ACIT(EXEMPTION), CIRCLE-2, AHMEDABAD, AHMEDABAD vs. GUJARAT ENVIORMENTAL SERVICE SOCIETY, ANAND

Aggrieved by the assessment order, the assessee carried the matter in appeal before the Ld. Commissioner of Income Tax (Appeals) and raised various grounds challenging the denial of exemption under section ACIT(Exemption) vs. Gujarat Enviormental Service Society Asst.Year –2023-24 - 3– 11 and the consequential addition. Before the Ld. CIT(A), the assessee contended that its objects were purely charitable in nature, being directed towards environmental protection, which falls within the ambit of “charitable purpose” as defined under section 2(15) of the Act. It was submitted that the activities carried out by the assessee, even though undertaken on a contractual basis, were only a means to achieve its charitable objects and were not in the nature of trade, commerce or business. The assessee also submitted that there was no profit motive and that the entire income had been applied towards the charitable objects of the trust.

The Ld. CIT(A) examined the submissions of the assessee and the material available on record. While dealing with the grounds of appeal relating to denial of exemption under section 11, the Ld. CIT(A) placed reliance on the earlier orders passed by the Income Tax Appellate Tribunal in the assessee’s own case for earlier assessment years, more particularly the decision of the ITAT, Ahmedabad Bench, for assessment year 2013–14. The Ld. CIT(A) noted that in those years, on identical facts, the Tribunal had held that the objects and activities of the assessee were charitable in nature, falling within the scope of preservation of environment, and that exemption under section 11 of the Act was rightly allowable. It was also observed that there was no change in the facts and circumstances of the case and that the registration granted to the assessee under section 12A had not been cancelled.

The Ld. CIT(A) further observed that the contractual receipts earned by the assessee were incidental to and in furtherance of its charitable objects and could not be treated as business income merely because they arose from agreements with various institutions. The Ld. CIT(A) accepted the contention of the assessee that the activities were not carried out with a profit motive and that the proviso to section 2(15) was not attracted. Following the binding precedent in the assessee’s own case and also placing reliance on judicial pronouncements including the decision of the Hon’ble Gujarat High Court in the case of Ahmedabad Urban Development Authority, the Ld. CIT(A) held that the assessee was eligible for exemption under section 11 of the Act.

The Department is in appeal before us against the order passed by CIT (Appeals) allowing the appeal of the assessee.

We have heard the rival contentions and perused the material on record. The brief facts of the case are that the Assessing Officer denied the exemption claimed under section 11 of the Act, on the ground that the receipts earned by the assessee were contractual in nature and not income derived from property held under trust and accordingly treated the surplus as taxable income under the head “Income from Other Sources”. In appeal, the Ld. CIT(A), after examining the objects of the assessee, the nature of activities carried out and the manner of application of income, ACIT(Exemption) vs. Gujarat Enviormental Service Society Asst.Year –2023-24 - 5– held that the activities of the assessee were purely charitable in nature, falling within the scope of preservation of environment as contemplated under section 2(15) of the Act. The Ld. CIT(A) further recorded a categorical finding that the contractual receipts were incidental to and in furtherance of the charitable objects of the trust, that there was no profit motive involved, that the proviso to section 2(15) of the Act was not attracted and that the entire income had been applied towards charitable purposes. The Ld. CIT(A) also noted that there was no violation of section 13 of the Act and that the registration granted to the assessee under section 12A had not been cancelled. Relying upon the binding decisions of the Coordinate Benches of the Tribunal in the assessee’s own case, particularly the decision of the Ahmedabad ITAT in for assessment year 2013–14, the Ld. CIT(A) allowed the appeal and directed deletion of the addition.

We find that the issue involved before us is squarely covered by the decision of the Coordinate Bench of the Ahmedabad ITAT in the assessee’s own case in for assessment year 2013– 14, wherein, on identical facts, it has been held that the objects and activities of the assessee are charitable in nature, that they fall specifically within the ambit of preservation of environment, that the proviso to section 2(15) of the Act is not applicable and that exemption under section 11 of the Act is allowable. The Tribunal in the said decision has also taken note of the fact that exemption under section 11 had been ACIT(Exemption) vs. Gujarat Enviormental Service Society Asst.Year –2023-24

In the year under consideration also, the facts remain identical and no distinguishing feature has been brought on record by the Revenue to take a different view. Respectfully following the binding decision of the Coordinate Bench in the assessee’s own case, we find no infirmity in the order passed by the Ld. CIT(A) allowing exemption under section 11 of the Act. Accordingly, the order of the Ld. CIT(A) is upheld.

In the result, the appeal of the Department is dismissed.