Charitable status of statutory port body upheld where fees were incidental to public utility functions, not profit-driven business.

A statutory body constituted for development and maintenance of minor ports retained charitable character because its receipts were charges or fees incidental to its public utility mandate and were applied for port development, not private profit. On that reasoning, the proviso to section 2(15) did not apply, the exemption under sections 11 and 12 remained available, and section 13(8) did not deny the benefit on the facts. The commentary also notes that the denial of charitable exemption was set aside, although a separately raised additional ground was not accepted.

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Issues: Whether the assessee's activities were hit by the proviso to section 2(15) of the Income-tax Act, 1961 so as to deny exemption under sections 11 and 12 and attract section 13(8).

Analysis: The assessee was constituted under a State enactment for development and maintenance of minor ports. The Tribunal followed the earlier decision in the assessee's own case and the jurisdictional High Court decisions holding that where the statutory body's receipts arise from charges or fees incidental to its public utility object, and the dominant purpose remains advancement of an object of general public utility without profit motive, the activity does not become trade, commerce or business merely because consideration is charged. The Tribunal also noted that the Board's income was applied for port development and that the statutory framework showed absence of private profit orientation.

Conclusion: The assessee's activities were not hit by the proviso to section 2(15), and the assessee was entitled to exemption under sections 11 and 12; section 13(8) did not deny that benefit on the facts.

Final Conclusion: The denial of charitable exemption was set aside, though the appeal did not succeed in full because the separately raised additional ground was not accepted.

Ratio Decidendi: A statutory body charging fees or cess for carrying out its mandated public utility functions does not lose charitable character under section 2(15) where the receipts are incidental to the object and the activity is not carried on with a profit motive.

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