Gujarat High Court
Commissioner Of Income-Tax vs Gujarat Maritime Board on 31 July, 2006
Equivalent citations: (2007)208CTR(GUJ)439
JUDGMENT
1. The following question is proposed for admission of this appeal:
Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that Gujarat Maritime Board fulfills the conditions as envisaged in Section 12AA of the Income-tax Act, 1961, which are necessary for its registration under Section 12A of the said Act?
2. The short controversy involved in this appeal is whether the Gujarat Maritime Board is a charitable trust/institution or not, for the purpose of Section 12A of the Income-tax Act, 1961. This aspect has been considered by the Tribunal as under:
4. We have considered the rival submissions with reference to each and every ground given by the Commissioner of Income-tax for refusing the registration of the assessee under Section 12A of the Act. Our finding in this regard is as under:
(i) The first ground given by the Commissioner of Income-tax for refusing the registration of the assessee is that the assessee cannot be considered to be a lawful trust within the meaning of term 'trust' used under Sections 11, 12 and 13 of the Income-tax Act, 1961. Section 12AA which is extracted in paragraph 3 above provides procedure for registration of trust. As per Section 12AA(1), any trust or institution can make an application under Section 12A(a) of the Act for the registration. It is contended by learned Counsel before us that the assessee is not a trust but it is an institution which is lawfully created by the State Government. Therefore, it is an institution which is entitled to apply for registration under Section 12A of the Act. The learned Departmental Representative could not satisfy us that the assessee is not an institution. We, therefore, hold that the assessee is an institution within the meaning of Section 12AA(1).
5. The Commissioner of Income-tax has held that the assessee was created as a local authority within the meaning of 'person' for the purpose of the Income-tax Act, 1961 and therefore, it cannot be considered as a public trust or charitable trust. We find that Section 2(31) of the Income-tax Act, 1961 defines the word 'person' as under:
2. (31) "person" includes-
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or not,
(vi) a local authority, and
(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.
In the above definition of the 'person' there is no mention of either trust or institution. As per Section 12A of the Act only trusts or institutions are entitled for registration. If the view of the Commissioner of Income-tax is accepted as correct, then no person would be entitled to registration under Section 12A of the Act. Therefore, if a person is a trust or institution, it is entitled to registration under Section 12A of the Act. Therefore, even though as per the definition of 'person' it is falling in another category like company, association of persons or local authority, in paragraph 4 we have already held that the assessee is an institution and therefore merely because within the definition of 'person' it is termed as local authority it would be no bar to apply for the registration under Section 12A of the Act.
6. The Commissioner of Income-tax has mentioned that the application is late by 21 years which is unusual delay. That as per the proviso to Section 12A(a) if there is delay in filing of application for the registration of institution and the Commissioner of Income-tax is satisfied that the assessee was prevented from making the application within time for sufficient reason, then the assessee would be entitled to registration from the date of creation of the trust. But if the Commissioner of Income-tax is not satisfied with the reasons for delay in making the application, the assessee would be entitled to registration from the 1st day of the financial year in which the application is made. Therefore, because of delay in filing the application the registration of the assessee cannot be refused. The assessee made the application on November 13, 2002, and therefore since the Commissioner of Income-tax is not satisfied with the reasons for delay in filing of the application, the assessee would be entitled to the registration from April 1, 2002, and not for the earlier period.
7. The Commissioner of Income-tax has refused to register the trust on the ground that the assessee has not given technical details, viz., name and address of the original founder/author/settler of the trust property. It was explained by learned Counsel that the assessee was created by the Gujarat Maritime Board Act, 1981, passed by the State Government, which is approved by the President of India. Copy of the Act was duly submitted before the Commissioner of Income-tax. It was not the case of creation of trust by some individual and therefore there was no specific name of any founder or settler of the trust and therefore the Commissioner of Income-tax was not justified in denying to register the institution for want of name of the settler or author of the trust.
