER THAT THE LEGISL ATURE DID NOT SEEK TO SET AT NAUGHT THE EFFECT OF THE JUDGMEN T OF THE SUPREME COURT IN THIS REGARD IN SURAT ART SILKS CA SE ((SUPRA)). THE INTRODUCTION OF THE PROVISO DOES NOT INDICATE S UCH AN INTENTION EITHER. 40. IF THE LEGISLATURE INTENDED THE LATTER PART OF THE PROVISO TO APPLY TO THE WORD ADVANCEMENT AS WELL AND NOT MER ELY TO THE WORDS OBJECT OF GENERAL PUBLIC UTILITY, IT WOULD HAVE WORDED THE AMENDMENT ENTIRELY DIFFERENTLY. THE PROVISO WOU LD HAVE EXPRESSLY BEEN MADE APPLICABLE TO THE ADVANCEMENT A S WELL AS TO THE OBJECT OF GENERAL PUBLIC UTILITY. THAT THE L EGISLATURE DID NOT DO SO IS AN INDICATION THAT IT ACCEPTED THE INT ERPRETATION OF THE SUPREME COURT OF SECTION 2(15) AS IT ORIGINALLY STOOD AND RETAINED THE EFFECT OF THE SECTION IN THAT REGARD I N THE 2009 AMENDMENT. THE RATION OF THE JUDGMENT IN SURAT ART SILKS CASE ((SUPRA)), IN THIS REGARD, THEREFORE, REMAINS THE S AME. O) DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LEARNED A. R. ALSO BROUGHT TO MY KNOWLEDGE THAT THE DEPARTMENT HAS ACCEPTED THE CLAIM OF THE APPELLANT UNDER SECTION 1 1 OF THE ACT BY WAY FOR GRANTING EXEMPTION TO IT BY THE ASSESSIN G OFFICER CONCERNED. THE DETAILS OF THE SAME ARE TABULATED BE LOW: ASSTT YEAR DATE OF ORDER SECTION UNDER WHICH PASSED ORDER 1990-91 29.12.2009 SECTION 254 READ WITH SECTION 143(3) HON'BLE I.T.A.T., VIDE ITS ORDER DATED 16.01.2009 IN I.T. ACT NO. 512/LUC/2007, HAS GRANTED REGISTRATION TO THE ASSESSE U/S 12A OF THE INCOME-TAX ACT, 1961. THE ASSESSE VIDE ITS WRITTEN REPLY DATED 29.12.2009 HAS CLAIMED THAT IN VIEW OF THE SAID DECISION OF THE HON'BLEBLE I.T.A.T., ITS ENTIRE INCOME IS EXEMPT U/S 11 OF THE INCOME TAX ACT, 1961, AFTER A CAREFUL CONSIDERATIONS OF THE MATERIAL ON RECORD AND IN COMPLIANCE WITH THE I.T.A.T.S DIRECTIONS, EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 IS ALLOWED AND THE RETURNED INCOME IS ACCEPTED 1995- 1996 29.12.2009 SECTION 254 READ WITH HON'BLE I.T.A.T., VIDE ITS ORDER DATED 16.01.2009 IN ITA NO S12/LUC/2007, HAS I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 22 SECTION 143(3) GRANTED REGISTRATION TO THE ASSESSEE U/S 12A OF THE INCOME L-TAX ACT, 1961. THE ASSESSEE VIDE ITS WRITTEN REPLY DATED 29.12.2009 HAS CLAIMED THAT IN VIEW OF THE SAID DECISION OF THE HON'BLE I.T.A.T., ITS ENTIRE INCOME IS EXEMPT U/S 11 OF THE INCOME- TAX ACT, 1961. AFTER A CAREFUL CONSIDERATIONS OF THE MATERIAL ON RECORD AND IN COMPLIANCE WITH THE I.T.A.T.S DIRECTIONS, EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 IS ALLOWED AND THE RETURNED INCOME IS ACCEPTED 1997- 1998 29.12.2009 SECTION 254 READ WITH SECTION 143(3) HON'BLE I.T.A.T., VIDE ITS ORDER DATED 16.01.2009 IN I.T. ACT NO 512/LUC/2007, HAS GRANTED REGISTRATION TO THE ASSESSEE U/S 12A OF THE INCOME-TAX ACT, 1961. THE ASSESSEE VIDE ITS