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TMI Blog2019 (4) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of trade, business or commercial activities and to make profit, and therefore, there is no exclusive usage of income or profit for the charitable purpose as defined in section 2(15) and therefore, the assessee is not entitled for benefit under section 11. CIT(A) has considered both the issues in detail and observed that the activities of the assessee trust clearly falls within the ambit of the clause of preservation of environment and the assessee is eligible for all the benefits under sections 11 and 12 and all the capital expenditure incurred by the assessee has to be considered as application of income. By holding so, CIT(A) has also treated ECP contribution as part of application of income, and accordingly disallowance to this extent also deleted. As decided in assessee's own case Asstt.Year 2010-11 the assessee and conclude that it was indeed not a fit case for invoking proviso to section 2(15) merely because the assessee was charging the fee for the services rendered to the industrial unit. - Decided against revenue. - ITA No.171 And 174/Ahd/2018 - - - Dated:- 10-4-2019 - Shri Rajpal Yadav, Judicial Member And Shri Amarjit Singh, Accountant Member Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in the form of fees, cess and charges. Therefore, the claim of the assessee was hit by provisions of section 2(15) of the Act and the assessee was not eligible for the benefit under section 11 of the Act. Similarly, assessee has claimed expenditure of ₹ 90,45,483/- towards ECP contribution as revenue expenditure. However, the ld.AO denied the claim of the assessee and treated the same to be capital expenditure, and added to the income of the assessee. However, in the appeal before the ld.First Appellate Authority, both the disallowances were deleted. Now the Revenue is before the Tribunal. 5. Before us, both the parties supported the respective orders of the Revenue authorities. The ld.cousnel for the assessee further relied upon the order of the Tribunal passed in the assessee own case for the Asstt.Year 2010-11, wherein Tribunal has allowed similar claim of the assessee. He placed on record a copy of the order of the Tribunal passed in ITA No.1704/Ahd/2014 dated 28.11.2017 in the case of the assessee. 6. We have considered rival submissions and gone through the record carefully, and also order of the Tribunal passed in the assessee s own case on similar issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... water treatment services and effluent services to all members having factories in and around Nandesari Industrial area. In the course of assessment proceedings, the Assessing Officer noted that the water treatment and effluent services provided to the trustees situated in Nandesari were provided in consideration of fees or cess and that the receipts, in respect of the same crossed the limit of ₹ 25 lakhs. It was in this backdrop the Assessing Officer required the assessee to show cause as to why he should not be treated as assessee being covered by fist proviso to section 2(15) and accordingly declined the status of charitable institution. Upon considering the submissions made by the Assessing Officer, the Assessing Officer was of the view that the assessee is rendering services in relation to trade, commerce or business in consideration for a fees that the receipts of the assessee from such services exceeds the threshold limit of ₹ 35 lakhs and accordingly in the light of proviso to section 2(15) read with section 13(8) notwithstanding the registration granted to the assessee as charitable institution the benefit of section 11 12 are to be declined to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty especially after the insertion of proviso to section 2(15) with effect from 1.4.2009. The assessee relied on the judgment of ICAI Accounting Research Foundation v. DGIT (Exemptions) [2009] 183 Taxman 462 (Delhi) but the facts of that case are different. The ratio laid down by the Hon'ble Delhi High Court in the aforesaid case is not applicable in the facts and circumstances of the present case. 3.3.2. The activities of the assessee are aimed at earning profit as it is carrying on activity in the nature of trade, commerce or business. Further, profit making by the assessee is not mere incidental or byproduct of the activity of the assessee. The main pre-dominant purpose of assessee is making profit, it is real object of the assessee and also there is no spending of the income exclusively for the purpose of charitable activities and profits of the assessee not used for charitable purpose under the terms of the object and there is no obligation on the part of the assessee to spend it on 'charitable purposes' only. The activities can be considered as trade, business or commercial activity because providing water treatment services and effluent services to all member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Accordingly, Assessing Officer has not disputed the fact that assessee is doing basic activity of treatment of various pollutants generated by industrial units. It is also not disputed by Assessing Officer that surplus generated 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 surplus for private profit of the settler or any other person. In this situation, Assessing Officer was not justified in holding that assessee was generating surplus or profit making was the predominant object of assessee. Assessee company was incorporated with a sole object to comply with directions of Hon'ble High Court of Gujarat in a PIL for industries of Naroda GIDC for establishment in running of Common Effluent Treatment Plant and its storage and disposal facility at Odhav, Ahmedabad. The project was setup under the directions and guidelines of Hon'ble High Court of Gujarat and various 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of ₹ 2,53,21,438. This reasoned finding of CIT(A) needs no interference from our side. We uphold the same. 6. I have also noted that on somewhat similar material facts, in case of a regulatory body i.e. Himachal Pradesh Environment Protection Pollution Control Board vs. CIT, 9 ITR (Trib) 604, Chandigarh B Bench of the Tribunal held as follows:- 8. We have noted that the learned Commissioner has proceeded on the assumption that the scope and connotations of regulatory function and charitable purposes under the Income-tax Act are mutually exclusive. While holding that the assessee was not engaged in an activity for charitable purposes, the learned Commissioner has held that since the assessee was engaged in a regulatory function, it could not be said that the assessee was engaged in an activity which could be said to be for charitable purposes. We must, therefore, consider whether or not merely because an assessee is engaged in a regulatory activity, could it be said that the assessee is not involved in activity for charitable purposes. 9. We are unable to see any conflict in an assessee being a regulatory body and its pursuing an object o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulatory body, which is decisive to hold whether or not the proviso to section 15 are satisfied on the nature of activities which are carried out govern that. There is no dispute, that the nature of activities is exclusively the same as carried out by the regulatory body. The limited issue before me is whether in such a situation the proviso to section 2(15) will come into play or not. I, therefore, see no reasons to come to a different conclusion in the case of this assessee just because it is not a government or regulatory body because of the fact which are material. The question before me is pari matria. 8. As regards the second point by the ld. Departmental Representative, once again it is important to bear in mind that undisputedly the assessee trust before me is having common cause and it is not even the case of the Assessing Officer that it involves any commercial venture. The limited objection of the Assessing Officer which has been upheld by the ld. CIT(A) is that proviso to section 2(15) is hit in the present case. That aspect of the matter, as I have noted earlier, has been decided in favour of the assessee by the two division bench decisions of this Tribunal. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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