SRUSHTI CONSERVATION FOUNDATION,PUNE vs. COMMISSIONER OF INCOME TAX (EXEMPTION), PUNE

The assessee was asked to file compliance to the above show cause notice(s) on 08.05.2025 and 09.07.2025 respectively. In response thereto, the assessee furnished its compliance on 08.07.2025 submitting as under : “We understand the observation regarding our role as an implementing agency and wish to clarify that all our projects whether grant-funded, CSR- supported, consultancy-based, or self-financed are carried out strictly in line with our charitable objectives. Our activities fall within the meaning of "charitable purpose under Section 2(15) of the Income-tax Act"

The above reply of the assessee was not found to be acceptable by the Ld. CIT(E). The Ld. CIT(E) having dissatisfied about the charitable nature and the genuineness of the activities of the assessee trust, rejected the assessee’s application treating the same as not maintainable without going into the merits of the case and without drawing any adverse interference against the assessee by observing as under : “7. However, the claim of assessee as a non-profit organization (NPO) is not substantiated by its operational and financial activities. While the stated objectives suggest charitable intent, the contractual agreements and financial transactions indicate a structured commercial enterprise engaged in profit-oriented activities. The implementing agreement (vide agreement of contract dated 21/01/2021) entered into by assessee with other organisation explicitly classify the organization as a "Service provider or Contractor". The contractual agreements with the other party to the agreement clearly establishes that the organization is operating on a profit- oriented model. A genuine non-profit organization normally function on a cost-recovery or subsidized service model rather than engaging in profit- sharing arrangements. On analysis of profit & loss accounts, it is seen that for F Y ending at 31st March 2023, the gross profit is Rs 16.34 lakhs which is 18% & for the FY ending at 31st March 2024, the gross profit is Rs 45.86 lakhs which is 31%. thus, from the above it is clear that the activity of the trust is that of a implementing agency in form of service provider or contractor. 7.1 On verification of reserves & surplus it is seen that year wise surplus generated is as follows: FY Reserve & surplus in Rs (Lakhs) 2020-21 1.67 Lakhs 2021-22 2.43 Lakhs 2022-23 17.76 Lakhs 2023-24 59.58 Lakhs It can be observed from the above table that the reserves/ surplus are increasing every year & these are not utilized by the assessee for its objects. Thus, from above it is clear that assessee trust is engaged in commercial activity with profiteering motive.

Aggrieved, the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.

The Ld. AR submitted that the assessee has already been granted registration u/s 12A of the Act (pages 51 to 54 of the paper book refers). He submitted that it is only at the time of application of renewal of regular registration in Form 10AB, the Ld. CIT(E) has doubted the charitable nature of the assessee trust. He submitted that the activities carried out by the assessee is per se a charitable activity and clearly falls within under the category of “preservation of environment (including watershed, forest and wild life)” u/s 2(15) of the Act. Further, to demonstrate the activities carried out by the assessee trust, the Ld. AR referred to the web page of the assessee trust containing the scope of work carried out by the trust.

Drawing support from the explanatory memorandum to Finance Bill, 2009, he submitted that the assessee’s activities i.e. preservation of environment are of charitable nature and the same are not hit by the proviso to section 2(15) of the Act. He drew our attention to the following para of the explanatory memorandum to the Finance Bill, 2009. “For the purposes of the Income-tax Act, "charitable purpose" has been defined in section 2(15) of the income-tax Act to include (a) relief of the poor. (b) education, (c) medical relief and, (d) the advancement of any other object of general public utility. However, the 'advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. It is now proposed to amend clause 15 of section 2 so as to separately list the preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest so that they would be excluded from the applicability of the aforesaid conditions which are applicable to the "advancement of any other object of general public utility”.

Further, referring to pages 62 to 248 of the paper book, the Ld. AR submitted that the detailed submissions were made before the Ld. CIT(E) on objectives and activities of the trust, however, the Ld. CIT(E) has not considered the same while passing the impugned order.

