TaxTMI 
TaxTMI 
2007 (1) TMI 238
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....ssee's claim to be registered under section 12A as a Charitable Institution for the reasons enumerated in her order dated 25-7-2006, while ground No. 7 challenges the action of the CIT in not condoning the delay in making the application under section 12A for registration. 3. Briefly stated, the relevant facts of the case are that the assessee, viz., The Mormugaon Port Trust, hereinafter called as MPT is an institution constituted under the Major Port Trusts Act, 1963 and is an autonomous body administered by a Board of Trustees constituted by the Central Government. The MPT is vested with the Administration, Control, Maintenance, Development and Management of the Major Port of Mormugaon. In India all the Port Trusts are formed primarily with the object of the development of the port infrastructure and are vested with the assets of the Government of India for the discharge of this function. The surplus generated from the rendering of port services to the port users is statutorily required to be fully invested/set aside for investment in development of port infrastructure and there is no provision for the distribution of the surplus. The development and maintenance of the Maj....
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....ribed conditions, even though exemption of income under section 10(20), which was earlier available to them, now stands withdrawn in view of the Explanation inserted by the Finance Act, 2002. According to the ld. Counsel, CIT might have examined whether the application was made in accordance with the requirements of section 12A read with rule 17A and whether Form No. 10A has been properly filled up. The ld. Counsel also submitted that it was incumbent upon the CIT to examine and determine whether the objects of the institution are charitable or not. For this purpose, the ld. Counsel referred to the cases of Fifth Generation Education Society v. CIT [1990] 185 ITR 634 (All.) and New Life in Christ Evangelistic Association v. CIT [2000] 246 ITR 532 (Mad.), where it was discussed that in order to be able to get registration under section 12A, there is no necessity of establishing as to how the concerned institution would be able to claim exemption under section 11 or 12. According to him, at the stage of grant of certificate under section 12A, the only inquiry which could possibly be made, would be whether the institution has actually made an application and whether the accounts of th....
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....nder section 11 (4A) has provided that the exemption under section 11 shall not be available in relation to any income of a trust of an institution being profit and gains of business unless the business is incidental to the attainment of the object of the trust. However, this exercise whether the assessee has income from business or not, and if there is business income whether it is incidental to the attainment of the object of the trust or not, is to be carried by the Assessing Officer while making the assessment of each year. But so far as the registration of trust is concerned, the CIT has to examine whether the object of the assessee falls within the definition of 'charitable purpose' under section 2(15). The object of the assessee-institution is to maintain and develop the Ports in the State of Gujarat. Maintenance and development of Ports is necessary for transport of goods and persons by sea. In the present scenario of globalization of the trade and industry, the transport of goods from one country to other which is mostly through sea has become essential. Therefore, the development and maintenance of Ports is certainly the object of general public utility. ....
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....ls under its jurisdiction. The ld. Counsel therefore argued that in accordance with the decision of the Hon'ble Gujarat High Court, MPT is also clearly a charitable institution eligible for registration under section 12A. He submitted that the objectives of the MPT are indisputably charitable in nature as defined under section 2(15) of the Income-tax Act, 1961. He re-emphasized that the Hon'ble High Court of Gujarat has held that maintenance and running of harbours is an activity of "General Public Utility" falling within me meaning of charitable purposes given in section 2(15) of the income-tax Act, 1961. 10. The ld. Counsel also contended that the mere were various other reasons why MPT should be held to be a charitable institution: (i) The creation of Mormugao Port Trust as an institution is wholly for a charitable purpose as defined under section 2(15) of the Income-tax Act, 1961; (ii) The institution of Mormugao Port Trust has not been created for the benefit of any particular religious community or caste. The benefits of running and maintenance of Mormugao Harbour by Mormugao Port Trust, accrue to the public at large; (iii) The institutio....
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....and other machines for cleaning, deepening and improving any portion of the port or port approaches or of the foreshore of the port or port approaches; (g) Lighthouses, lightships, beacons, buoys, pilot boats and other appliances necessary for the safe navigation of the port and of the port approaches; (h) Vessels, tugs or other boats for use within the limits of 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 transshipping passengers or goods under section 42; (i) Sinking of tubewells 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 o....
