ITAT Denies Section 12AB Registration to Infosys Green Forum Solar Project Entity

Infosys Green Forum, a Section 8 company incorporated under the Companies Act, 2013, was established pursuant to amendments in the CSR Rules mandating that capital assets created from CSR expenditure be held by a Section 8 entity. Infosys Ltd had set up a 40 MW solar power plant as part of its CSR obligations and subsequently transferred the solar power assets to the assessee company without consideration, along with a lease of land and a power supply agreement.

The assessee obtained provisional registration under Section 12AB and thereafter applied for final registration under Section 12AB and approval under Section 80G(5). Under the power supply agreement, all electricity generated by the solar plant was supplied to Infosys Ltd at an agreed tariff, with Infosys entitled to all green and environmental benefits arising from the project. The CIT (Exemptions) rejected the application, holding that the assessee was engaged in a commercial activity of power generation solely benefiting its holding company and cancelled the provisional registration.

Aggrieved, the assessee filed appeals before the ITAT challenging the denial of registration under Section 12AB and rejection of recognition under Section 80G.

Central Issue: Whether generation and captive supply of solar power exclusively to the holding company, though arising from CSR assets, constitutes a “charitable purpose” under Section 2(15) so as to qualify for registration under Section 12AB and approval under Section 80G of the Income Tax Act.

Tribunal Held: The ITAT held that while solar power generation is capable of falling within the scope of “preservation of environment” under Section 2(15), the decisive test is whether the dominant object of the activity benefits the public or a defined section of the public. On a detailed examination of the asset transfer agreement, power supply agreement, tariff structure, and allocation of green benefits, the Tribunal found that the entire benefit of the solar power project accrued exclusively to Infosys Ltd.

The Tribunal noted that Infosys Ltd consistently consumed the full capacity of power generated, obtained electricity at rates lower than prevailing DISCOM tariffs, and retained all green and environmental credits associated with the project. There was no instance of power being supplied for the benefit of the public at large or any identifiable section of the public. Any environmental benefit was held to be incidental and not the dominant purpose.

Applying the predominant object test and relying on settled principles laid down by the Supreme Court and High Courts, the Tribunal concluded that the assessee’s activities were designed for private benefit rather than public charity. Consequently, the assessee did not satisfy the definition of “charitable purpose” under Section 2(15).

Accordingly, the ITAT upheld the order of the CIT (Exemptions), denied registration under Section 12AB, and also rejected approval under Section 80G(5). Both appeals filed by the assessee were dismissed.

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