COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH vs. M/S HARYANA STATE POLLUTION CONTROL BOARD, C-II, SECTOR 6, PANCHKULA PAN: AAAJH0446F

The appellant-Revenue has filed the instant appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 04.09.2016 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Division Bench, Chandigarh (in short, 'the Tribunal') in ITA No.668/CHD/2016 for the assessment year 2012-13, claiming the following substantial questions of law:- “(i) Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in upholding the order of CIT(A) in deleting the additions made by the AO simply on the ground that exemption certificate u/s 10(23C)(iv) had been granted to the assessee? (ii) Whether on the facts and circumstances of the case the Gurbax Singh 2018.07.04 11:43

A few facts necessary for adjudication of the controversy involved as narrated in the appeal may be noticed. The assessee- respondent filed return of income claiming exemption under Section 10(23C)(iv) of the Act. The Assessing Officer (AO) framed assessment by denying the exemption under Section 10(23C)(iv) of the Act as it was not approved by the prescribed authority. Credit for capital expenditure which was allowable to an exempted entity was also denied. The AO made the additions of excess of income over expenditure of `15,15,89,376/- apart from additions of capital expenditure of `1,52,03,549/- (Annexure A-1). Against the Nil returned income, the total income was assessed at ` 16,67,92,925/-. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), Panchkula, [in short, 'the CIT(A)], who vide order dated 22.03.2016 (Annexure A-2), allowed the assessee's claim for exemption under Section 10(23C)(iv) of the Act and the capital expenditure by treating the same as application of income. The CIT(A) allowed the relief on the ground that the Commissioner of Income Tax (Exemptions)'s order dated 01.03.2016 granting exemption under Section 10(23C)(iv) of the Act for the assessment years 2006-07 to 2011-12 was also applicable

We have heard learned Sr. Standing Counsel for the appellant-Revenue.

Admittedly, the assessee filed return of income declaring Nil income. During the year under consideration, the assessee was having income of ` 15,15,89,376/-, but after claiming exemption under Section 10(23C)(iv) of the Act, the assessee showed Nil income in the return of income. The CIT(A) noticed that CIT(Exemption) vide order dated 1.3.2016 had granted exemption under Section 10(23C)(iv) of the Act to the assessee with effect from assessment years 2006-07 to 2011-12. It was further observed that after considering the explanation of the assessee in the light of the Circular No.7/2010, once the approval had been granted under Section 10(23C)(iv) of the Act, that would be valid until withdrawn. The relevant extract from Circular No. 7/2010 dated 27.10.2010 reads as under:- “Approvals under sub-clauses (vi) and (via) of Section 10(23C) are governed by the procedure contained in rule

When the matter was taken by the revenue in appeal, it was recorded by the Tribunal that in the present case, capital expenditure had not been charged to Profit and Loss Account. The third proviso to Section 10(23C) of the Act provides for “xxxx....applies its income or accumulates it for application, wholly or exclusively to the objects for which it is established....xxxxx”. Thus, the amount was spent by the assessee towards the object. It was further recorded by the Tribunal, after examining the matter that the amounts spent by the assessee were clearly the application of its income in nature which had been spent to achieve the objects of the assessee. The assessee had been granted approval under Section 10(23C)(iv) of the Act and thus, there was no question of ITA No.229 of 2017 -5- ---- disallowing of any amount of this nature.

Adverting to the judgment relied upon by learned Sr. Standing counsel for the appellant-Revenue in 'Commissioner of Income Tax vs. Red Rose School' (2007) 212 CTR 394 (All), it may be 251 (P&H). In view of the findings of fact recorded by the CIT(A) and the Tribunal in the present case, as noticed hereinabove, the revenue cannot derive any benefit from these pronouncements.

Learned Senior Standing Counsel for the appellant-Revenue has not been able to point out any error in the order passed by the Tribunal. He has also not been able to produce any material to substantiate the claim made in the appeal. Thus, no substantial question of law arises and the appeal stands dismissed. (AJAY KUMAR MITTAL) JUDGE July 14, 2017 (AVNEESH JHINGAN) 'gs'