Ita v. Commissioner Of Income Tax, Calcutta] ?_

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 12TH DAY OF DECEMBER 2018 / 21ST AGRAHAYANA,1940 ITA.No. 51 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 797/2007 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 22-08-2008 APPELLANT/S: THE COMMISSIONER OF INCOME TAX, COCHINCOCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: COCHIN PORT TRUST, WILLINGTON ISLANDWILLINGTON ISLAND, KOCHI-3. BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SRI.ANIL D. NAIRSRI.K.JOHN MATHAISRI.P.BENNY THOMAS OTHER PRESENT: SRI PKR MENON SR COUNSEL FOR GOI TAXES, THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 12.12.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: CR J U D G M E N T Vinod Chandran, J. The following questions arise from the order ofthe Income Tax Appellate Tribunal:- (i) Whether in the facts and circumstances ofthe case, the Tribunal was correct, in havingdirected the Commissioner to condone the delayin filing the application for registrationunder Section 12A of the Income Tax Act, 1961('IT Act', for short) and also directing grantof registration Section 12A ? (ii) Whether the Tribunal was correct in havingentertained the additional ground of a deemedgrant of registration under Section 12Aespecially when it was raised at the appellatestage? An additional ground arises in the course of thependency of the appeal by reason of anothersimilarly situated assessee having been grantedregistration under Section 12A by orders of theTribunal; which has been acceded to by theDepartment. This cannot be said to be a questionarising from the order of the Tribunal. (iii) Whether the Revenue could havecontinued prosecution of the instant appealin the circumstances of the Revenue havingacceded to a similar Major Port beingregistered under Section 12A under theorders of yet another Income Tax AppellateTribunal; going by the dictum in (2004) 12SCC 42 [Berger Paints India Ltd. v.Commissioner of Income Tax, Calcutta] ? 2. On facts, suffice it to notice that theassessee 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 and59 dated 08.01.1952 issued by the Ministry ofTransport, Government of India. Like other Portsin India, before 13.11.2002, the assessee hereinwas registered as a 'local authority' as definedunder Section 3(31) of the General Clauses Act,1897. By virtue of such registration prior to 2002,the assessee was also availing exemption fromincome-tax as a 'local authority' under Section10(20) of the IT Act. When an Explanation wasadded under Section 10(20) by which 'localauthority' was defined, the restricted meaning;took the assessee along with some others out of thedefinition of 'local authority' and hence, was thenon exigible to tax under the IT Act. 3. The assessee then made an application tothe Commissioner of Income Tax to register it as acharitable institution as defined under Section ITA No.51/2009 2(15) of the IT Act. This was for the purpose ofclaiming exemption as a trust established forcharitable purposes in respect of income derivedfrom their properties/businesses as permissibleunder Section 11 of the IT Act. The Commissionerdeclined the prayer, and in appeal the Tribunalallowed the same. There is also an ancillaryquestion insofar as the delay occasioned of aboutthree years, from the date on which the definitionof 'local authority' was amended and restricted.Whether the delay was condonable or not and whetherthere could be a deemed registration under Section12A for reason of the delay in consideration byvirtue of Section 12AA(2) of the IT Act. ITA No.51/2009 2(15) of the IT Act. This was for the purpose ofclaiming exemption as a trust established forcharitable purposes in respect of income derivedfrom their properties/businesses as permissibleunder Section 11 of the IT Act. The Commissionerdeclined the prayer, and in appeal the Tribunalallowed the same. There is also an ancillaryquestion insofar as the delay occasioned of aboutthree years, from the date on which the definitionof 'local authority' was amended and restricted.Whether the delay was condonable or not and whetherthere could be a deemed registration under Section12A for reason of the delay in consideration byvirtue of Section 12AA(2) of the IT Act. 4. In the present case, the applicationunder Section 12AA was made on 09.06.2006 and theorder was passed on 10.08.2007. Sub-section (2) ofSection 12AA also mandates that the applicationshall be considered and the registration granted or refused before six months from the last date of themonth in which the application was received. TheCommissioner by Annexure-B order passed afterfourteen months refused to grant the registration.The Commissioner, at the first instance, was of theopinion that there was no satisfactory explanationfor the delay and what was stated was merely thatthe delay was not intentional. The assessee wasagain requested to explain the delay. In a furtherapplication, the major contention was that thedelay was condoned in similar applications all overthe country. The decisions relied on by theassessee were distinguished. The provisions ofSection 12A was found to necessitate an applicationfor