TMI Blog2014 (5) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is involved in an activity which is of general public utility is doubtless - the fact that there is no profit making or motive to make profit is equally clear from the provisions of the Act of 1963. Following Commissioner of Income-tax vs. Gujarat Maritime Board [2006 (7) TMI 102 - HIGH COURT, GUJARAT] and Commissioner of Income-tax, A.P. v. Andhra Pradesh State Road Transport Corporation [1986 (3) TMI 1 - SUPREME Court] - the Corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income-tax - section 10(20) of the Act and section 11 operate in different spheres - Even if the Board has ceased to be a “local authority”, it is not precluded from claiming exemption under section 11(1) of the Act. Whether the conditions for exemption under section 11 are satisfied or not, are the issues which need to be examined only at the time of assessment. However, the assessee in the facts of the present case cannot be denied registration under section 12A of the Act - Decided against Revenue. - TAX APPEAL NO. 575 of 2009 With TAX APPEAL NO. 1507 of 2011 With TAX APPEAL NO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue, therefore, is that now granting registration under section 12A would defeat the legislative purpose of taxing the income of such entities. In the third question, therefore, we would read the correct reference to section 10(20) of the Act instead of erroneously referred section 10(2). Once the Tribunal granted such registration, the assessment of the respondent assessee had to be done accordingly. While framing such assessments as directed by the Tribunal in order to keep the issue alive, the Revenue has preferred the other three appeals contending that if ultimately Revenue s Tax Appeal No.791 of 2012 succeeds and the judgment of the Tribunal granting registration to the respondent assessee is reversed as a consequence thereof, the assessments already made on the basis of such registration of the assessee would also have to be set aside. These three appeals, therefore, are purely consequential in nature and their outcome would depend on the outcome of the main Tax Appeal No.575 of 2009. In other words, if such appeal of the Revenue is dismissed the remaining three appeals would stand automatically dismissed as well. We, therefore, take up the questions framed in such appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 2(15) of the Act. Registration was, therefore, wrongly refused by the Commissioner. 7. Counsel further submitted that while ascertaining the purpose of the trust what is to be seen is dominant purpose for which the trust is constituted. Even if incidental activity involves profit making, the same would not take the trust out of the expression charitable purpose . Counsel drew our attention to the decision of the Panaji Bench of the Income Tax Appellate Tribunal in case of Mormugao Port Trust vs. Commissioner of Income-tax, Panaji reported in [2007] 109 ITD 303 (Panaji)in which, after detailed discussion, the Tribunal held as under:- 13. Referring to the above, the ld.AR pointed out that all the above activities tantamount to creating and maintaining variable and much needed infrastructure for the Nation. Ports greatly facilitate trade and commence and contribute significantly to the development of not only the hinterland which they serve directly, but also to the growth and development of the national economy. Advancement of an object of General Public Utility has been held to be a charitable purposes. The provisions in the Major Port Trusts Act as regards the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections 60 to 63 the incomes provided in clauses (a) to (d) shall not be included in the total income of the previous year of the person in receipt of the income. Section 12 of the Act pertains to the income of the trusts or institutions from contributions. Sub-section(1) thereof provides that any voluntary contributions received by the trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes not being contributions made with a specific direction that they shall form part of the corpus of the trust, shall for the purposes of section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes. 12. Section 12A of the Act pertains to conditions as to registration of trusts and reads as under: Conditions as to registration of trusts, etc. 12A. The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant: Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. 14. It can thus be seen that for a trust to claim exemption under section 11 of the Act from the property held wholly for charitable or religious purposes it has to apply for registration under section 12A and such application has to be considered by the Commissioner as per the procedure laid down under section 12AA of the Act. It is in this context that the term charitable purpose assumes significance for our purpose. We may recall that section 2(15) as it stood at the relevant time defined charitable purpose to include relief of the poor, eduction, medical relief and advancement of any other object of general public utility. 