2015 (1) TMI 1417 - AT - Income Tax

Benefit of Section 11 & 12 - charitable activity as per Section 2(15) - HELD THAT - 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 AO is not applicable in the instant case. Accordingly AO was not justified to conclude that assessee is not doing any charitable activity. With regards to AO s contention that assessee 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 predominant object of activity. CIT(A) was justified in holding that assessee is doing charitable activity as per Section 2(15) benefit of Section 11 & 12 of the Income-tax Act is available to it. CIT(A) was justified in directing AO to treat the activity of assessee company as charitable and further rightly directed to delete the addition. This reasoned finding of CIT(A) needs no interference from our side. - Decided against revenue.

Summary

Issues:
1. Whether the activities of the Assessee should be treated as charitable, leading to the deletion of a specific addition.
2. Whether the Assessee qualifies for the benefits under Section 11 & 12 of the Income Tax Act.

Analysis:

Issue 1:
The Appellate Tribunal ITAT Ahmedabad heard an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals). The Revenue contested the direction to treat the Assessee's activities as charitable, resulting in the deletion of an addition of Rs. 2,53,21,438. The Assessee, a company engaged in pollution control treatment, was accused by the Assessing Officer of not conducting charitable activities as per Section 2(15) of the Income-tax Act. The Assessing Officer argued that the Assessee was operating for profit under the guise of charity. The Assessing Officer concluded that the Assessee did not qualify for exemptions under Section 11 & 12 of the Income-tax Act due to its profit-making nature. The First Appellate Authority granted relief to the Assessee, leading to the appeal.

Issue 2:
Upon reviewing the submissions and evidence, the Tribunal found that the Assessee's primary objective was environmental protection and pollution abatement, aligning with the requirements of Section 2(15) of the Income-tax Act. The Tribunal noted that the Assessee's activities were in compliance with the directions of the High Court and various regulatory bodies. The Assessee's incorporation under Section 25 of the Companies Act and the relevant certifications supported its charitable nature. The Tribunal emphasized that the Assessee's surplus generation was not for private profit but for environmental preservation. The Tribunal upheld the First Appellate Authority's decision, stating that the Assessee's activities qualified as charitable under Section 2(15), making it eligible for benefits under Section 11 & 12 of the Income-tax Act. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition of Rs. 2,53,21,438.

In conclusion, the Tribunal's judgment favored the Assessee, recognizing its charitable activities in pollution control and environmental preservation, thereby upholding the benefits under relevant sections of the Income-tax Act.