registration before the expiry of one year fromthe date of creation of the trust or establishmentof the institution. The date of notification of thetrust being 29.02.1964, the application made on09.06.2006 after about 42 years was found to be inordinately delayed. Again, it was found that theexemption under Section 10(20) was withdrawn witheffect from 01.04.2003 by reason of the amendmentdated 13.11.2002. The attempt made for registrationunder Section 12AA, as a trust established for"charitable purpose" as defined by Section 2(15);as has been correctly found by the Commissioner wasto necessitate recourse to an alternate plan forclaiming exemption. We have to immediately noticethat there cannot be any malafides found on theattempt made by the assessee to get an exemption,which was permissible in accordance with law. Inany event, having found that the delay was notentitled to be condoned, the Commissioner wentahead and looked at the issue of registration,since even if the delay is not condoned theregistration could be granted from the financialyear in which the registration is sought for, underSection 12A. ITA No.51/2009 5. The contentions of the assessee withrespect to the various provisions of the Major PortTrusts Act, 1963 and the functions carried on bythe assessee were extracted. The constitution ofthe trust was also noticed along with the manner inwhich the income generated was to be applied. TheCommissioner found that there was no trust createdin the manner envisaged under Sections 11, 12 and12A of the IT Act. The Major Port Trusts Act wasfound to have merely appointed a Board of Trustees,without any creation of trust as such by a specificprovision. The definition of 'trust' under theTrusts Act, 1882 was referred to as an obligationannexed to the ownership of the property andarising out of a confidence reposed in and acceptedby the owner or declared and accepted by him forthe benefit of another or of another and the owner.The Commissioner noticed that the Trusts Act wouldnot be applicable to public trusts, but however, the essential ingredients of trust was found to beequally applicable to a public trust. TheCommissioner also found from the preamble of theMajor Port Trusts Act that the basic purpose is toconstitute the Port authorities and to vest in suchauthorities the administration, control andmanagement of the Port and held that the Act didnot create a charitable trust. There was also nodiscernible transfer of immovable property infavour of the trustees, unless the same isevidenced by a document of transfer. It was foundthat there is no founder or settlor; nor anyspecific movable or immovable property, that couldbe termed as a trust property; nor is there anyspecified beneficiary indicated in any instrument,which could make Cochin Port Trust a 'trust' forthe purpose of Sections 11,12 and 12A of the ITAct. 6. On the activities carried on by the Portauthorities, it was found that the assessee rendersservices to the importers and exporters for aprice, and hence, functions purely as a commercialorganisation. The commercial element, hence, wasfound to take the assessee away from the definitionof 'charitable purpose'. It was also asserted that,normally, charitable trusts generate funds fortheir activities from donations from the public,but however, the Port generates its funds throughrendering of services on commercial lines. Hencethere was in existence no distinction between theassessee and a private Port. The income was foundto be generated from Port and dock charges, cargohandling, storage charges, railway earnings and soon and so forth. None of it has been sourced forany charitable activity or even a non-commercialactivity or source. The concept of charity denotesaltruistic thought and action and it cannot be directedtowards benefitingoneself.The Commissioner, hence, found the provisions under Sections 11, 12 and 12A inapplicable and alsoreferred to the various leases made by the PortTrust to Companies for starting hotels and otherbusiness activities. 7. The Tribunal reversed the findings ofthe Commissioner based on the various decisionsplaced before it; which were also placed before usin arguments. We have, in fact, specifically takennote of the documents produced by the assessee asAnnexure-R1(a), which indicates that Mormugao PortTrust, which is a similarly situated entity, wasgranted registration under Section 12AA of the ITAct by the Panaji Bench of the Income Tax AppellateTribunal. The issue was considered in the meetingof 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 iseligible for registration underSection 12A i.e. whether the income ofMormugao Port Trust is eligible forexemption under Section 11.” “The representative of CBDT statedthat the issue has attained finalityas the apex court has since decided itagainst the department. He soughtpermission of the Committee towithdraw the case. The Committeedirected that the case may be treatedas withdrawn.” 