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....very wide. It is well-settled by now that 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 all persons in a particular country or State. It is sufficient if the intention to benefit a section of the public, as distinguished from a specified individual, is present. According to the ld. AR this view was affirmed by the Supreme Court in the case of CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1. 14. The ld. A.R continues to argue by stating that in that case of CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC), the Supreme Court has held that the expression 'general public utility' is not restricted to objects beneficial to the whole of mankind. An object beneficial to the 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 province. It is sufficient if the intention is to benefit a section of the public as distinguished from specified in....
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....tainly not denied as section 90 dealing with the utilization of surplus funds would show. However, the profit element is only incidental to the main functions of the Port Trust as per the ratio laid down in the case of CIT v. Andhra Pradesh State Road Transport Corpn. [1986] 159 ITR 1 (SC), where the Hon'ble Apex Court held as under: "It was not disputed that the object of the activity carried on by the respondent-corporation was one of general public utility. What was submitted was that such activity was carried on for profit as shown by section 22 under which the respondent-corporation was enjoined to act on business principles. It was further submitted that the respondent-corporation could issue shares even to the members of the public and that dividend would be paid to the shareholders and, therefore, profit would be made from the activity of the respondent-corporation by its owners, namely, the shareholders. We are unable to accept these submissions. The submission founded upon section 22 is based upon a misunderstanding of what that section provides. A road transport corporation cannot be expected or be required to run at a loss. It is not established fo....
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....d development and after the Amendment Act of 1959 is to be utilized for financing the expansion programmes of the respondent-corporation and the remainder, if any, is to be made over to the State Government for the purpose of road development. As pointed out by this Court in Andhra Pradesh Road Transport Corporation v. ITO [1964] 52 ITR 524 (SC), the amount handed over to the State Government does not become a part of the general revenues of the State but is impressed with an obligation that it should be utilized only for the purposes for which it is entrusted, namely, road development. It is not, and cannot be, disputed that road development is an object of general public utility. For the reasons given above, we hold that the respondent-corporation was entitled to the exemption claimed by it both under the 1922 Act and under the 1961 Act." 17. The ld. Counsel for the assessee clarified that the application for registration by MPT was not as a Trust, but as a 'Charitable institution'. Referring to the definition of 'institution' in the Oxford Dictionary, he submitted that an institution is understood to be an establishment, organization or association, i....
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.... and misplaced. MPT is not a commercial organization and notwithstanding withdrawal of exemption under section 10(20), it was eligible for exemption under section 11, as a charitable institution. 20. Finally, the ld. Counsel once again stated that at the stage of examining an application for registration, the CIT was only required to see whether the objectives of the institution were charitable or not. The extent of utilization of income, and the actual exemption under section 11, if any, was to be determined by the ld. Assessing Officer during scrutiny assessment for each year separately. Thus, registration under section 12A was independent of the actual allowance of the claim for exemption under section 11. He strenuously emphasized that MPT was a charitable institution engaged in carrying out activities of general public utility in accordance with the definition contained in section 2 (15) and should, therefore, have been registered under section 12A by CIT, Panaji. Lastly, the ld. A.R made a request that registration under section 12A may kindly be granted retrospectively. 21. On the other hand, the ld. D.R (CIT) strongly defended the order under section 12AA(1)(b)(ii) of....
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....'s order. These can be briefly summarized as below:- (i) The Major Port Trusts Act cannot be said to have created a lawful Trust for the purposes of sections 11 to 13. Mormugao Port Trust was created as a "local Authority" within the meaning of term "person" of the Income-tax Act, 1961 and continues to be one till date; (ii) Application for registration under section 12A is inordinately delayed and the reasons given cannot be valid ones except to evade the charge of income-tax; (iii) MPT is not engaged in activities falling within the meaning of 'charitable purpose' or 'general public utility' and has to be treated as a purely commercial organization; (iv) The extent of utilisation of the income of the Port for any genuine charitable activity can only be assessed during the regular scrutiny assessment for each year separately. 24. CIT (DR) further strongly argued that MPT was a commercial organization with the primary objective of earning profits. The activities of the Port can in no way be said to be charitable in nature. The Port Trust was catering only to the requirements of limited number of importers and exporters, as ....
