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2019 (10) TMI 150 - HC - Income TaxExemption u/s 11 - Registration u/s 12AA denied - charitable activities u/s 2(15) - activity of preservation of environment by providing pollution control treatment for disposal of the liquid and solid industrial waste - HELD THAT - Just because the members of the assessee company, in the case on hand, are being benefited and their statutory liability is being discharged by the assessee company, by itself, would not be sufficient to hold that the company could not be said to have been set up for charitable purpose. Merely because a fee or some other consideration is collected or received by an Institution, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business or trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of the trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profit, but the object is to promote, aid, foster and engage in the area of Environment Protection, abatement of pollution of various kinds such as water, air, solid, noise, vehicular etc. without limiting its scope. In short, the main object appears to be preservation and protection of environment. The Latin word utilis means useful, beneficial, equitable, available . Chambers Dictionary of English defines utility as useful power to satisfy the wants of people in general a useful thing, public utility public service or a company providing such public service. According to New Oxford Dictionary of English (1998), as a Noun, utility is the status of being useful, profitable or beneficial. The words public utility or general public utility are not capable of a precise meaning. The question whether service is public utility or not has to be discharged in the context of different situations but it is, as considered infra, well settled that public utility means public purpose depending upon the context in which it is used in the statute or the Rules. Indeed, in some decisions, public utility is considered very similar to one for public purpose The CIT (A) and the Income Tax Appellate Tribunal have concurrently held that taking an overall view, the dominant objects of the assessee are charitable as the dominant object is not only preservation of environment, but one of general public utility and, therefore, the assessee is entitled to seek exemption under Section 11 of the Act. The Tribunal is the last fact finding body. As a principle, this Court should not disturb the findings of fact in an appeal under Section 260A of the Act unless the findings of fact are perverse.- Decided in favour of the assessee and against the revenue.
Issues Involved:
1. Whether the activities of the assessee fall within the ambit of "Preservation of Environment" as envisaged under section 2(15) of the Income Tax Act, 1961. 2. Whether the activities carried out by the assessee fall within the ambit of the proviso to section 2(15) of the Income Tax Act, 1961. 3. Whether the benefit of exemptions under Sections 11 and 12 of the Income Tax Act, 1961, is justified. Issue-wise Detailed Analysis: 1. Whether the activities of the assessee fall within the ambit of "Preservation of Environment" as envisaged under section 2(15) of the Income Tax Act, 1961: The assessee company was engaged in activities related to pollution control treatment for the disposal of liquid and solid industrial waste, which it argued fell within the scope of "preservation of environment." The Assessing Officer (AO) initially rejected this claim, stating that the activities of the company were commercial in nature and did not qualify as charitable under Section 2(15) of the Act. The AO noted that the main object of the company, as per its Memorandum of Association, was commercial and profit-oriented. However, the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT) both held that the company's activities were indeed charitable, emphasizing that the primary purpose was environmental protection, which falls under the definition of charitable purposes in Section 2(15) of the Act. The ITAT further noted that the company's surplus was not distributed to its members, reinforcing its charitable nature. 2. Whether the activities carried out by the assessee fall within the ambit of the proviso to section 2(15) of the Income Tax Act, 1961: The proviso to Section 2(15) excludes activities that involve trade, commerce, or business from being considered charitable if they generate income exceeding a specified threshold. The AO argued that the company's activities were commercial and profit-making, thus falling within this proviso. However, the CIT(A) and ITAT disagreed, stating that the company's primary purpose was environmental preservation, not profit-making. They emphasized that any surplus generated was incidental and not the main objective. The ITAT also referenced CBDT Circular No. 11/2008, which clarifies that genuine charitable organizations will not be affected by the proviso to Section 2(15). 3. Whether the benefit of exemptions under Sections 11 and 12 of the Income Tax Act, 1961, is justified: The AO denied the company's claim for exemption under Sections 11 and 12, arguing that the company's activities were commercial and did not qualify as charitable. However, the CIT(A) and ITAT held that the company's activities were charitable and thus eligible for exemption. They noted that the company was registered under Section 12AA and had been granted approval under Section 80G(5), which indicated its charitable status. The ITAT also emphasized that the company's activities were in line with its charitable objectives and that any surplus generated was incidental and used for furthering its charitable purposes. Conclusion: The High Court upheld the decisions of the CIT(A) and ITAT, affirming that the company's activities fell within the ambit of "preservation of environment" under Section 2(15) and did not fall within the proviso to Section 2(15). The Court also upheld the company's eligibility for exemptions under Sections 11 and 12, emphasizing that the company's primary purpose was charitable and any surplus generated was incidental and used for furthering its charitable objectives. The substantial questions of law were answered in favor of the assessee and against the revenue.
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