8. The assessee had claimed on the basis of the decision in Berger Paints India Limited(supra) that the Income Tax Department shall not be allowed to pursue the appeal, in view of a specificdecision having been taken in the case of Mormugao ITA No.51/2009 ::13:: Port Trust to accede to the decision of ITATgranting registration under Section 12AA. The “The representative of CBDT statedthat the issue has attained finalityas the apex court has since decided itagainst the department. He soughtpermission of the Committee towithdraw the case. The Committeedirected that the case may be treatedas withdrawn.” 8. The assessee had claimed on the basis of the decision in Berger Paints India Limited(supra) that the Income Tax Department shall not be allowed to pursue the appeal, in view of a specificdecision having been taken in the case of Mormugao ITA No.51/2009 ::13:: Port Trust to accede to the decision of ITATgranting registration under Section 12AA. The minutes of the CoD was on 26.06.2008 and thedecision referred to therein is that reported in(2007) 295 ITR 561 [Commissioner of Income Tax v.Gujarat Maritime Board]. The assessee also relieson the decisions of the Honourable Supreme Court in(1980) 2 SCC 31 [Additional Commissioner of Income,Gujarat v. Surat Art Silk Cloth Manufacturers'Association, Surat]a Constitution Bench decision,and (1986) 2 SCC 391 [Commissioner of Income Tax v.Andhra Pradesh State Road Transport Corporation]. 9. We have heard the learned Senior Counsel, Government of India (Taxes) for theDepartment and Sri.P.Gopinath, learned counsel forthe assessee. 10. The Indian Ports Act defines 'MajorPort' as "any port which the Central Governmentmay by notification in the Official Gazette declare, or may under any law for the time being inforce have declared, to be a major port”. As wenoticed, the Central Government had issued anotification specifically extending the provisionsof the Indian Ports Act to the Port of Cochin. TheMajor Port Trusts Act, a subsequent enactment,defines a Major Port as having the same meaning asin the Indian Ports Act. The Major Port TrustsAct, specifically by Section 1(3), applies theprovisions in the first instance, inter alia, tothe Major Port of Cochin. Major Port of Mormugaowas also brought within the ambit of the Major PortTrusts Act by notification No.GSR No.922 dated22.06.1964 w.e.f. 01.07.1964. As far as theassessee-Cochin Port Trust is concerned, the samewas brought under the Major Port Trusts Act on16.10.1963 as found by the Commissioner. However,at that point, there was absolutely no necessityfor the assessee to apply under Section 12AA, since ITA No.51/2009 at that time, they were registered as a localauthority and had been entitled to exemption underSection 10(20) of the IT Act. The need for aregistration as a trust carrying on activities ofcharitable purposes arose when the definition oflocal authority was restricted and the Port Trustwas taken out of such definition and also madeliable to tax under the IT Act. The mere fact thatthe assessee had claimed registration under anexemption clause, when the registration availableto it under one another clause was taken away, doesnot by itself stand in the way of a properconsideration of the claim raised. 11. Though in common parlance a charitablepurpose has its source in an altruistic thought andoften the money to carry out the same is generatedfrom voluntary contributions; the exemption underSection 11 and 12 has to be read along with Section2 (15). A charitable purpose as defined under Section 2 (15) takes within its ambit advancementof any object of general public utility. Theexemption under Section 12 is for income of trustsor institutions from voluntary contributions andunder Section 11 for income from property held forcharitable or religious purposes. The misconceptionof the Commissioner was, first, in having decidedthe issue of registration looking solely at how theincome was generated without a consideration of howit is applied; which is the most relevant aspect tobe considered under Section 12AA. Section 2 (15) takes within its ambit advancementof any object of general public utility. Theexemption under Section 12 is for income of trustsor institutions from voluntary contributions andunder Section 11 for income from property held forcharitable or religious purposes. The misconceptionof the Commissioner was, first, in having decidedthe issue of registration looking solely at how theincome was generated without a consideration of howit is applied; which is the most relevant aspect tobe considered under Section 12AA. 12. Yet again; on the question of whetherthe assessee is a trust or not, we see that theCommissioner laboured on the definition of Trustin the Indian Trusts Act, without avail andmisunderstood the true import of the definition. Wefind that all the ingredients which have beenreferred to by the Commissioner is available,insofar as the present assessee is concerned. The ITA No.51/2009 ::17:: statute as has been found by the Commissionerconstitutes a Board of Trustees under Chapter-II,Section 3 & 4 and designates it to be a bodycorporate having perpetual succession and a commonseal, by Section 5. Section 29 of Chapter IV vests;the property, assets and funds for the purposes ofthe Port, vested in the Central Government or anyother authority before the appointed day, on theBoard constituted under the Act. Section 29 also,by