WRITTEN REPLY DATED 29.12.2009 HAS CLAIMED THAT IN VIEW OF THE SAID DECISION OF THE HON'BLE I.T.A.T., ITS ENTIRE INCOME IS EXEMPT U/S 11 OF THE INCOME TAX ACT, 1961, AFTER A CAREFUL CONSIDERATIONS OF THE MATERIAL ON RECORD AND IN COMPLIANCE WITH THE I.T.A.T.S DIRECTIONS, EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 IS ALLOWED AND THE RETURNED INCOME IS ACCEPTED 1998- 1999 29.12.2009 SECTION 254 READ WITH SECTION 143(3) HON'BLE I.T.A.T., VIDE ITS ORDER DATED 16.01.2009 IN ITA NO 512/LUC/2007, HAS GRANTED REGISTRATION TO THE ASSESSEE U/S 12A OF THE INCOME TAX ACT, 1961. THE ASSESSEE VIDE ITS WRITTEN REPLY DATED 29.12.2009 HAS CLAIMED THAT IN VIEW OF THE SAID DECISION OF THE HON'BLE I.T.A.T., ITS ENTIRE INCOME IS EXEMPT U/S 11 OF THE INCOME TAX ACT, 1961, AFTER A CAREFUL CONSIDERATIONS OF THE MATERIAL ON RECORD AND IN COMPLIANCE WITH THE I.T.A.T.S DIRECTIONS, EXEMPTION CLAIMED BY THE ASSESSEE U/S 11 IS ALLOWED AND THE RETURNED INCOME IS ACCEPTED 199- 2000 29.12.2009 SECTION 254 READ WITH SECTION 143(3) HON'BLE I.T.A.T., VIDE ITS ORDER DATED 16.01.2009 IN ITA NO 512/LUC/2007, HAS GRANTED REGISTRATION TO THE ASSESSEE U/S 12A OF THE INCOME TAX ACT, 1961. THE ASSESSEE VIDE ITS WRITTEN REPLY DATED 29.12.2009 HAS CLAIMED THAT IN VIEW OF THE SAID DECISION OF THE HON'BLE I.T.A.T., ITS ENTIRE INCOME IS EXEMPT U/S 11 OF THE INCOME-TAX ACT, 1961, AFTER A CAREFUL CONSIDERATIONS OF THE MATERIAL ON RECORD AND IN COMPLIANCE WITH THE I.T.A.T.S DIRECTIONS, EXEMPTION CLAIMED BY THE I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 23 ASSESSEE U/S 11 IS ALLOWED AND THE RETURNED INCOME IS ACCEPTED 4.3 THE ABOVE FINDINGS OF LEARNED CIT(A) ARE QUITE EXHAUSTIVE WHICH ARE CORRECT ALSO AND WE DO NOT FIND ANY INFIR MITY IN THE SAME. IN VIEW OF THE ABOVE, GROUND NO. 1,2,3,7 & 8 IN ASSESSMENT YEAR 2009-10 ARE DISMISSED AND SIMILARLY GROUND NO. 1 TO 3 AND 5 TO 7 IN REST OF THE APPEALS ARE DI SMISSED. 5. NOW COMING TO GROUND NO. 4 REGARDING PRIOR PERIO D EXPENSES, WE FIND THAT THIS ISSUE HAS ALSO BEEN DEC IDED IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEARS 02-03 T O 08-09 BY THE TRIBUNAL VIDE ORDER DATED 13/12/2018. THE FIND INGS OF THE TRIBUNAL ARE CONTAINED IN PARA 8 ONWARDS, WHICH FOR THE SAKE OF COMPLETENESS ARE REPRODUCED BELOW: 8. NOW COMING TO GROUND NO. 4 & 6 WHICH RELATE TO DELETION OF ADDITION WHICH THE ASSESSING OFFICER HAD MADE ON ACCOUNT OF PRIOR PERIOD EXPENSES. WE FIND THAT THIS ISSUE HAS ALSO BEEN DEALT BY LEARNED CIT(A) EXHAUSTIVELY AND AFTER RELY ING ON NUMBER OF CASE LAWS AND KEEPING IN VIEW THE FACTS A ND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS A LLOWED RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 5.7 GROUND OF APPEAL NO. 8 (A)THIS GROUND OF APPEAL RELATES TO DISALLOWANCE OF EXPENSES AMOUNTING TO RS 6,63,812 BY THE AO FOR