Infosys Green Forum Vs ITO (Exemptions) (ITAT Bangalore)
ITAT Bangalore: CSR Solar Power Company Not Entitled to Section 12AB & 80G Registration—Dominant Benefit Accrued to Parent Company
The Bangalore Bench of the ITAT dismissed the appeals filed by Infosys Green Forum, a Section 8 company, and upheld the orders of the CIT(E) denying registration under section 12AB and recognition under section 80G(5). The assessee was incorporated pursuant to amendments in the CSR Rules, which mandated that capital assets created out of CSR funds be held by a Section 8 company. Accordingly, Infosys Ltd. transferred a 40 MW solar power plant—set up as part of its CSR obligation—to the assessee, which in turn supplied the entire power generated back to Infosys Ltd. under a power supply agreement.
While the Tribunal accepted in principle that generation of solar power contributes to preservation of environment, a charitable purpose expressly covered under section 2(15), it emphasized that mere classification of an activity is not sufficient. Applying the predominant object and public benefit test, the Tribunal found that the solar power generated was exclusively and fully consumed by Infosys Ltd., with no instance of supply or benefit accruing to the public or any identifiable section of the public. The tariff charged (₹6.85 per unit) was lower than prevailing DISCOM rates, resulting in clear economic benefit to Infosys Ltd., and all “green benefits” (carbon credits, environmental incentives, etc.) were contractually assigned solely to Infosys Ltd.
The Tribunal held that any environmental benefit to the public was remote and incidental, whereas the dominant and direct benefit accrued to a single private entity, namely the parent company. Relying on settled Supreme Court jurisprudence on charitable purpose, the ITAT concluded that altruistic public benefit is sine qua non for registration under section 12AB. Since this condition was not met, the assessee was rightly denied charitable registration and 80G approval. Consequently, both appeals were dismissed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
