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10-04-2019, Nandesari Industries, Section 2(15), 11, 12, Tribunal Ahmedabad

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2 months 1 week ago #9091 by amit
Section - 2(15), 11, 12, 12AA
Order Date - 10-04-2019
Favouring - Assessee
Court - Tribunal Ahmedabad
Appellant - DCIT
Respondent - Nandesari Industries Association
Justice - RAJPAL YADAV JM & AMARJIT SINGH AM
Citation - 419Taxpundit126
Appeal No. - ITA No.171 and 174/Ahd/2018
Asstt. Year - 2013-14 and 2014-15

Order

PER : RAJPAL YADAV

Present two appeals are directed at the instance of the Revenue against separate orders of the ld.CIT(A)-7, Ahmedabad dated 2.11.2017 and 16.11.2017 passed for the Asstt.Years 2013- 14 and 2014-15.

2. Common grievance of the Revenue in both the assessment years relates to deletion of addition of Rs.3,28,75,751/-made on account of disallowance of capital expenditure, and addition of Rs.77,43,658/- made on account of disallowance of ECP contribution expenses by applying provisions of section 2(15) and thereby rejecting benefit of sections 11 and 12 of the Income Tax Act for the Asstt.Year 2013-14. Similar grievance is raised in the Asstt.Year 2014-15 where amount involved is Rs.1,52,43,275/- on account of disallowance of capital expenditure and addition of Rs.90,45,483/- made on account of disallowance of ECP contribution expenses.

3. The facts on all vital points are common, therefore for the facility of reference we take the facts from the Asstt.Year 2014- 15.

4. Brief facts of the case are that the assessee is a trust registered under section 12AA of the Income Tax Act. The assessee is running a common effluent treatment plant for treatment of polluted water generated by industrial units around Nandesari area, who are members of the appellant trust. The assessee has filed return of income on 7.8.2014 declaring NIL income. The case of the assessee was selected for scrutiny assessment by issuance of notice under section 143(2) of the Act. During the assessment proceedings, the AO noticed that the assessee-trust has claimed application of capital expenditure of Rs.4,71,49,186/- which included depreciation of Rs.3,19,05,911/-.

The AO doubted a part of the capital expenditure of Rs.1,52,43,275/- to be disallowable on the ground that predominant object of the assessee-trust is to make profit; there was no spending of the income exclusively for the purpose of charitable activities nor any obligation on the part of the assessee to spent income or profit on charitable purpose only; that the activities carried out by the assessee was in the nature of trade, business or commercial activity, and for such activities or services rendered by the assessee, the members have paid assessee in the form of fees, cess and charges. Therefore, the claim of the assessee was hit by provisions of section 2(15) of the Act and the assessee was not eligible for the benefit under section 11 of the Act. Similarly, assessee has claimed expenditure of Rs.90,45,483/- towards ECP contribution as revenue expenditure. However, the ld.AO denied the claim of the assessee and treated the same to be capital expenditure, and added to the income of the assessee. However, in the appeal before the ld.First Appellate Authority, both the disallowances were deleted. Now the Revenue is before the Tribunal.

5. Before us, both the parties supported the respective orders of the Revenue authorities. The ld.cousnel for the assessee further relied upon the order of the Tribunal passed in the assessee own case for the Asstt.Year 2010-11, wherein Tribunal has allowed similar claim of the assessee. He placed on record a copy of the order of the Tribunal passed in ITA No.1704/Ahd/2014 dated 28.11.2017 in the case of the assessee.

6. We have considered rival submissions and gone through the record carefully, and also order of the Tribunal passed in the assessee’s own case on similar issue in the Asstt.Year 2010-11. It is an undisputed fact that the assessee is trust registered under section 12AA of the Act which formed by members of Nandesari Industries. The assessee trust is engaged in the activity of preservation of environment by treating and controlling pollution of environment i.e. land and water. As a part of its activities, trust is running a common effluent treatment plant for treatment of effluent and wastewater generated and discharged by the

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