THE REASON THAT THESE EXPENSES PERTAIN TO PRIOR PERIOD AND WERE ACCORDING LY DISALLOWED AS PRIOR PERIOD EXPENSES. THE AO IN THE ASSESSMENT ORDER HAS PINPOINTED OUT THAT THE APPELLANT SHOULD HAVE MADE A PROVISION IN ITS ACCOUNTS FOR THAT YEAR IN WHICH TH E PURCHASE PRICE/ROYALTY WAS TO BE PAID. THE AO FURTHER STATED THAT THE APPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THEREFORE, THESE EXPENSES WERE DISALLOWED. (B) IN THIS REGARD THE APPELLANT HAS SUBMITTED THAT THE SAID AMOUNT OF RS 6,63,812 CANNOT BE CONSIDERED AS A PRI OR PERIOD EXPENSES IN LIGHT OF THE FACT THAT SUCH AMOUNT IS O NLY DETERMINABLE AND CRYSTALLIZED AFTER THE CLOSE OF TH E FINANCIAL YEAR I.E. THE SAID EXPENSES HAD NOT CRYSTALLIZED AT THE CLOSE OF THE RELEVANT FINANCIAL YEAR. I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 24 (C) DURING THE COURSE OF APPELLATE PROCEEDINGS IT W AS SUBMITTED THAT THE BASIS -OF DETERMINING THIS EXPEN SE IS A CERTAIN PERCENTAGE WHICH IS DECIDED IN THE COMMITTE E MEETING HELD AFTER CLOSE OF THE FINANCIAL YEAR. THEREFORE, THE SAID AMOUNT IS CRYSTALLIZED IN THE SUBSEQUENT F.Y. IN WH ICH IT IS DETERMINABLE. THE APPELLANT IN HIS REPLIES HAS GIVE N A THRUST ON THE TIME PERIOD WHEN THESE EXPENSE ARE CRYSTALLIZED AND THEREAFTER ONLY THE SAME CAN BE RECORDED IN THE BOO KS OF ACCOUNTS. THE APPELLANT CONTENDED THAT UNLESS AND U NTIL THESE EXPENSES ARE NOT KNOWN TO THE APPELLANT THE PROVISI ON OF THE SAID EXPENSES CANNOT BE MADE IN THE BOOKS OF ACCOUN TS. (D)IN THIS REGARD, THE APPELLANT HAS PLACED A STRON G RELIANCE THAT THE EXPENSES CAN ONLY BE BOOKED IN BOOKS OF AC COUNTS ONCE THEY ARE CRYSTALLIZED. RELIANCE IN THIS REGARD WAS PLACED ON THE FOLLOWING JUDGMENTS OF HON'BLE HIGH COURTS INCL UDING HON'BLE JURISDICTIONAL HIGH COURT I)THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAU RASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. V. CIT (213 ITR 5 23) HELD THAT MERELY BECAUSE AN EXPENSE RELATED TO A TRANSAC TION OF AN EARLIER YEAR DOES NOT BECOME A LIABILITY PAYABLE IN THE EARLIER YEAR UNLESS IT CAN BE SAID THAT THE LIABILITY WAS D ETERMINED AND CRYSTALLIZED IN THE YEAR IN QUESTION. II) THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF ADDL. CIT V. FARASOL LTD.(163 ITR 364) HELD THAT THE ASSESSEE EN TERED INTO A CONTRACT WITH OIL AND NATURAL GAS COMMISSION IN FEB RUARY, 1964. THE OPERATION STARTED IN DECEMBER 1964. THE A SSESSEE CLAIMED DEDUCTION OF EXPENSES FOR THE PERIOD 10-9-1 964 TO 31- 12-1965 AFTER THE COMMUNICATION OF APPROVAL IN THE ASSESSMENT YEAR 1966-67. THE HON'BLE HIGH COURT HELD THAT THE EXPENDITURE INCURRED IN EARLIER YEARS CAN BE ALLOWED AS A DEDUC TION IN THE ASSESSMENT YEAR 1966-67 AS IT CRYSTALLIZED ONLY WHE N APPROVAL WAS RECEIVED. IV)THE HON'BLE HIGH COURT OF GUJRAT IN THE CASE OF COMMISSIONER OF INCOME-TAX STATE