Lastly, relying on the decision of the Ahmedabad Bench of the Tribunal in the case of ITO (Exemptions) Vs. Gujarat Environment Service Society in and 2520/Ahd/2015 for AYs 2010-11 and 2011- 12, order dated 25.10.2017, the Ld. AR submitted that under the similar set of facts as that of the assessee in the present case, the Tribunal has dismissed the appeal of the Revenue holding the activities carried out by the assessee to be charitable in nature falling within the ambit of “preservation of environment” and not under the “advancement of any other object of general public utility”.

The Ld. DR relied upon the order of the Ld. CIT(E).

We have heard the Ld. Representatives of the parties and perused the order of the Ld. CIT(E) and paper book filed by the Ld. AR on behalf of the assessee as well as judicial precedents relied upon by the Ld. AR. The facts of the case are not disputed. The assessee is a section 8 not for profit company formed with the primary objective of promoting research based conservation of biodiversity and ecosystems. Its work focuses on habitat restoration, climate change mitigation and adaptation, agro-biodiversity, and environmental education, aimed at supporting ecologically sustainable development. It closely works with Government agencies, academic and research institutions, corporates, and civil society groups to address critical environmental issues. From the FY 2022 to 2025, the assessee has undertaken implementation of various environments based projects and additionally going to work towards implementation of projects that have been approved for FY 2025-26, the details of which along with the supporting documents were duly submitted before the Ld. CIT(E) vide submissions dated 8th April, 2025 placed on pages 246 and 247 of the paper book. The assessee was granted provisional registration for the period from AYs 2021-22 to 2023-24 on 27.05.2021. The assessee’s application for regular registration filed on 29.01.2025 has been rejected by the Ld. CIT(E) for the reasons reproduced in the preceding paragraphs. We find force in the arguments advanced by the Ld. AR that the activities of the assessee trust fall within the ambit of “preservation of environment” which is per se charitable in nature and it is outside the scope of 1st proviso to section 2(15) of the Act which is applicable in the case of those assessee’s who fall within the category of “advancement of any other object of general public utility”. The assessee has duly demonstrated the charitable nature of its activity as “preservation of environment” by the web page of the assessee trust as well as detailed submissions on objectives and activities of the trust which were filed before the Ld. CIT(E) (pages 62 to 248 of the paper book refers). Undisputedly, the assessee was earlier granted registration u/s 12A of the Act on 30.09.2022, a copy of which is placed on record on pages 51 to 54 of the paper book. However, at the time of reviewing the application for renewal of regular registration in Form 10B filed by the assessee on 29.01.2025, the Ld. CIT(E) has rejected the same not being satisfied by the charitable nature and genuineness of the activities of the assessee trust for the reasons stated in para 7 (reproduced above) of his impugned order. We find such approach of the Ld. CIT(E) not justifiable specifically considering the fact that the assessee in the past was granted registration u/s 12A and there is no change in the facts and circumstances of the case. We also find that in the case of Gujarat Environment Service Society (supra) under the similar set of facts, the Tribunal has decided the impugned issue in favour of the assessee and dismissed the appeal of the Revenue by observing as under : “7. The ld.counsel for the assessee has pointed out that a bare perusal of this clause would indicate that the proviso is applicable on the expression “advancement of any other object of general public utility”. The assessee is engaged in preservation of environment including watersheds, forests and wildlife etc. This activity in itself is for charitable purposes and it stands apart from “advancement of any other object of general public utility”. Thus, the proviso is not applicable upon activities of the assessee. The ld.DR on the other hand relied upon the order of the AO.

Considering the totality of the facts and in the circumstances of the case and the legal position enumerated above, in our considered view, the activities carried out by the assessee are charitable in nature falling within the scope of section 2(15) of the Act under the category of preservation of environment and the Ld. CIT(E) should have been granted registration to the assessee u/s 12A of the Act. We, therefore, set aside the order of the Ld. CIT(E) and direct him to grant registration u/s 12A of the Act to the assessee. The grounds raised by the assessee are accordingly allowed.

In the result, the appeal of the assessee is allowed.