the various sub-clauses transfers the debts,obligations and liabilities of, the non-recurringexpenditures incurred by, all sums due to, allsuits and legal proceedings by or against and everyemployee connected with the affairs of the Port,under; the Central Government or any authority, tobe thereafter the responsibility or liability ofthe Board. The necessity for a documenttransferring the same from the settlor to theTrustees is also present in the form of a statute and the notifications brought out, which theCommissioner failed to take note of. As to thebeneficiary not being specifically pointed out, wehave to notice the Commissioner's own finding thatthe Port is intended for facilitating imports andexports which activities are definitely infurtherance of public good and is in advancement ofgeneral public utility. The beneficiary as wediscern from the various provisions of the MajorPort Trusts Act is the general public, thecitizenry of the Country. 13. The works and services to be providedby the Ports has also been delineated in Chapter Vof the Port Trust Act. Section 35 confers power onthe Board to execute such works and provide withinor without the limits of the Port such appliancesas it may deem necessary to further the objects ofthe Port. The works and appliances include wharves,quays, docks, stages, jetties, piers and appliances include buses, railways, locomotives, rollingstock, sheds, hotels, warehouses and otheraccommodation for passengers and goods as alsoother appliances for carrying passengers and forconveying, receiving and storing goods landed or tobe shipped or otherwise. It also include mooringsand cranes, scales and all other appliancesrequired for loading and unloading vessels. Theworks include reclamation, excavation, enclosing orraising any part of the foreshore of the Port andsuch breakwaters and other works as may beexpedient. Dredgers and other machines forcleaning, deepening and improving any portion ofthe Port, lighthouses, lightships, beacons, buoys,pilot boats, vessels, tugs or other boats andsinking of tube-wells and equipment, maintenance,are all, included in the works and appliances thatare covered under Section 35. Section 37 confersthe power on the Board to order sea-going vessels to use docks, wharves managed by the Board and notothers with an auxiliary power to compel all seagoing vessels to use the docks and wharves managedby the Port Trust alone, when there is sufficientaccommodation under Section 38. The servicesoffered by the Board has been further elaboratedin Section 42 which refers to services for landingshipping or transshipping passengers and goods andso on and so forth. The Board also has beenmulcted with the responsibility for loss etc., ofthe goods on board, which it has taken charge underthe provisions of the Act, by Section 43. The Boardhasalso theresponsibility toprovideaccommodation to the Customs Officers of theCentral Government under Section 44. 14. The functions as seen from Chapter V infact specifically commends us to find a publicutility service being carried on by the Board,facilitating the movement of goods into and without the country. The Ports enable commerce and economyof the country, trading with foreign countries andchecks and balances of goods exported andimported , all in the larger national interest. Italso advances the collection of revenue andfacilitates easy movement of goods and servicesacross the seas. Now the question arises as towhether the activities carried on would fall underdefinition of charitable purposes as has beendefined under sub-section 2(15). We are consciousof the fact that there have been amendments tothe definition clause at various points. Theprovision as available from 1984 to 2009, whichapplies for the purposes of this appeal, since theapplication was filed in the year 2006 and declinedin the year 2007 is as extracted here under:(15) “charitable purpose” includes reliefof the poor, education, medical relief andthe advancement of any other object of general public utility”. 15. To understand the definition we firstrefer to the decision of the Supreme Court inAndhra Pradesh State Transport Corporation(hereinafter referred as APSRTC). The Corporationwas constituted under the Road TransportCorporation Act and claimed exemption as anactivity carried on for charitable purposes. Theapplication was filed in the year 1958 on thecommencement of its activities in that year. TheCorporation approached the High Court of AndhraPradesh, contending that the property and income isof a State exempted from Union taxation underArticle 289. The Corporation failed to get anexemption under Article 289(1), up to the Hon'bleSupreme Court. Later, having filed a return forthe assessment years 1960-61 and 1961-62, itclaimed exemption from income tax under Section4(31) of the Indian Income Tax Act, 1922 for the first year and under Section 11 of the Income TaxAct, 1961 for the second year. The materialprovisions of both the statutes granting exemptionat that time, included charitable purposes. Underthe 1922 Act, charitable purposes included “reliefof the poor education, medical relief and theadvancement of any other object of general