Commissioner Of Income Tax v. Gujarat Maritime Board

COMMISSIONER OF INCOME TAX v. GUJARAT MARITIME BOARD DECEMBER 5, 2007 [S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.J Income Tax Act, 1961: c ss. 2(15), 11 and 12-A-Expression "Charitable purpose " and "advancement of any other object of general public utility" in s. 2(15)-Connotation of-Gujarat Maritime Board claiming registration under s.12-A-HELD: Jf the primary or predominant ubject of an institution is charitable any other object which might not D [be ][charitable ][but ][which ][is ][ancillary ][or ][incidental ][to ][dominant ][purpose, ]would not prevent institution from being a valid charity-On facts, Gujarat Maritime Board having been established for predominant purpose of development of minor ports within State of Gujarat, management and control of Board is essential with State Government E [and ][there ][is ][no ][profit ][motive, ][as ][indicated ][by ][provisions ][of ][ss. ][7 ][3, ][7 ][4 ]and 75 of the Gujarat Maritime BoardAct-lncome earned by Board is deployed for development of minor ports in India-Under the Scheme of s.11 (I), source of income must be held under trust or under other legal obligation-Applying the said test, it is clear that Gujarat Maritime Board is under legal obligation to apply income which arises F directly and substantially from business held under trust for development of minor port in State of Gujarat-Therefore, the Board is entitled to be registered as "Charitable Trust" under s.12-A of 1961 Act-Gujarat Maritime Board Act, 1981-s. 3(3). Commissioner of Income Tax, Madras v. Andhra Chamber of Commerce, [196SJ SS ITR 722 (SC); Addi. Commissioner of Income Tax, Gujarat v. Surat Art Silk Cloth Manufacturers Assn., [1980) 221 ITR 2 (SC) and Commissioner of Income Tax, A.P. v. Andhra Pradesh State Road Transport Corporation, [1986) 1S9 ITR l(SC), relied on. 962 Commissioner of Income Tax, Gujarat-Ill Ahmedabad v. A Ahmedabad Rana Caste Asson., [1983] 140 ITR l(SC), referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5656 of 2007. From the Judgment and Order dated 31.07.2006 of the High Court B of Gujarat at Ahmedabad in Tax Appeal No. 1433 of2005. Mohan Parasaran, A.S.G., D.L. Chidananda, Lakshmi Iyengar, B.V. Balararn Das, Krishan Mahajan, K.S. Sampath and Rani Chhabra for the Appellant. Soli Sorabjee and T.R. Andhyarujina, Pritesh Kapur, Hemantika Wahi, Jesal and Pinky for the Respondent. The following Order of the Coutt was delivered ORDER Leave granted. Gujarat Maritime Board is a statutory Authority constituted under Section 3(2) of Gujarat Martime Board Act, 1981. Before 13 .11.2002, the Board was registered as "Local Authority" as defined under Section 3(31) of the General Clauses Act, 1897 which was a very wide definition. Prior to 2002, the Board was availing exemption as Local Authority under Section 10(20) of the 1961 Act. Accordingly, prior to 2002 the income of the Board was not exigible to income-tax under Section 10(20) of the Income-tax Act, 1961. By Finance Act, 2002, an Explanation was added in Section 10(20) by which "Local Authority" was defined. It gave a restricted meaning to the word "Local Authority". By reason of the said Explanation, the expression. "Local Authority" was confined to Panchayats, municipality, G municipal committtee, district board and cantonment board. Thus, Maritime Board did not come within the definition of the expression "Local Authority". Under the circumstance, Gujarat Maritime Board made an A application to the Commissioner for registering it (Board) as a "Charitable Institution" as defined under Section 2(15) of the Income-tax Act, 1961 (hereinafter for the sake of brevity as "1961 Act'). Accordingly, they claimed exemption as Charitable Institution in respect of income derived from their property/business under Section 11 of the 1961 Act. This has B [been ][denied ][by ][the ][Department. ]