ITAT Allows Section 80G Registration To Trust Recycling Post-Consumer Plastic Waste

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has allowed the registration under Section 80G of the Income Tax Act to the trust recycling post-consumer plastic waste.

The bench of Sandeep Singh Karhail (Judicial Member) and Amarjit Singh (Accountant Member) has observed that the assessee earned income only from donations, the sale of scraps, and the sale of finished goods, and no such service was rendered to any entity. A service, even if it is rendered by the assessee, will only be for the preservation of the environment and thus be a charitable activity.

The assessee or appellant filed an application in Form 10AB seeking approval under Section 80G of the Act. Form 10AC was issued by the CPC, granting provisional approval under Section 80G of the Income Tax Act. The CIT(E) rejected the prayer of the assessee for a grant of approval under Section 80G of the Income Tax Act on the basis that the assessee is established for spending corporate social responsibility (CSR) funds of Huhtamaki India Ltd. It was held that the material produced by the assessee is again sold in the market, which is a commercial activity, and thus it does not come under the purview of charitable activities.

The assessee contended that the object of the assessee is the preservation of the environment, and it aims to achieve that by recycling post-consumer plastic waste. Under Section 2(15), preservation of the environment is included within the definition of “charitable purpose," therefore the activities of the assessee fall within the ambit of charitable purpose. The assessee has built the building and installed the required machinery to process the plastic waste. The assessee recycles multi-layer plastic (MLP), which includes ink, fibre, and foil, and the output in the form of granules derived from the recycling of MLP waste is of low quality and does not have much market value. The assessee does not sell these granules to Huhtamaki India Ltd. as they require a different quality of plastic raw material.

The department contended that CSR funds from the company were transferred to the assessee, and therefore there is a nexus between the company and the assessee. The assessee is engaged in commercial activity since, as one of its 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. The activities carried out by the assessee fall under the residual category of advancement of any other object of general public utility.

The tribunal noted that the assessee was settled as an irrevocable trust, with the main object being to work in the area of environmental preservation. The assessee is registered under the Bombay Public Trusts Act, of 1950. The assessee has also 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 ITAT held that no doubt has been raised by the Revenue regarding the genuineness of the activity conducted by the assessee. The assessee satisfies all the conditions for the grant of approval under Section 80G. Therefore, the order denying the grant of approval under Section 80G is set aside, and the grounds raised by the assessee are allowed.

Counsel For Appellant: Vijay Mehta

Counsel For Respondent: Biswanath Das

Case Title: Huhtamaki Foundation Versus Commissioner of Income Tax

Case No.: ITA no.1911/Mum./2023

Click Here To Read The Order