ITAT Denies 12AB & 80G to Infosys Green Forum: CSR Is Not Charity, Even If It Incidentally Saves the Environment

Infosys Green Forum

ITAT Bangalore dismissed the company’s appeals, upholding the denial of Sections 12AB and 80G. The solar plant exclusively supplied power and benefits to Infosys, serving private business needs, not public welfare, hence failing the charitable purpose under Section 2(15) requirements lawfully.

The present two appeals have been filed by M/s. Infosys Green Forum against the Income Tax Department in the ITAT Bangalore, challenging two orders, both dated the same, i.e., March 26, 2024, passed by the CIT(E) Bangalore and CIT. One impugned order had rejected the assessee’s application for Section 12AB registration in Form No. 10AB dated 26/9/2023, and the other had rejected the assessee’s application for approval under Section 80G(5) in Form No. 10AB dated 28/9/2023. The aggrieved assessee approached the ITAT Bangalore.

Before, the tribunal assessee claimed that previously, it was established as a non-profit Section 8 company to carry out Corporate Social Responsibility (CSR) activities of Infosys Limited, as mandated under the Companies Act and CSR Rules. The MCA Notification dated January 22, 2021, had amended the Companies (Corporate Social Responsibility Policy) Rules, 2014. The notification has clarified that any Section 8 company acting as a CSR implementing agency is required to obtain registration under Section 12A/12AB of the Income Tax Act. The assessee further claimed that its key activity, i.e., generation of electricity through a solar power plant, falls under the category of “preservation of environment” under section 2(15) of the Act and hence qualifies as a charitable purpose.

When the tribunal analysed the facts of the case and relevant agreements, it noted that the assessee’s 40 MW solar power plant set up over land of 226.495 acres in Tumkur district, Karnataka, was completely utilised to supply electricity to Infosys Limited. Complete generated electricity was consumed by Infosys, and no energy or benefit was made available for public welfare or the use of the general public. Infosys paid a fixed rate of Rs. 6.85 per unit, which was lower than the rates charged by electricity distribution companies, and the assessee also bore operation and maintenance costs.

The tribunal further noted that all green benefits, including carbon credits, subsidies, and environmental incentives arising out of the solar project, were accrued only to Infosys Limited and not to the assessee. Therefore, despite environmental benefits, they were maintained by the solar plant in question by the holding company. The tribunal ruled that the primary purpose of the arrangement was to meet Infosys’s own power requirements and decrease the overall cost of electricity, instead of serving public welfare.

Therefore, the tribunal referenced an earlier judgment of the Supreme Court in a case titled Commissioner of Income Tax, Ujjain vs. Dawoodi Bohara Jamaat [2014], and held that the key purpose of any charitable activity should be to benefit the general public. The charitable activities that mainly benefit a single authority or entity, even if they fall under the category of “preservation of environment” under section 2(15) of the Act, cannot qualify as charitable.

Accordingly, the ITAT sustained the CIT’s decision and held that the assessee is not entitled to registration under section 12AB nor for approval under section 80G. As a result, dismissed both the appeals.