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TMI Blog2014 (5) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... r on the facts of the case, the Appellate Tribunal is right in law in allowing registration u/s.12AA to the assessee when exemption u/s.10(2) was withdrawn by the legislature, it will defeat the legislature intent to allow the same under another provision ?" 2. In Tax Appeal No.575 of 2009, respondent assessee is the Kandla Port Trust ("KPT" for short). The respondent applied for registration under section 12A of the Income Tax Act,1961 ("the Act" for short) on 26.2.2006. The Commissioner, however, was not inclined to accept the application. The assessee was given an opportunity. Availing such opportunity the assessee made submissions under letter dated 24.4.2007. Commissioner of Income-tax, Rajkot, however, by an order dated 27.4.2007 rejected the application of the assessee. The assessee carried the matter in appeal. The Tribunal by the impugned judgment dated 20.6.2008 allowed the appeal relying on the decision of the Banglore Bench of the Tribunal in case of New Manglore Port Trust vs. CIT, Manglore. The Revenue is, therefore, in appeal before us. Questions (1) and (2) pertain to validity of the Tribunal's decision to grant registration under section 12A of the Act. Question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel also relied on the decision of the Uttarakhand High Court in case of Commissioner of Income-tax vs. National Institute of Aeronautical Engineering Educational Society reported in [2009] 315 ITR 428 (Uttarakhand)in which it was observed that mere imparting of education for making profit would not make it a charitable purpose. It was held that the Commissioner while passing the order under section 12AA of the Act is not supposed to allow registration blindly. Expression "charity" in the expression "charitable purpose" is the soul of the expression and mere trade or commerce in the name of eduction cannot be said to be a charitable purpose. 5. Counsel further submitted that the Tribunal reversed the findings of the Commissioner without any discussion of facts merely relying on the decision of the Banglore Bench in case of another port trust. 6. On the other hand, learned counsel Shri J.P.Shah for the respondent opposed the appeal contending that KPT is constituted under the Major Ports Trusts Act, 1963 (hereinafter referred as " the Act of 1963). Its activities are governed by the provisions contained in the Act of 1963. In particular, our attention was drawn to Chapter VIII ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified individual, is present. According to the ld. AR this view was affirmed by the Supreme Court in the case of CIT vs. Ahmedabad Rana Caste Association [1983] 140 ITR 1." 8. Our attention was drawn to the decision of this Court in the case of Commissioner of Income-tax vs. Gujarat Maritime Board reported in [2007] 289 ITR 139(Guj) in which the High Court confirmed the decision of the Tribunal that the said Board was entitled to registration under section 12A of the Act. 9. It was pointed out that the decision of this Court in the case of Gujarat Maritime Board was carried in appeal by the Revenue before the Supreme Court. The Supreme Court in the decision rendered in case of Commissioner of Income-tax vs. Gujarat Maritime Board reported in [2007] 295 ITR 561 (SC) after detailed discussion dismissed Revenue's appeal. 10. We may notice that section 2(15) of the Act which defines the term "charitable purpose" has undergone changes from time to time. We would, therefore, refer to the said provision as it stood at the relevant time, which reads as under:- "2(15) "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under this Act without giving effect to the provisions of section 11 and section 12 exceeds fifty thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section(2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed from duly signed and verified by such accountant and setting forth such particulars as may be prescribed." 13. Section 12AA of the Act provides the procedure for registration. Sub-section (1) thereof which is relevant reads as under:- "Procedure for registration. 12AA (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) of section 12A, shall- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the meaning of S. 4(3)(i) of the Act an advancement of an object of general public utility. In enacting the last paragraph of S. 4(3) the legislature has used language of great amplitude. "Charitable purpose" includes not only relief of the poor, education and medical relief alone, but advancement of other objects of general public utility as well. The clause is intended to serve as a special definition of the expression "charitable purpose" for the Act : it is again inclusive and not exhaustive or exclusive. Even if the object or purpose may not be regarded as charitable in its popular signification as not tending to give relief to the poor or for advancement of education or medical relief, it would still be included in the expression "charitable purpose" if it advances an object of general public utility. The expression "object of general public utility" however is not restricted to objects beneficial to the whole mankind. An object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difficult of practical realization but would reflect unsound principles of management. What section 22, therefore, does when it states that it shall be the general principle of a Road Transport Corporation that in carrying on its undertakings it shall act on business principles is to emphasize the objects set out in section 3 for which a Road Transport Corporation is established and to prescribe the manner in which the general duty of the corporation set out in section 18 is to be performed. It is now firmly established by decisions of this Court in the Surat Art Cloth Manufacturers Association's case [1980] 120 ITR 1(SC) and the Bar Council of Maharashtra's case [1981] 130 ITR 28(SC) that the test is "What is the pre-dominant object of the activity - whether it is to carry out a charitable purpose or to earn profit?" If the pre-dominant object is to carry out a charitable purpose and not to earn profit, the purpose would not lose its charitable character merely because some profit arises from the activity." 18. Bearing in mind these principles if we revert back to the facts of the case, we may recall that the respondent assessee is constituted under the Act of 1963. The said Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the port or beyond those limits, whether in territorial waters or otherwise, for the purpose of towing or rendering assistance to any vessel, whether entering or leaving the port or bound elsewhere, and for the purpose of saving or protecting life or property and for the purpose of landing, shipping or transhipping passengers or goods under section 42; (i) sinking of tube-wells, and equipment, maintenance and use of boats, barges and other appliances for the purpose of the supply of water at the port; (j) engines and other appliances necessary for the extinguishing of fires; (k) construction of models and plans for carrying out hydraulic studies; (l) dry docks, slipways, boat basins and workshops to carry out repairs or overhauling of vessels, tugs, boats, machinery or other appliances." Section 36 pertains to power of the Board to undertake certain works. Section 50 of the Act of 1963 authorizes the Board from to time to frame consolidated scale of rates for any combination of service specified in section 48 or for any combination of such service or services with any user or permission to use any property belonging to or in the possession or occupation of the Board. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board is of the opinion that any amount due or any loss incurred by the Board is irrecoverable, the Board may with the previous approval of the Central Government sanction the writing off finally of the said amount or loss. It can thus be seen that the Act of 1963 was enacted with a specific purpose of constitution of port authorities and to vest the administration of major ports, its control and management in such authorities constituted under the Act of 1963. 21. Various provisions noted above leave no manner of doubt that the port trust under the said Act would control the activities at a major port for utilizing and creating facilities. Agencies utilizing such facilities would pay charges to the port trust at the rates specified with prior sanction of the Government. It would be open for the Board to utilize the money credited to the general account for the purposes mentioned in sub-section(1) of section 88. Such purposes include the administrative expenses and salary and other benefits to be paid to the employees and also the cost of repairs and maintenance of the property of the Board and other expenses. The Board would also be allowed to create reserve fund for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in case Commissioner of Income-tax vs. Gujarat Maritime Board (supra) referring to the various provisions under the Act of 1981 and in particular sections 73,74 and 75 thereof held and observed as under:- "14. We have perused number of decisions of this court which have interpreted the words, in Section 11(15), namely, "any other object of generally public utility". From the said decisions it emerges that the said expression is of the widest connotation. The word "general" in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose [Commissioner of Income-tax, Gujarat- III, Ahmedabad v. Ahmedabad Rana Caste association, (1983) 140 ITR 1 SC). The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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