utility”as in the extracted provision relevant for thiscase. The provision under the 1961 Act, wasanalogous to the extracted provision but with theaddition of “ not involving the carrying on of anyactivity for profit”. On the interpretation of theexclusion provided to activity for profit, we referto Paragraph 16 and part of 17 in Surat Art SilkCloth Manufacturers Association (supra): 16. The other interpretation is to seewhether the purpose of the trust orinstitution in fact involves the carryingon of an activity for profit or in other 16. The other interpretation is to seewhether the purpose of the trust orinstitution in fact involves the carryingon of an activity for profit or in other words whether an activity for profit isactually carried on as an integral partof the purpose or to use the words ofChandrachud, J, as he then was inDharmodayam case ([1977) 4 SCC 75], “as amatter of advancement of the purpose”.There must be an activity for profit andit must be involved in carrying out thepurpose of the trust or institution or toput it differently, it must be carried onin order to advance the purpose or in thecourse of carrying out the purpose of thetrust or institution. It is then that theinhibition of the exclusionary clausewould be attracted. This appears to us tobe a more plausible construction whichgives meaning and effect to the lastconcluding words added by the legislatureand we prefer to accept it. Of course,there is one qualification which must bementioned here and it is that if theconstitution of a trust or institutionexpressly provides that the purpose shallbe carried out by engaging in an activity which has a predominant profit motive,as, for example, where the purpose isspecifically stated to be promotion ofsports by holding cricket matches oncommercial lines with a view to makingprofit, there would be no scope forcontroversy, because the purpose would,on the face of it, involve carrying on ofan activity for profit and it would benon-charitable even though no activityfor profit is actually carried on or, inthe example given, no cricket matches arein fact organised. 17. ...The Finance Minister explained thereason for introducing this exclusionaryclause in the following words:reason for introducing this exclusionaryclause in the following words: “The definition of ‘charitable purpose’in that clause is at present so widelyworded that it can be taken advantage ofeven by commercial concerns which, whileostensibly serving a public purpose, getfully paid for the benefits provided bythem namely, the newspaper industry whichwhile running its concern on commercial lines can claim that by circulatingnewspapers it was improving the generalknowledge of the public. In order toprevent the misuse of this definition insuch cases, the Select Committee feltthat the words ‘not involving thecarrying on of any activity for profit’should be added to the definition.” It is obvious that the exclusionary clausewas added with a view to overcoming thedecision of the Privy Council in theTribune case ([1939) 7 ITR 415] where it washeld that the object of supplying thecommunity with an organ of educated publicopinion by publication of a newspaper wasan object of general public utility andhence charitable in character, even thoughthe activity of publication of thenewspaper was carried on commercial lineswith the object of earning profit. Thepublication of the newspaper was anactivity engaged in by the trust for thepurpose of carrying out its charitablepurpose and on the facts it was clearly an It is obvious that the exclusionary clausewas added with a view to overcoming thedecision of the Privy Council in theTribune case ([1939) 7 ITR 415] where it washeld that the object of supplying thecommunity with an organ of educated publicopinion by publication of a newspaper wasan object of general public utility andhence charitable in character, even thoughthe activity of publication of thenewspaper was carried on commercial lineswith the object of earning profit. Thepublication of the newspaper was anactivity engaged in by the trust for thepurpose of carrying out its charitablepurpose and on the facts it was clearly an activity which had profit making as itspredominant object, but even so it washeld by the Judicial Committee that sincethe purpose served was an object ofgeneral public utility, it was acharitable purpose. It is clear from thespeech of the Finance Minister that it waswith a view to setting at naught thisdecision that the exclusionary clause wasadded in the definition of “charitablepurpose”. The test which has, therefore,now to be applied is whether thepredominant object of the activityinvolved in carrying out the object ofgeneral public utility is to subserve thecharitable purpose or to earn profit.Where profit making is the predominantobject of the activity, the purpose,though an object of general publicutility, would cease to be a charitablepurpose. But where the predominant objectof the activity is to carry out thecharitable purpose and not to earn profit,it would not lose its character of acharitable purpose merely because some profit arises from the activity. Theexclusionary clause does not require thatthe