COMMISSIONER OF INCOME TAX SHIMLA vs. H.P.STATE POLLUTION CONTROL BOARD

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA ITA No.2 of 2010 Date of decision: 24.10.2017 Commissioner of Income Tax ..Appellant Versus HP State Environment Protection & Pollution Control Board … Respondents Coram: The Hon’ble Mr. Justice Sanjay Karol, Acting Chief Justice The Hon’ble Mr. Justice Ajay Mohan Goel, Judge Whether approved for reporting? For the appellant: Mr.Vinay Kuthiala, Senior Advocate, with Mr.Diwan Singh Negi, Advocate. For the respondent: Mr.Ajay Vaidya, Advocate. ________________________________________________________________________________ Sanjay Karol, Acting Chief Justice (oral) Appeal came to be admitted on the following substantial questions of law: “1. Whether the assessee, being a Govt. Board carrying out purely regulatory functions on behalf of the State Govt., can be said to be an institution set up for charitable purposes as defined in Section 2(15) of the Income Tax Act? 2. Whether the Tribunal was right in holding that the registration granted to the assessee under Section 12AA could not be cancelled, even though the assessee was not carrying out its activities in accordance with the objections for which it was set up? 2 3. Whether the assessee could be said to be engaged in charitable activity especially since it was accumulating huge profits and surplus funds instead of utilizing the same for fulfilling its objects?” 2. The matter was argued extensively and during the course of submissions, our attention was invited to the following decisions rendered by this Court: (i) CWP No.2066/2009, decided on 7.12.2008, titled as M/s Himachal Pradesh State Environment Protection and Pollution Control Board vs. Chief Commissioner of Income Tax. (ii) ITA No.19 of 2012, decided on 25.10.2016, titled as Commissioner of Income Tax, Shimla vs. Himachal Pradesh Road Transport Corporation. 3. Primarily, the issue pertains to the cancellation of exemption granted in favour of the assessee by the appropriate authority under the provisions of Section 12AA of the Income Tax Act, 1961 (for short, the ‘Act’). 4. According to the Revenue, the assessee was performing functions which were regulatory in nature; not engaged in the advancement of objects of general public utility; not performing its duties, in accordance with the objects for which it was established; was only carrying on monitoring and supervising activity; receiving grant from the 3 Government and generating income in the form of consent fee etc. Hence, activities of the Board could not be termed to be charitable in nature. 5. One finds the Tribunal to have taken a view contrary to the view taken by the Commissioner of Income Tax. What weighed with the Tribunal was the definition of charitable purpose stipulated under Section 2(15) of the Act. 6. Significantly we find the factual matrix not to have been considered or discussed by the Tribunal/authorities below. Perusal of the order passed by the Appellate Authority demonstrates that there is no reasoning assigned as to on what basis it arrived at the