Pollution Control Services by Section 12AA Trust Qualify as Exempt Environment Preservation, Voiding Section 74 Notice

“[1] Whether on the facts and in the circumstances, the Income Tax Appellate Tribunal was justified in affirming the view of the Commissioner (Appeals) that the activities of the assessee fall within the ambit of Preservation of Environment as envisaged under section 2(15) of the Income Tax Act, 1961?”

“50. The ratio discernible from the aforesaid decision is that once the procedure is completed as provided under sub-section (1) of Section 12AA of the Act and a certificate is issued granting registration to the trust or institution, it is apparent that the same is a document evidencing satisfaction about (I) the genuineness of the activities of the trust or institution and (ii) about the objects of the trust or institution. While framing the assessment order, it is not open to the Assessing Officer to ignore the certificate of registration granted under Section 12AA of the Act by the Director of Income Tax (Exemption). It is not permissible for the Assessing Officer to go behind the registration obtained by the assessee under Section 12AA of the Act.

51. The legislature has consciously used the word “preservation”. Preserve means, to keep something in its original form or keep it in good condition. To put it in other words, to preserve is like keeping things the way they are. The only question is whether preservation would include protection?. To protect means, to keep away from harm or danger. As noted above, to preserve is like keeping things the way they are, same as protect, but this one is more like you are keeping it safe from a potential threat. One simple example of preservation could be “the fossil was perfectly preserve for hundreds of years”. If the trade effluent or the liquid or solid, waste generated by the polluting industries is treated in a central treatment effluent plant, the same could be said to be in the direction of protecting the environment. Would this be synonymous to “preservation of environment”. Section 2(15) for the purpose of preservation of environment has included watersheds, forests and wildlife, and at the same time, it also talks about preservation of monuments or places or objects of artistic and historic interest. One thing is for sure that while preserving anything, indirectly or directly, that thing is also protected.

94. The CIT (A) and the Income Tax Appellate Tribunal have concurrently held that taking an overall view, the dominant objects of the assessee are charitable as the dominant object is not only preservation of environment, but one of general public utility and, therefore, the assessee is entitled to seek exemption under Section 11 of the Act. The Tribunal is the last fact finding body. As a principle, this Court should not disturb the findings of fact in an appeal under Section 260A of the Act unless the findings of fact are perverse.”

“26.This Court in the case of Pushpam Pharmaceuticals Company V/s. Collector of Central Excise, Bombay (supra), while dealing with the meaning of the expression “suppression of facts” in proviso to Section 11A of the Act held that the term must be construed strictly, it does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held :-

‘In taxation, it (“suppression of facts”) can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.’

27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. V/s. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that “suppression of facts” can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty. When facts were known to both the parties, the omission by one to do what he might have done and not that he must have done, would not render it suppression. It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. Therefore, in view of our findings made herein above that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in the proviso to Section 11A of the Act”.