activity must be carried on in such amanner that it does not result in anyprofit. It would indeed be difficult forpersons in charge ofa trust orinstitution to so carry on the activitythat the expenditure balances the incomeand there is no resulting profit. Thatwould not only be difficult of practicalrealisation but would also reflect unsoundprinciple of management. (UNDERLINING SUPPLIED BY US) We find it apposite also to extract Paragraphs 9 and 10 of the APSRTC : 9. It was not disputed that the object ofthe activity carried on by the respondentCorporation was one of general publicutility. What was submitted was that suchactivity was carried on for profit asshown by Section 22 under which therespondent Corporation was enjoined to act on business principles. It was furthersubmitted that the respondent Corporationcould issue shares even to the members ofthe public and that dividend would be paidto the shareholders and, therefore, profitwould be made from the activity of therespondent Corporation by its owners,namely, the shareholders. We are unable toaccept these submissions. 10. The submission founded upon Section22 is based upon a misunderstanding ofwhat that section provides. A RoadTransport Corporation cannot be expectedor be required to run at a loss. It isnot established for the purpose ofsubsidizing the public in matters oftransportation of passengers and goods.The objects for establishing a RoadTransport Corporation are those set outin Section 3 of the RTC Act which wehave already reproduced above. Section18 shows that it is the duty of a ReadTransport Corporation to provide, secureand promote the provision of an 10. The submission founded upon Section22 is based upon a misunderstanding ofwhat that section provides. A RoadTransport Corporation cannot be expectedor be required to run at a loss. It isnot established for the purpose ofsubsidizing the public in matters oftransportation of passengers and goods.The objects for establishing a RoadTransport Corporation are those set outin Section 3 of the RTC Act which wehave already reproduced above. Section18 shows that it is the duty of a ReadTransport Corporation to provide, secureand promote the provision of an efficient, adequate, economical andproperly co-ordinated system of roadtransport services in the State. Noactivity can be carried on efficiently,properly, adequately or economicallyunless it is carried on on businessprinciples. If an activity is carried onon business principles, it would usuallyresult in profit, but as pointed out bythis Court in the Surat Art Silk ClothManufacturers’ Association case [(1980 )]2 SCC 31, it is not possible so to carryon a charitable activity that theexpenditure balances the income andthere is no resultant profit, for toachieve this would not only be difficultof practical realization but wouldreflectunsoundprinciplesofmanagement. What Section 22, therefore,does when it states that it shall be thegeneral principle of a Road TransportCorporation that in carrying on itsundertakings it shall act on businessprinciples is to emphasize the objects set out in Section 3 for which a RoadTransport Corporation is established andto prescribe the manner in which thegeneral duty of the Corporation set cutin Section 18 is to be performed. It isnow firmly established by decisions ofthis Court in the Surat Art Si!k ClothManufacturers’ Association case[(1980) 2] SCC 31and theBar Council ofMaharashtra case[ (1981) 3 SCC 308] thatthe test is: “What is the predominantobject of the activity — whether it isto carry out a charitable purpose or toearn profit?” If the predominant objectis to carry out a charitable purpose andnot to earn profit, the purpose wouldnot lose its charitable character merelybecause some profit arises from theactivity. 16. We are of the opinion that the decisions squarely apply in the case of theassessee also. The public utility services are managed through Corporations or Departments of theGovernment.Theyareestablishmentsandinstitutions independently carrying on suchservices for the benefit of the general public.APSRTC was found to be established for the purposeof facilitating the transport of passengers fromone place to another which services are of publicutility. Likewise, as we found earlier, the CochinPort Trust, the assessee herein, facilitatesimports and exports of goods by maintaining theport and also provides services and facilities forthe importers and exporters. As was held in theaforesaid decisions, public utility services cannotbe expected to make no profits and generate noincome in which event, they would eventually foldup. The establishments thus providing services forthe benefit of the general public cannot also, beexpected to always balance their income andexpenditure. To meet the specific ground taken by the Commissioner as to the commercial activitiescarried on by the Board generating income, we referto the Constitution Bench decision aforecited andalso the decision of a Division Bench of this Courtin CIT v. Dharmodayam Company [(1974) 94 ITR 113(Ker). the Commissioner as to the commercial activitiescarried on by the Board generating income, we referto the Constitution Bench decision aforecited andalso the decision of a Division Bench of this Courtin CIT v. Dharmodayam Company [(1974) 94 ITR 113(Ker). 