FOREST DEVELOPMENT (163 TAXMAN 547) WHEREIN THE HON'BLE HIGH COURT WHILE DECIDING A SIM ILAR ISSUE HELD THAT ROYALTY IS TO BE ALLOWED ON ACTUAL PAYMEN T AND SUCH DEDUCTION WOULD BE ALLOWED ONLY AFTER ITS PAYMENT. IN THE PRESENT MATTER, THOUGH THE LIABILITY TO PAY THE ROY ALTY WAS IN I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 25 RELATION TO THE ASSESSMENT YEARS 1981-82 AND 1982-8 3, THE LIABILITY TO PAY THE ROYALTY WAS FINALISED ON 2-1-1 985, AND, THEREFORE, SECTION 43B OF THE ACT WOULD APPLY WITH FULL FORCE IF THE ROYALTY IS PAID IN THE SAID ASSESSMENT YEAR. (V)THE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSI ONER OF INCOME-TAX V. AMRIT BANASPATI CO. LTD (59 ITR 388) WITH RESPECT TO PAYMENT OF DEARNESS ALLOWANCE WHEREIN TH E HON'BLE COURT HAS HELD THAT THE CLAIM TO DEDUCTION, THEREFO RE, WAS ONLY ADMISSIBLE IN THE YEAR WHEN THE LIABILITY UNDER THE AWARD WAS FINALLY DETERMINED. VI) SIMILAR FINDINGS HAVE ALSO BEEN GIVEN IN TH E FOLLOWING JUDGMENTS OF HON'BLE HIGH COURT: HON'BLE HIGH COURT OF DELHI IN THE CASE OF COM MISSIONER OF INCOME-TAX, NEW DELHI V. SHRI RAM PISTONS & RINGS L TD(174 TAXMAN 147) HON'BLE HIGH COURT OF DELHI IN THE CASE OF COM MISSIONER OF INCOME-TAX V. TRIVENI ENGG. & INDUSTRIES LTD. (196 TAXMAN 94) (E) THE UNDERSIGNED HAS GONE THROUGH THE WRITTEN SUBMISSIONS OF THE APPELLANT AND THE ABOVE CITED JU DGMENTS AND ON PERUSAL IT IS EVIDENT THAT THE EXPENSES CAN ONLY BE BOOKED WHEN THE SAME ARE KNOWN TO THE APPELLANT AND FOR THAT MATTER ITS CRYSTALLIZATION AND DETERMINATION OF EXP ENSES IS NECESSARY. THE KEY WORDS ARE 'DETERMINED' AND 'CRYS TALLIZED'. THE APPELLANT WAS CERTAIN OF THE EXPENSES TO BE PAI D ONLY WHEN IT WAS DECIDED/FINALISED BY THE COMMITTEE OF THE GO VERNMENT OF UTTAR PRADESH AFTER THE CLOSE OF THE EARLIER YEAR. THE CONTENTION OF THE APPELLANT IS SUPPORTED BY THE JUDGMENT OF TH E HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAURASHTRA CEMENT & CHEMICAL INDUSTRIES LTD. V. CIT (213 ITR 523) WHERE IT HAS BEEN CATEGORICALLY HELD THAT MERELY BECAUSE AN EXPE NSE RELATED TO A TRANSACTION OF AN EARLIER YEAR DOES NOT BECOME A LIABILITY PAYABLE IN THE EARLIER YEAR UNLESS IT CAN BE SAID T HAT THE LIABILITY WAS DETERMINED AND CRYSTALLIZED IN THE YEAR IN QUES TION. (F)THE APPELLANTS CONTENTION IS DULY SUPPORTED BY J UDGMENTS OF HON'BLE HIGH COURTS AS OUTLINED IN PARA 5.7(D) ABOV E AND THE FACT THAT THE AMOUNT IN QUESTION WERE DETERMINED AN D CRYSTALLIZED ONLY AFTER THE CLOSE OF AN EARLIER FY. THE SAID AMOUNT CRYSTALLIZED IN F.Y. 2001-02. THUS, THE ACTI ON OF THE AO I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 26 IN HOLDING AND DISALLOWING THESE EXPENSES AS PRIOR PERIOD EXPENSES CANNOT BE UPHELD. (G)FURTHER, IT WAS ALSO CONTENDED THAT THE APPELLAN T IS A CORPORATION WHICH IS AN AOP(TRUST) AND THE TAX RATE