PR. COMMISSIONER OF INCOME TAX vs. HP STATE ENVIORNMENT PROTECTION AND POLLUTION CONTROL BOARD

Since common questions of law arise for determination in both these appeals, therefore, the same are being disposed of by a common judgment.

1 Whether the reporters of Local Papers may be allowed to see the judgment? Yes.

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ITA No. 18 of 2016 was admitted on 01.11.2016 on the following substantial question of law:-

ITA No. 18 of 2016 “Whether the activities carried on by the assessee amount to charitable purposes as envisaged by Sec.2(15) read with Sections 10 & 11 of the I.T. Act, 1961?

Whereas, ITA No.56 of 2016 was admitted on the following substantial questions of law on 29.11.2016:- ITA No. 56 of 2016 i) Whether the facts and in the circumstances of the case, the activities carried on by the assessee amount to “charitable purposes” as envisaged by section 2(15) read with Section 10 & 11 of the Income Tax Act, 1961.

ii) Whether the findings of the ITAT are perverse since it has misconstrued the relevant provisions of the Act and the impugned order is thus liable to be set aside, especially since it is contrary to the judgment passed by this Hon’ble Court in CWP No.2066/2009.

iii) Whether the govt. Corporation performing regulator functions is entitled to exemption u/s 10 & 11 of the I.T. Act even though it is not existing for charitable purposes.”

We have heard learned counsel for the parties and have also gone through the material available on record.

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At the outset, it needs to be noticed that identical issue came up for consideration before this Court in ITA No.2 of 2010 titled as Commissioner of Income Tax vs. H.P. State Environment Protection & Pollution Control Board, decided on 24.10.2017, wherein, the appellant like in the present case, had relied upon following two decisions of 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.

These contentions were rejected on the ground that the factual matrix of the case had not at all been discussed by the Tribunal/Authorities below and there was no reasoning assigned as to on what basis it arrived at the conclusion mentioned in the order. 6.

It also needs to be noticed that primarily the issue in these appeals pertain to the cancellation of exemption granted in favour of the assessee by the appropriate authority

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under the provisions of Section 12AA of the Income Tax Act, 1961 (for short the ‘Act’). 7.

According to the Revenue, the assessee was performing the 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 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. 8.

It also needs to be noticed that the Assessing Officer completed assessment and assessed the entire income over expenditure to determine the net taxable income vide order dated 06.01.2014. However, this order was set aside in appeal vide order dated 05.11.2014 and affirmed by the Appellate Authority, constraining the Revenue to file these appeals. 9.

Significantly, we find that the factual matrix has not been considered or discussed by the Tribunal/Authorities below. Rather, perusal of order passed by the Appellate Authority demonstrates that there is no reasoning assigned

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as to on what basis it arrived at the conclusion mentioned in the order. 10.

As such, we deem it appropriate to remand the matters back to the Commissioner of Income Tax for taking a fresh decision, after considering the rival contentions of the parties. Needless to add, Commissioner of Income Tax shall discuss the factual matrix and also, as to whether the case of the assessee is covered by any of the decisions rendered by this Court in Pollution Control Board (supra) and Himachal Pradesh Road Transport Corporation (supra). 11.

Parties agree to apprise the Commissioner of Income Tax of the passing of the order and undertake to appear before him/her on 13th January, 2025. We also clarify that the Commissioner while adjudicating the case shall also take into consideration the amendment brought in the statute as also the Circular No.21/2016, dated 27th May, 2016 issued by the Revenue. 12.

Consequently, order dated 05.11.2014 passed by the Commissioner of Income Tax (Appeals) and order dated 01.09.2015 passed by the Income Tax Appellate Tribunal in ITA No.18 of 2016 and order dated 04.09.2014 passed by the Commissioner of Income Tax (Appeals) and order passed by

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the Income Tax, Appellate Tribunal on 25.02.2016 in ITA No.56 of 2016 are quashed and set aside. Questions of law are left open to be decided in appropriate proceedings. 13.

With these observations, the appeals stand disposed of, so also the pending applications, if any.

( Tarlok Singh Chauhan )

Acting Chief Justice

December 21, 2024 ( Satyen Vaidya ) (naveen)

Judge