17. The Division Bench decision of thisCourt was upheld by the Hon'ble Supreme Court in[(1977)109 ITR 527] CIT v. Dharmodayam Company.However, the Hon'ble Supreme Court in IndianChamber of Commerce Vs. CIT[(1975) 101 ITR 796]took a different view and doubted the findings ofthe Division Bench of this Court. The ConstitutionBench above cited however held that the viewexpressed inIndian Chamber of Commercewasincorrect and held so in paragraph 14 : 14. We have already examined the languageof Section 2 clause (15) and pointed outhow the plain natural meaning of the words used by the legislature in thatdefinitional clause does not accord withthe contention of the Revenue. We have saidenough on the subject and nothing more needbe said about it. It is enough to point outthat in a subsequent decision in CIT v.Dharmodayam Company[(1977) 4 SCC 75]whichcame by way of an appeal from the judgmentof the Kerala High Court[(1974) 94 ITR 113](Ker.), this Court itself has, in effectand substance, departed from this view andadopted the same construction which hascommended itself to us. The question whicharose in this case was whether the incomefrom business of conducting kuries carriedon by the assessee was exempt from tax. Thecontention of the Revenue was that sincethe assessee was an institution establishedfor promoting an object of general publicutility and this purpose was sought to beachieved out of the income of the businessof conducting kuries, the last concludingwords of Section 2 clause (15) were attracted and the income of the assesseewas disentitled to exemption from tax. Thiscontention was, however, rejected by theKerala High Court which took the view thatthe business of conducting kuries was heldunder trust to apply its income for thecharitable purpose of the assessee and wasnot carried on as a matter of advancementof that charitable purpose and hence it wasnot possible to say that the purpose of theassessee involved the carrying on of anactivity for profit so as to attract themischief of the last few words in Section 2clause (15). Krishna Iyer, J., in theIndian Chamber of Commerce case whilediscussing the judgment of the Kerala HighCourt in the Dharmodayam case, observed,consistently with the interpretation placedby him on the last concluding words inSection 2 clause (15), that the decision ofthe Kerala High Court in this caseproceeded on a wrong test and impliedly,therefore, was incorrectly decided. Butthis Court while disposing of the appealfrom the decision of the Kerala High Court differed from the view taken by KrishnaIyer, J. and upheld the judgment of theKerala High Court. This Court pointed outthat the facts of Dharmodayam case were notbefore Krishna Iyer, J. and that the testapplied by Kerala High Court was held byhim to be wrong on the assumption that thecase fell under the last clause of Section2 clause (15) but, in fact, this assumption was invalid, as Dharmodayam casewas notone falling under the last part of thedefinition clause. The finding of theKerala High Court was that the business ofconducting kuries was a business held undertrust for applying its income to thecharitable purpose and it was not carriedon as a matter of advancement of theprimary purpose of the trust or in thecourse of carrying out such purpose and itcould not, therefore, be said that theprimary purpose of the trust involved thecarrying on of an activity for profitwithin the meaning of the last concludingwords in Section 2 clause (15). This Court was invalid, as Dharmodayam casewas notone falling under the last part of thedefinition clause. The finding of theKerala High Court was that the business ofconducting kuries was a business held undertrust for applying its income to thecharitable purpose and it was not carriedon as a matter of advancement of theprimary purpose of the trust or in thecourse of carrying out such purpose and itcould not, therefore, be said that theprimary purpose of the trust involved thecarrying on of an activity for profitwithin the meaning of the last concludingwords in Section 2 clause (15). This Court thus held in no uncertain terms that if abusiness is held under trust or legalobligation to apply its income forpromotion of an object of general publicutility or it is carried on for the purposeof earning profit to be utilisedexclusively for carrying out suchcharitable purpose, the last concludingwords in Section 2 clause (15) would haveno application and they would not deprivethe trust or institution of its charitablecharacter. What these last concluding wordsrequire is not that the trust orinstitution whose purpose is advancement ofan object of general public utility shouldnot carry on any activity for profit at allbut that purpose of the trust orinstitution should not involve the carryingon of any activity for profit. So long asthe purpose does not involve the carryingon of any activity for profit, therequirement of the definition would be metand it is immaterial how the monies forachieving or implementing such purpose arefound, whether by carrying on an activity ::38:: for profit