S FOR THE APPELLANT REMAIN CONSTANT FOR THIS ASSESSMENT YEAR AND EARLIER/SUBSEQUENT AY'S. ACCORDINGLY, THE APPELLANT 'S CLAIM OF THESE ITEMS IN A SUBSEQUENT ASSESSMENT YEAR DUE TO CRYSTALLIZATION CAN BY NO MEANS REPRESENT A DEVICE TO EVADE OR MINIMIZE CORRESPONDING TAX LIABILITY. RELIANCE IN T HIS REGARD IS PLACED ON THE JUDGMENT OF THE HON'BLE DELHI HIGH CO URT IN THE CASE OF CIT VS. VISHNU INDUSTRIAL GASES ITR NO. 229 /1988) WHEREIN THE HON'BLE DELHI HIGH COURT FOLLOWED THE R ULING OF THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF NAGRI MILL S CO. LTD. [1958] 33 ITR 681. RELEVANT EXTRACTS OF THE JUDGMENT IN THE CASE OF NA GRI MILLS CO. LTD (SUPRA) ARE REPRODUCED BELOW: 'WE HAVE OFTEN WONDERED WHY THE INCOME TAX AUTHORITIES, IN A MATTER SUCH AS THIS WHERE THE DED UCTION IS OBVIOUSLY A PERMISSIBLE DEDUCTION UNDER THE INCO ME TAX ACT, RAISE DISPUTES AS TO THE YEAR IN WHICH THE DED UCTION SHOULD BE ALLOWED. THE QUESTION AS TO THE YEAR IN W HICH A DEDUCTION IS ALLOWABLE MAY BE MATERIAL WHEN THE RAT E OF TAX-CHARGEABLE ON THE ASSESSEE IN TWO DIFFERENT YEA RS IS DIFFERENT; BUT IN THE CASE OF INCOME OF A COMPANY, TAX IS ATTRACTED AT A UNIFORM RATE, AND WHETHER THE DEDUCT ION IN RESPECT OF BONUS WAS GRANTED IN THE ASSESSMENT YEAR 1952-53 OR IN THE ASSESSMENT YEAR CORRESPONDING TO THE ACCOUNTING YEAR 1952. THAT IS IN THE ASSESSMENT YEA R 1953-54, SHOULD BE A MATTER OF NO CONSEQUENCE TO TH E DEPARTMENT', AND ONE SHOULD HAVE THOUGHT THAT THE DEPARTMENT WOULD NOT FRITTER AWAY OUR ENERGIES IN FIGHTING MATTERS OF THIS KIND. BUT, OBVIOUSLY, JUDG ING FROM THE REFERENCES THAT COME UP TO US EVERY NOW AND THE N, THE DEPARTMENT APPEARS TO DELIGHT IN RAISING POINTS OF THIS CHARACTER WHICH DO NOT AFFECT THE TAXABILITY OF THE ASSESSEE OR THE TAX THAT THE DEPARTMENT IS LIKELY T O COLLECT FROM HIM WHETHER IN ONE YEAR OR THE OTHER.' (H) IN LIGHT OF THE WRITTEN SUBMISSIONS OF THE APPE LLANT AND JUDGMENTS CITED IT ; IS TO BE SEEN THAT THERE BEING NO CHANGE IN I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 27 RATE OF TAXES, THE AMOUNT INCURRED UNDER THE SAID H EAD HAS TO BE ALLOWED IN THE AY UNDER CONSIDERATION AS THE SAI D EXPENSES WERE DETERMINED AND CRYSTALLIZED DURING THE AY UNDE R CONSIDERATION. ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO UNDER THE HEAD PRIOR PERIOD EXPENSES IS HEREBY DELETED. THE SAID E XPENSES ARE ALLOWED FOR THE REASON THAT THESE EXPENSES WERE DET ERMINED AND CRYSTALLIZED ONLY DURING THE AY UNDER CONSIDERA TION. GROUND OF APPEAL NO. 8 IS ALLOWED. FINDING NO INFIRMITY IN THE ORDER OF LEARNED CIT(A) , THESE GROUNDS OF APPEAL OF THE REVENUE ARE ALSO DISMISSED . 5.1 FOLLOWING THE ABOVE FINDINGS OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF, WE DISMISS GROUND NO. 4 IN ALL APP EALS. 5. