Income Tax Appellate Tribunal Mumbai Allows Huhtamaki Foundation’s Appeal for 80G Approval

Case Name:

Huhtamaki Foundation v/s Commissioner of Income Tax (Exemption), Mumbai

Key Takeaways:

1. The activities of the assessee, particularly the recycling of plastic waste, were considered to fall within the category of preservation of the environment, which is a charitable purpose under the Income Tax Act, 1961.
2. The Tribunal highlighted that preservation of environment was included in the definition of “charitable purpose” under section 2(15) (of Income Tax Act, 1961).
3. The Tribunal referred to a decision by the coordinate bench of the Tribunal in Punjab Plastic Waste Management Society v/s CIT(E), which held the multi-layer plastic waste management undertaken by the taxpayer to be an activity forming part of the charitable purpose of the protection of environment.
4. The objection raised by the Commissioner of Income Tax (Exemption) that the assessee was established for the spending of Corporate Social Responsibility (CSR) funds of Huhtamaki India Ltd was found to have no merits.
5. The Tribunal considered the financial statements of the assessee and found that the assessee earned income only from donations, sale of scraps, and sale of finished goods, and no such service was rendered to any entity.

Case Synopsis:

The provided is an order from the Income Tax Appellate Tribunal, Mumbai, regarding the appeal filed by Huhtamaki Foundation against the rejection of its application for approval under section 80G (of Income Tax Act, 1961). The order was pronounced on 29/11/2023 by Shri Amarjit Singh, Accountant Member, and Shri Sandeep Singh Karhail, Judicial Member.

The appeal was filed by the assessee challenging the order dated 30/03/2023, passed by the Commissioner of Income Tax (Exemption), Mumbai, rejecting the application for grant of approval under section 80G (of Income Tax Act, 1961).

The grounds of appeal raised by the assessee were as follows:

The rejection of the application filed by the Appellant Trust for grant of approval under section 80G(5) (of Income Tax Act, 1961).

Holding that the Appellant Trust is engaged in commercial activity not falling within the purview of ‘charitable purpose’ as required under section 80G(5) (of Income Tax Act, 1961).

Passing the impugned order without granting effective opportunity of hearing to the Appellant Trust.

The Tribunal considered the submissions of both the assessee and the revenue and perused the material available on record. It was observed that the assessee was established as an irrevocable trust with the main object to work in the area of preservation of the environment. The assessee was registered under the Bombay Public Trusts Act, 1950 and had received a Registration Certificate for recycling plastic waste issued by the Maharashtra Pollution Control Board under the Environment (Protection) Act, 1986 read with the Plastic Waste Management Rules, 2016.

The Tribunal also noted that preservation of environment was included in the definition of “charitable purpose” under section 2(15) (of Income Tax Act, 1961). It was found that the assessee had been involved in the recycling of plastic waste, which falls under the category of preservation of environment, rendering it to be an activity for the charitable purpose. The Tribunal also highlighted that the assessee had been registered under section 12AA (of Income Tax Act, 1961) as it was involved in the Preservation of Environment, and thus the provisions of section 11 (of Income Tax Act, 1961) and 12 (of Income Tax Act, 1961) would apply in the case of the assessee from the assessment year 2021-22.

The Tribunal also referred to a decision by the coordinate bench of the Tribunal in Punjab Plastic Waste Management Society v/s CIT(E), which held the multi-layer plastic waste management undertaken by the taxpayer to be an activity forming part of the charitable purpose of the protection of environment, as envisaged under section 2(15) (of Income Tax Act, 1961).

The Tribunal further addressed the objection raised by the Commissioner of Income Tax (Exemption) that the assessee was established for the spending of Corporate Social Responsibility (CSR) funds of Huhtamaki India Ltd. It was noted that the MLP waste, which was recycled by the assessee, was collected from Pune and other nearby areas by NGOs, and Huhtamaki India Ltd was not the direct source of such waste. The Tribunal found no merits in the basis of the Commissioner’s rejection of the approval under section 80G (of Income Tax Act, 1961).

Additionally, the Tribunal considered the financial statements of the assessee and found that the assessee earned income only from donations, sale of scraps, and sale of finished goods, and no such service was rendered to any entity. It was concluded that even if such a service was rendered by the assessee, it would only be for the preservation of the environment and thus would be a charitable activity.

In conclusion, the Tribunal set aside the impugned order dated 30/03/2023 denying the grant of approval under section 80G (of Income Tax Act, 1961) and allowed the grounds raised by the assessee.

FAQ

Q1: What was the outcome of the appeal filed by Huhtamaki Foundation?

A1: The Income Tax Appellate Tribunal, Mumbai, allowed the appeal filed by Huhtamaki Foundation against the rejection of its application for approval under section 80G (of Income Tax Act, 1961).

Q2: What were the key reasons for allowing the appeal?

A2: The Tribunal found that the activities of the assessee, particularly the recycling of plastic waste, fell within the category of preservation of the environment, which is considered a charitable purpose under the Act. The objection raised by the Commissioner of Income Tax (Exemption) regarding the spending of Corporate Social Responsibility (CSR) funds was also found to have no merits.