AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 1465
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.... of another similarly situated assessee having been granted registration under Section 12A by orders of the Tribunal; which has been acceded to by the Department. This cannot be said to be a question arising from the order of the Tribunal. (iii) Whether the Revenue could have continued prosecution of the instant appeal in the circumstances of the Revenue having acceded to a similar Major Port being registered under Section 12A under the orders of yet another Income Tax Appellate Tribunal; going by the dictum in (2004) 12 SCC 42 [Berger Paints India Ltd. v. Commissioner of Income Tax, Calcutta] ? 2. On facts, suffice it to notice that the assessee had been carrying on activities of a Port having been notified under the Indian Ports Act, 1908 by virtue of notification Nos.SRO 57, 58 and 59 dated 08.01.1952 issued by the Ministry of Transport, Government of India. Like other Ports in India, before 13.11.2002, the assessee herein was registered as a 'local authority' as defined under Section 3(31) of the General Clauses Act, 1897. By virtue of such registration prior to 2002, the assessee was also availing exemption from income-tax as a 'local authority' under Secti....
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....drawn with effect from 01.04.2003 by reason of the amendment dated 13.11.2002. The attempt made for registration under Section 12AA, as a trust established for "charitable purpose" as defined by Section 2(15); as has been correctly found by the Commissioner was to necessitate recourse to an alternate plan for claiming exemption. We have to immediately notice that there cannot be any malafides found on the attempt made by the assessee to get an exemption, which was permissible in accordance with law. In any event, having found that the delay was not entitled to be condoned, the Commissioner went ahead and looked at the issue of registration, since even if the delay is not condoned the registration could be granted from the financial year in which the registration is sought for, under Section 12A. 5. The contentions of the assessee with respect to the various provisions of the Major Port Trusts Act, 1963 and the functions carried on by the assessee were extracted. The constitution of the trust was also noticed along with the manner in which the income generated was to be applied. The Commissioner found that there was no trust created in the manner envisaged under Sections 11, 12 and....
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....nd the provisions under Sections 11, 12 and 12A inapplicable and also referred to the various leases made by the Port Trust to Companies for starting hotels and other business activities. 7. The Tribunal reversed the findings of the Commissioner based on the various decisions placed before it; which were also placed before us in arguments. We have, in fact, specifically taken note of the documents produced by the assessee as Annexure-R1(a), which indicates that Mormugao Port Trust, which is a similarly situated entity, was granted registration under Section 12AA of the IT Act by the Panaji Bench of the Income Tax Appellate Tribunal. The issue was considered in the meeting of the Committee on Disputes (CoD) on 26.06.2008. The specific issue considered as item No.13 and the decision as given in the minutes of the CoD meeting produced along with Annexure-R1(a) are as below: "Whether the Mormugao Port Trust is eligible for registration under Section 12A i.e. whether the income of Mormugao Port Trust is eligible for exemption under Section 11." "The representative of CBDT stated that the issue has attained finality as the apex court has since decided it against the department. He ....
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....n the definition of local authority was restricted and the Port Trust was taken out of such definition and also made liable to tax under the IT Act. The mere fact that the assessee had claimed registration under an exemption clause, when the registration available to it under one another clause was taken away, does not by itself stand in the way of a proper consideration of the claim raised. 11. Though in common parlance a charitable purpose has its source in an altruistic thought and often the money to carry out the same is generated from voluntary contributions; the exemption under Section 11 and 12 has to be read along with Section 2 (15). A charitable purpose as defined under Section 2 (15) takes within its ambit advancement of any object of general public utility. The exemption under Section 12 is for income of trusts or institutions from voluntary contributions and under Section 11 for income from property held for charitable or religious purposes. The misconception of the Commissioner was, first, in having decided the issue of registration looking solely at how the income was generated without a consideration of how it is applied; which is the most relevant aspect to be con....
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....rying passengers and for conveying, receiving and storing goods landed or to be shipped or otherwise. It also include moorings and cranes, scales and all other appliances required for loading and unloading vessels. The works include reclamation, excavation, enclosing or raising any part of the foreshore of the Port and such breakwaters and other works as may be expedient. Dredgers and other machines for cleaning, deepening and improving any portion of the Port, lighthouses, lightships, beacons, buoys, pilot boats, vessels, tugs or other boats and sinking of tube-wells and equipment, maintenance, are all, included in the works and appliances that are covered under Section 35. Section 37 confers the power on the Board to order sea-going vessels to use docks, wharves managed by the Board and not others with an auxiliary power to compel all sea going vessels to use the docks and wharves managed by the Port Trust alone, when there is sufficient accommodation under Section 38. The services offered by the Board has been further elaborated in Section 42 which refers to services for landing shipping or transshipping passengers and goods and so on and so forth. The Board also has been mulcte....
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....able purposes. Under the 1922 Act, charitable purposes included "relief of the poor education, medical relief and the advancement of any other object of general utility" as in the extracted provision relevant for this case. The provision under the 1961 Act, was analogous to the extracted provision but with the addition of " not involving the carrying on of any activity for profit". On the interpretation of the exclusion provided to activity for profit, we refer to Paragraph 16 and part of 17 in Surat Art Silk Cloth Manufacturers Association (supra): 16. The other interpretation is to see whether the purpose of the trust or institution in fact involves the carrying on of an activity for profit or in other words whether an activity for profit is actually carried on as an integral part of the purpose or to use the words of Chandrachud, J, as he then was in Dharmodayam case (1977) 4 SCC 75, "as a matter of advancement of the purpose". There must be an activity for profit and it must be involved in carrying out the purpose of the trust or institution or to put it differently, it must be carried on in order to advance the purpose or in the course of carrying out the purpose of the trus....
