Tax Deduction U/s 80G of Income Tax Act Allowable on Donation received by Public Trust for Recycling Plastic Waste: ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has tax deductions under section 80G of the Income Tax Act, 1961 allowable on donations received by public trusts for recycling plastic waste.

Huhtamaki Foundation, the assessee challenged the impugned order passed in Form No.10AD by the Commissioner of Income Tax (Exemption), Mumbai [“CIT(E)”] rejecting the assessee’s application for grant of approval under section 80G of the Income Tax Act, 1961 ("the Act").

 The assessee filed an application in Form 10AB seeking approval under section 80G of the Act. Form 10AC in this case was issued by the CPC granting provisional approval under section 80G of the Act. Vide order dated 30/03/2023 the CIT(E) rejected the prayer of the assessee for a grant of approval under section 80G of the Act on the basis that the assessee is established for spending Corporate Social Responsibility (“CSR”) funds of Huhtamaki India Ltd. Further, it was held that the material produced by the assessee is again sold in the market which is a commercial activity and thus it doesn’t come under the purview of charitable activities.

During the hearing, the Authorised Representative (“AR”) by referring to the Trust Deed submitted that the object of the assessee is the preservation of the environment and it aims to achieve the same by recycling post-consumer plastic waste. The AR further submitted that under section 2(15) of the Act preservation of environment is included within the definition of “charitable purpose”, therefore the activities of the assessee fall within the ambit of charitable purpose.

It was also submitted that the assessee has built the building and has installed the required machinery to process the plastic waste. The AR submitted that the assessee recycles multi-layer plastic (“MLP”), which includes ink, fibre, and foil, and the output in the form of granules derived from recycling of MLP waste is of low quality and does not have much market value. It was further submitted that the assessee does not sell these granules to Huhtamaki India Ltd as they require different quality of plastic raw material.

 On the other hand, the Departmental Representative (“DR”) submitted that CSR funds from the company were transferred to the assessee and therefore there is a nexus between the company and the assessee. It was further submitted that the assessee is engaged in the commercial activity, since as per its one of the objects it can provide integrated recycling and waste management services, ranging from simple recycling collections to full recycling and waste management solutions to businesses of all sizes.

A two-member bench comprising of Shri Amarjit Singh, Accountant Member and Shri Sandeep Singh Karhail, Judicial Member observed 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. In any case, it is to be noted that such a service even if it is rendered by the assessee, the same will only be for the preservation of the environment and thus is a charitable activity.

It was evident from the record that no other objection was raised by the learned CIT(E) while denying the approval under section 80G of the Act to the assessee. Further, no doubt has been raised by the Revenue regarding the genuineness of the activity conducted by the assessee.

The Tribunal held that the assessee satisfies all the conditions for the grant of approval under section 80G of the Act and set aside the denying of the grant of approval under section 80G of the Act. The ITAT allowed the appeal.

To Read the full text of the Order CLICK HERE

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