8. The Commissioner of Income-tax has stated that Sections 11,12 and 13 provide tax incentives to private individuals and not to public enterprises/public sector undertakings. The learned senior Departmental Representative also vehemently contended that the assessee is a statutory body and it is discharging its duties as provided in the GMTB Act, 1981. The statutory bodies or public enterprises (or) public sector undertakings are created for discharging their specific duties and therefore they cannot be said to be doing any charitable work. He contended that the statutory body is not entitled to exemption under Section 11.
Learned Counsel for the assessee has strongly opposed the above submissions of the learned Departmental Representative.
8.1 After considering the arguments of both the sides and the facts of the case, we are unable to agree with the stand of the Revenue. Section 12A does not make any distinction between the trust and institution created by private individuals or by the Government. If an assessee is an institution whose object is charitable as defined under Section 2(15) of the Act, in our opinion, the trust/institution would be entitled to registration under Section 12A of the Act.
9. The Commissioner of Income-tax has mentioned that the GMBT Act, 1981, have not specifically mentioned that income of the port authority could be exempt from the charge of income-tax. In our opinion, it is an irrelevant consideration for the registration of the institution under Section 12A of the Act. In fact, had the GMTB Act, 1981, provided that income of the port authority would be exempt from 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 Sections 11,12 and 13 of the Act. Since the GMTB Act has not provided about the exemption of income of the port authority, therefore the assessee is required to claim the exemption under the provisions of the Income-tax Act.
10. It has also been mentioned by the Commissioner of Income-tax that the assessee may earn income from its activity of providing infrastructural facilities and also from other ancillary activities such as rental income from letting out of the property, sale of goods, etc. which may not be exempted. It is also contended by the learned DR that the assessee does not have any income which is exempt under Section 11. However, in our opinion, whether part of the income is exempt or not is irrelevant for the registration of the institution. This issue would be relevant only when the assessment of a particular assessment year would be made by the Assessing Officer. For the registration of the institution, the Commissioner of Income-tax has to satisfy himself about the object of the institution and genuineness of the activities of the institution and not about the nature of the income. If the object of the institution falls within the definition of charitable purposes under Section 2(15) of the Act and the institution is genuinely carrying out such object, the Commissioner of Income-tax must register the institution. Therefore, the moot question to examine is whether the object of the assessee institution is charitable or not? Section 2(15) of the Income-tax Act defines the words 'charitable purpose' as under:
2. (15) "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility.
From the above definition of 'charitable purpose', it is evident that advancement of any other object of general public utility is also charitable purpose. The above definition of 'charitable purpose' is modified by the Finance Act, 1983, with effect from April 1, 1984. Before the above amendment, the purpose, i.e., advancement of any other object of general public utility was qualified by the words 'not involving the carrying on of any activity for profit'. However, the Finance Act, 1983, has omitted the words 'not involving the carrying on of any activity for profit'. Therefore, after the omission of the above words, if an activity which is for the purpose of advancement of an object of general public utility is carried out with profit motive, it would fall within the definition of 'charitable purpose' under Section 2(15). Though the Legislature by simultaneous amendment under Section 11 (4A) has provided that the exemption under Section 11 shall not be available in relation to any income of a trust or 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 a trust is concerned, the Commissioner of Income-tax 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. While taking this view, we derive support from the decision of the honble apex court in the case of Cit v. A.P. state Road Transport Corporation . It is also not in dispute that the assessee institution is genuinely engaged in the activities of development and maintenance of ports in the State of Gujarat. Therefore, in our opinion, the assessee duly fulfils both the conditions of Section 12AA which are necessary for the registration of the institution under Section 12A. We therefore direct the Commissioner of Income-tax to register the trust under Section 12A with effect from April 1, 2002.
3. Admittedly, the Gujarat Maritime Board is a statutory body and the Tribunal has after detailed discussion held that under the requirement of Section 12A of the Income-tax Act, 1961, the Gujarat Maritime Board is a charitable institution and is entitled to the benefit of Section 12A with effect from April 1, 2002.
4. Considering the detailed discussion of the Tribunal from paragraph No. 4 onwards, we see no infirmity in the order of the Tribunal.
5. The appeal stands dismissed at the admission stage.