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....minant object, but even so it was held by the Judicial Committee that since the purpose served was an object of general public utility, it was a charitable purpose. It is clear from the speech of the Finance Minister that it was with a view to setting at naught this decision that the exclusionary clause was added in the definition of "charitable purpose". The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit making is the predominant object of the activity, the purpose, though an object of general public utility, would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity that....
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....he 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 cut in Section 18 is to be performed. It is now firmly established by decisions of this Court in the Surat Art Si!k Cloth Manufacturers' Association case(1980) 2 SCC 31 and the Bar Council of Maharashtra case (1981) 3 SCC 308 that the test is: "What is the predominant object of the activity - whether it is to carry out a charitable purpose or to earn profit?" If the predominant 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. 16. We are of the opinion that the decisions squarely apply in the case of the assessee also. The public utility services are managed through Corporations or Departments of the Government. They are establishments and institutions independently carrying on such services for the benefit of the general public. APSRTC was found to be established for the purpose of facilitating the transport of passengers from one place to another which services are of public utility. Likewise, as ....
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....ome of the assessee was disentitled to exemption from tax. This contention was, however, rejected by the Kerala High Court which took the view that the business of conducting kuries was held under trust to apply its income for the charitable purpose of the assessee and was not carried on as a matter of advancement of that charitable purpose and hence it was not possible to say that the purpose of the assessee involved the carrying on of an activity for profit so as to attract the mischief of the last few words in Section 2 clause (15). Krishna Iyer, J., in the Indian Chamber of Commerce case while discussing the judgment of the Kerala High Court in the Dharmodayam case, observed, consistently with the interpretation placed by him on the last concluding words in Section 2 clause (15), that the decision of the Kerala High Court in this case proceeded on a wrong test and impliedly, therefore, was incorrectly decided. But this Court while disposing of the appeal from the decision of the Kerala High Court differed from the view taken by Krishna Iyer, J. and upheld the judgment of the Kerala High Court. This Court pointed out that the facts of Dharmodayam case were not before Krishna Iye....
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....ments. It was argued that as per the earlier enactment if the income derived from a business was used in advancing an object of general public utility, even if the same involved carrying on any activity of profit; it was exempted, while the new definition provided a specific exclusion with respect to an activity carried on for profit. The Supreme Court refused to accept the said argument and unequivocally held that the business of kuries was held in trust. We specifically refer to the underlined portion in the above extract, to find that in the assessee's case also the purpose is to afford services and facilities to the exporters and importers to which end commercial activities are carried on by the Port. The lease of buildings and plots for setting up of warehouses and hotels are not the purpose for which the Port Trust is established. But the income generated from such activities are applied to the facilitation of various services and facilities to the exporters and importers. We are definitely of the opinion that it is a public utility service and the object of the Trust is not the carrying on of any activity of profit. 19. We also refer to the decision of the Hon'ble S....
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....for the development of minor ports in the State of Gujarat. In the circumstances, in our view the judgment of this Court in Andhra Pradesh State Road Transport Corporation squarely applies to the facts of the present case." 21. The decisions squarely apply herein too. We also notice Sub-section (3) of Section 12AA wherein though a trust or institution is granted registration, the Commissioner is empowered to look into the activities carried on to cancel the registration on satisfaction that the activities are not genuine or are not being carried out in accordance with the objects of the trust or institution as the case may be. The definition for the subject period did not have the words involving the carrying on of any activity for profit, in later amendments, it came in a different form, and then again was omitted. In APSRTC the finding was rendered even when the provision contained the specific restriction insofar as the carrying on of any activity for profit. Hence even when the carrying on activity of profit stood included the assessee would be entitled to be covered under Section 2(15). 22. We are also not convinced that the mere delay would have affected the registration b....
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....pect to the Cochin Port Trust; both of whom are entities of same status, coming within the definition of major ports as available in Major Port Trust Act, carrying on identical activities and providing similar facilities and services. Annexure R1(a) was produced by the assessee on 12.07.2018. We hence specifically directed the learned Standing Counsel, Government of India (Taxes) to get instruction as to the document produced, by interim order dated 20.07.2018. Till 14.11.2018,no instructions were forthcoming and we directed the appearance of the Assistant Commissioner of Income Tax, Circle 2(1), Non-Corporate Range - 2, Thoppumpady, Kochi by interim order dated 14.11.2018. The Assistant Commissioner appeared on 22.11.2018 and he submitted before us that no decision can be taken by him. We hence directed the Commissioner of Income Tax, Cochin to file an affidavit as to why the litigation on the very same issue pending against the Mormugao Port Trust was withdrawn, while that against the Cochin Port Trust is being pursued by the Department. This was by interim order dated 22.11.2018. The Commissioner has filed an affidavit dated 28.11.2018 admitting that though the facts of the Morm....