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....ion. But the word 'Institution' has the particular meaning of an established organized society. Institute is similarly employed. The difference seems to be that Institution being an old word in English and Institute in this sense being an adoption of the French Institute, which is a literary and philosophical society. So among other institutions in large towns, literary, charitable, or commercial, we observe generally in these days a mechanics' institute (Smith Syn Dis)." 26. Accordingly, she submitted that MPT is not a charitable institution. She also repeated the ratio laid down by the Delhi High Court in the case of Agricultural Produce Market Committee v. CIT [2006] 156 Taxman 286, where the Hon'ble High Court observed in paragraph 6 as under: "We have given our anxious consideration to the submissions made by Mrs. Ahlawat. The question that fell for consideration before the Court in the previous round of litigation between the parties was whether the appellant Committee was a local authority within the meaning of section 10(20) of the Income-tax Act, 1961 as it existed before its amendment. Since the Act did not provide any definition for the expres....
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.... or institution. Therefore, even though the status of the assessee is a 'local authority' it is still to be considered as an institution which cannot be debarred from applying for registration under section 12A. Since the assessee came into existence by an Act of the Legislature, there is no person who can be named as founder, author or settler. Section 12A does not make any distinction between a trust or an institution created by private individual or by the Government. If an assessee is an institution, whose object is charitable as defined under section 2(15), the institution would be entitled for registration under section 12A. 29. There is no doubt that the assessee, prior to insertion IT Explanation in section 10(20) with effect from 1-4-2003, was treated as a local body and accordingly, its income was exempt. In view of the statutory charge, the Legislature withdrew blanket exemption enjoyed by the local authorities like the assessee. 30. It may be mentioned that under Article 12 of the Constitution of India the doctrine of instrumentality is not applicable on the assessee (MPT). After the said amendment with effect from 1-4-2003, the word "local authorities" ha....
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.... the Major Port Trusts Act, 1963 has not specifically mentioned that income of the Port Authority would be exempt from the charge of income-tax. This, in our view, is an irrelevant condition for the registration of the institution under section 12A. In fact, had MPT Act, 1963 provided that income of the Port authority would be exempt from the charge of income-tax, there would have been no necessity for the assessee to apply under section 12A for registration because then it was not required to claim exemption under section 11. It is only since the MPT Act has not provided exemption of income of the institution that the assessee is required to claim exemption under the provision of the Income-tax Act. 33. The enactment of section 12AA has brought about important changes in law with effect from assessment year 1997-98. The law now requires satisfaction of the CIT as regards the object of the trust or institution, and the genuineness of its activities. The CBDT's Circular No. 762, dated 18-2-1998 requires that CIT should be satisfied about the charitable or religious nature of the objects and the genuineness of the activities of the institution. At the stage of examination of t....
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....nt scenario of globalization of trade and industry, the transport of goods from one country to another, which is mostly by sea, has become essential. Therefore, development and maintenance of Ports are of 'general public utility' it is also not in dispute that the assessee-institution is genuinely engaged in the activities of development and maintenance of Mormugao Port. Therefore, the assessee duly fulfils both the conditions under section 12AA which are necessary for the registration of the institution under section 12A. The predominant objectives of MPT being charitable in nature, we are unable to agree with the view taken by the CIT, Panaji that the assessee is not eligible to be registered as an institution within the meaning of section 12A of the Act. Since all the requisite conditions are satisfied, we direct the CIT to register the Mormugao Port Trust as an institution under section 12Afrom the first day of financial year in which the application was made i.e., from 1-4-2005. 38. Another grievance of the appellant is mentioned in ground No. 7 of the appeal which relates to the question of condoning the delay in filing the application for registration. It is an un....
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..... Where the application for registration is admitted belatedly and the registration has been granted by condoning the delay, the registration shall have retrospective effect from the date of creation of the trust. The provision inserted below section 12A(a) impliedly requires that the condonation of delay will relate back the effect of registration to the very date of creation of the trust or institution. As a matter of fact, by the amendment of the proviso below clause (a) of section 12A by the Finance (No. 2) Act, 1991, with effect from 1-10-1991, it is now made clear by the Legislature itself that where condonation is granted and the trust is registered upon condonation, the registration shall have effect from the date of creation of the trust. The subsequent amendment only made patent what was latent in the earlier proviso. That apart, it is a principle of interpretation that on any aspect as regards which the law is vague or silent the subsequent legislation removing such vagueness or silence can be taken as guidance for construction of the unamended provisions." 39. In the light of our above discussion and by considering the totality of the facts and circumstances of the c....