15. In case of Additional Commissioner of Income-tax, Gujarat vs. Surat Art Silk Cloth Manufacturers Association reported in [1980]121 ITR 1, in the context of expression charitable purpose and the object of general public utility not involving any activity for profit held that the test to be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t C.J., in Commissioner of Income-tax v. Grain Merchants Association of Bombay that an object of general public utility means an object of public utility which is available to the general public as distinct from any section of the public and that objects of an association to benefit works of public utility confined to a section of the public, i.e. those interested in commerce are not objects of general public utility, do not correctly interpret the expression objects of general public utility . The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature: where there is no common quality uniting the potential, beneficiaries into a class, it may not be regarded as valid. 17. In case of Commissioner of Income-tax, A.P. vs. Andhra Pradesh State Road Transport Corporation reported in [1986] 159 ITR 1 while considering whether a State Road Transport Corporation was carrying the activity of profit, it was observed as under:- The submission founded upon section 22 is based upon a misunderstanding of what that section provides. A road Transport Corporation cannot be expect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such ports in such authorities and for matters connected thereof. The Act of 1963 besides providing for the constitution of the Board of trustees and committees thereof further provides under section 29 that from the appointed day in relation to any port, all property, assets and funds vested in the Central Government or any other authority shall vest in the Board. Chapter V of the Act of 1963 pertains to works and services to be provided at ports. Section 35 thereof provides for power of the Board to execute such works and provide appliances. Section 35(1) provides that the Board may execute such works within and outside the limits of the port and provide such appliances as deemed necessary or expedient. Sub-section (2) provides that such works and appliances may include:- (a) wharves, quays, docks, stages, jetties, piers and other works within the port or port approaches or on the foreshore of the port or port approaches, with all such convenient arches, drains, landing places, stairs, fences, roads, railways, bridges, tunnels and approaches and buildings required for the residence of the employees of the Board as the Board may consider necessary; (b) buses, railways, lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations for the purposes specified therein. Chapter VIII of the Act of 1963 pertains to revenue and expenditure. Section 86 pertains to general account of port. Section 88 pertains to application of moneys in general account. Sub-section (1) provides inter alia that the money credited to the general account under section 87, shall, subject to the provisions of section 89 of this Act and section 36 of the Indian Ports Act be applied by the Board in payment of charges specified therein which includes the interest on installments of the principal amount due on the loan taken by the Board, salaries, fees, allowances, pensions, gratuity etc. to the employees, cost and expenses incurred by the Board in the conduct and administration of any provident or welfare fund, cost of repairs and maintenance of the property belonging to or vested in the Board etc. 19. Section 90 of the Act of 1963 pertains to the establishment of reserve funds. Section 90 reads as under:- 90. Establishment of reserve funds.-(1) A Board may, from time to time, set apart such sums out of its surplus income as it thinks fit, as a reserve fund or funds for the purpose of expanding existing facilities or creating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or for any other emergency arising in the ordinary conduct of its work under this Act. Thus creating an autonomous body under the Major Port Trusts Act still envisages the involvement of the Central Government in important decision making. For example under section 92 the Board would have to take prior sanction of the Central Government to charge expenditure to capital. Under section 96 before writing off any loss as irrecoverable the Board would have to obtain prior approval of the Central Government. 22. Thus the fact that the respondent is involved in an activity which is of general public utility is doubtless. Further the fact that there is no profit making or motive to make profit is equally clear from the said provisions of the Act of 1963. This is precisely what the Tribunal in case of Mormugao Port Trust vs. Commissioner of Income-tax, Panaji (supra) analyzed and came to the conclusion. In somewhat similar statutory scheme, the Supreme Court in case of Commissioner of Income-tax vs. Gujarat Maritime Board(supra) held that the activities of Gujarat Maritime Board would be covered under section 2(15) of the Act. The Gujarat Maritime Board was constituted under the Gujarat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry [Commissioner of Income-tax Madras v. Andhra Chamber of Commerce, - (1965) 55 ITR 722 SC]. If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity- [Addl. Commissioner of Income-tax, Gujarat v. Surat Art Silk Cloth Manufacture Association, (1980) 121 ITR 1 (SC). 15. The present case in our view is squarely covered by the judgment of this Court in the case of Commissioner of Income-tax, A.P. v. Andhra Pradesh State Road Transport Corporation, (1986) 159 ITR 1 (SC) in which it has been held that since the Corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income-tax. 16. Applying the ratio of the said judgment in the case of Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1(SC), we find that, in the present case, Gujarat Maritime Board is establishe ..... 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