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF TH E TRIBUNAL IN ASSESSEES OWN CASE, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF LEARNED CIT(A) AND DISMISS THE GROUNDS OF APPEAL TA KEN BY THE REVENUE. 5. IT IS THUS SEEN THAT BY VIRTUE OF THE AFORESAID T RIBUNAL ORDER DATED 26/07/2019, PASSED IN I.T.A. NO.649/LKW/2019, FOR AS SESSMENT YEAR 2015-16, IN THE ASSESSEES OWN CASE, THE POSITION WITH REGARD T O THE ACTIVITIES OF THE ASSESSEE FALLING WITHIN 'PRESERVATION OF ENVIRONMENT (INCLUD ING WATERSHEDS, FOREST AND WILDLIFE)' AS INSERTED IN SECTION 2(15) OF THE ACT W.E.F. 01.04.2009, HAS DULY BEEN TAKEN INTO CONSIDERATION AND THE MATTER HAS BEEN DE CIDED IN FAVOUR OF THE ASSESSEE ON DUE APPRECIATION OF THE SAME. VIDE ORD ER DATED 16/01/2009, THE TRIBUNAL HAD ORIGINALLY ALLOWED REGISTRATION TO THE ASSESSEE. IN THE SAID ORDER DATED 16/01/2009, THE TRIBUNAL HELD THAT THE ACTIVITIES O F THE ASSESSEE PERTAINING TO REMOVAL AND DISPOSAL OF TREES WAS FOR THE PRESERVAT ION OF THE ENVIRONMENT. WHILE HOLDING SO, THE ASSESSING OFFICERS FINDING THAT TH E ACTIVITIES OF THE ASSESSEE DO NOT FALL WITHIN THE EXPRESSION 'PRESERVATION OF ENVIRON MENT (INCLUDING WATERSHEDS, FOREST AND WILDLIFE)' AS INSERTED IN SECTION 2(15) OF THE ACT W.E.F. 01.04.2009, WAS REVERSED. THE SAID ORDER DATED 16/01/2009, PASSED BY THE TRIBUNAL, WAS UPHELD BY ALLAHABAD HON'BLE HIGH COURT VIDE ORDER DATED 12 /05/2010 AND ULTIMATELY BY I.T.A. NO.574/LKW/2019 ASSESSMENT YEAR:2016-17 28 HON'BLE SUPREME COURT VIDE ORDER DATED 12/05/2011, AS SUBMITTED ON BEHALF OF THE ASSESSEE AND NOT REBUTTED BY THE DEPARTMENT. IT WAS IN KEEPING WITH THESE ORDERS THAT THE CIT(A) HAS HELD THE ACTIVITIES OF T HE ASSESSEE TO BE FALLING WITHIN THE EXPRESSION 'PRESERVATION OF ENVIRONMENT (INCLUD ING WATERSHEDS, FOREST AND WILDLIFE)' AS INSERTED IN SECTION 2(15) OF THE ACT W.E.F. 01.04.2009. IT IS ALSO NOTEWORTHY THAT VIDE ORDER DATED 13/12/2018, THE TR IBUNAL DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE, FOR ASSESSMENT YEAR 2002-03 TO 2004-05, 2007-08 & 2008- 2009. 6. IN VIEW OF THE ABOVE, THERE IS NO MERIT FOUND IN THE GRIEVANCE OF THE DEPARTMENT WHEREIN IT HAS BEEN CONTENDED THAT THE A CTIVITIES OF THE ASSESSEE DO NOT FALL WITHIN THE EXPRESSION 'PRESERVATION OF ENV IRONMENT (INCLUDING WATERSHEDS, FOREST AND WILDLIFE)' AS INSERTED IN SECTION 2(15) OF THE ACT W.E.F. 01.04.2009; AND THAT THE ACTIVITIES OF THE ASSESSEE ARE COMMERCIAL AND IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, HIT BY THE PROVISIONS OF THE FIRST PROVISO TO SECTION 2(15) OF THE I.T. ACT. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS D ISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 22/09/2021) SD/. SD/. ( A. D. JAIN ) ( T. S. KAPOOR ) VICE PRESIDENT ACCOUNTANT MEMBER DATED:22/09/2021 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSISTANT REGISTRAR