2020 (10) TMI 516 - HC - Income Tax

Exemption u/s 11 - charitable activity u/s 2(15) - As per AO Assessee was engaged in the activities which are not in the nature of charity but were of business as per proviso 1 and 2 of Section 2(15) r/w Section 13(8) - assessee is a company registered under section 25 of the Companies Act, 1996 and is inter alia engaged in the activity of management of liquid and solid wastes in Naroda Industrial Area and thereby earned profit - HELD THAT - No error in the impugned orders passed by the CIT(A) as well as Income-tax Appellate Tribunal and have concurrently held that taking on overall view, the dominant objects of the assessee are charitable in nature and 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. Following the judgment of the Division Bench of this Court 2019 (10) TMI 150 - GUJARAT HIGH COURT in the case of respondent -assessee for three assessment years and Division Bench has considered the order passed in relation to the AY 2009-10 as lead matter, we do not find any case to take a contrary view then the view taken by the CIT(A) as well as Income-tax Appellate Tribunal. We do not find that this is a fit case to interfere in appeal under section 260-A of the Act as the findings of fact are not perverse. - Decided in favour of assessee.

Summary

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. If not, 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 Tribunal was correct in deleting the additions relying on the decision of the Coordinate Bench of Ahmedabad in ITA No. 546/AHD/2013.

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 respondent-assessee is a trust engaged in the management of liquid and solid wastes in Naroda Industrial Area. The Assessing Officer (AO) determined the total income at ?7,59,26,949/-, concluding that the respondent-assessee was engaged in business activities rather than charitable activities as per proviso 1 and 2 of Section 2(15) r/w Section 13(8) of the Act. The AO denied exemptions under sections 11 and 12. However, the CIT(A) and the Tribunal concluded that the respondent-assessee was engaged in the preservation of the environment, thereby carrying out charitable activities. This conclusion was based on previous judgments for the assessment years 2010-11 to 2013-14 and the Tribunal's decision in ITA No. 546/AHD/2013.

2. If not, 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 Revenue contended that the Tribunal and CIT(A) erred in concluding that the respondent-assessee's activities were charitable. They argued that the activities were in the nature of business. However, the High Court referred to its previous judgment in the case of Commissioner of Income-tax v. Naroda Enviro Projects Ltd., where it was held that the assessee's activities amounted to the preservation of the environment, thus falling within the definition of charitable purposes under Section 2(15) of the Act. The court emphasized that the intention of the legislature in a taxation statute should be gathered from the plain language of the provisions.

3. Whether the Tribunal was correct in deleting the additions relying on the decision of the Coordinate Bench of Ahmedabad in ITA No. 546/AHD/2013:
The High Court noted that the Tribunal and CIT(A) had relied on previous decisions, including the Tribunal's decision in ITA No. 546/AHD/2013, which had become final. The court reiterated that the dominant object of the assessee was charitable in nature, specifically the preservation of the environment and general public utility. The court also referred to various judgments, including the Delhi High Court's decision in the case of Institute of Chartered Accountants of India v. Director General of Income-tax (Exemptions), which supported the view that incidental activities generating income do not alter the charitable nature of the institution.

Conclusion:
The High Court dismissed the Revenue's appeal, affirming the conclusions of the CIT(A) and the Tribunal. The court held that the activities of the respondent-assessee were charitable, focusing on the preservation of the environment and general public utility. The substantial questions of law were answered in favor of the assessee and against the Revenue, with no costs awarded.