or not.We may point out thateven in Sole Trustee, Loka Shikshana Trust v. CIT[(1976) 1 SCC 254], a decision which,as we shall presently point out, does notcommend itself to us on another point, thesame interpretation has been accepted bythis Court. (Underlining by us for emphasis and futurereference) 18. In Dharmodayam Company , the Department had taken a contention that the purpose or objectof the Company was conducting kuries which is abusiness with eye on the profits derived. Adistinction was sought to be drawn between theprovisions of the 1922 and 1961 enactments. It wasargued that as per the earlier enactment if theincome derived from a business was used inadvancing an object of general public utility, evenif the same involved carrying on any activity ofprofit; it was exempted, while the new definition provided a specific exclusion with respect to anactivity carried on for profit. The Supreme Courtrefused to accept the said argument andunequivocally held that the business of kuries washeld in trust. We specifically refer to theunderlined portion in the above extract, to findthat in the assessee's case also the purpose is toafford services and facilities to the exporters andimporters to which end commercial activities arecarried on by the Port. The lease of buildings andplots for setting up of warehouses and hotels arenot the purpose for which the Port Trust isestablished. But the income generated from suchactivities are applied to the facilitation ofvarious services and facilities to the exportersand importers. We are definitely of the opinionthat it is a public utility service and the objectof the Trust is not the carrying on of any activityof profit. 19. We also refer to the decision of theHon'ble Supreme Court in Commissioner of-IncomeTax v. Gujarat Maritime Board [(2007) 295ITR 561], a later decision on identicalcircumstances. Gujarat Maritime Board was alsoentitled to exemption under Section 10(20) beingregistered as a local authority. After theexemption was taken away by reason of therestriction provided in the definition of localauthority they applied for registration underSection 12A. A reading of the judgment indicatesthat the activities carried on by the Board werealmost analogous to the activities carried on bythe assessee herein. The extracted definitionunder Section 2(15) came up for specificconsideration before the Hon'ble Supreme Court.The Hon'ble Supreme Court specifically found thatSection 10(20) and 11 operate in different spheresand when a particular entity has ceased to be local authority it does not preclude them fromclaiming exemption under Section 11. Relying onCIT v. Ahmedabad Rana Caste Association [(1983) 140ITR 1 (SC)] the expression charitable purposes wasfound to prima facie include all objects whichpromote the welfare of the general public. It wascategorically held that “when an object is topromote or protect the interest of a particulartrade or industry that object becomes an object ofpublic utility, but not so, if it seeks to promotethe interest of those who conduct the said trade orindustry (CIT v. Andhra Chamber of Commerce [(1965)55 ITR 722 (SC)]. If the primary or predominantobject of an institution is charitable, any otherobject which might not be charitable but which isancillary or incidental to the dominant purpose,would not prevent the institution from being avalid charity (Addl.CIT v. Surat Art Silk Cloth”Manufacturers Association). 20. The Hon'ble Supreme Court found the case of Gujarat Maritime Boardto be squarelycovered by the decision in APSRTC.We extractParagraph 16: “Applying the ratio of the said judgmentin the case of Andhra Pradesh State RoadTransport Corporation, we find that, inthe present case, the Gujarat MaritimeBoard is established for the predominantpurpose of development of minor portswithin the State of Gujarat, themanagement and control of the Board isessentially with the State Government andthere is no profit motive, as indicated bythe provisions of section 73,74 and 75 ofthe 1981 Act. The income earned by theBoard is deployed for the development ofminor ports in the State of Gujarat. Inthe circumstances, in our view thejudgment of this Court in Andhra PradeshState Road Transport Corporation squarelyapplies to the facts of the present case.” 21. The decisions squarely apply hereintoo. We also notice Sub-section (3) of Section12AA wherein though a trust or institution isgranted registration, the Commissioner is empoweredto look into the activities carried on to cancelthe registration on satisfaction that theactivities are not genuine or are not being carriedout in accordance with the objects of the trust orinstitution as the case may be. The definition forthe subject period did not have the words involvingthe carrying on of any activity for profit, inlater amendments, it came in a different form, andthen again was omitted. In APSRTC the finding wasrendered even when the provision contained thespecific restriction insofar as the carrying on ofany activity for profit. Hence even when thecarrying on activity of profit stood included theassessee would be entitled to be covered underSection 2(15). 22. We are also not convinced that the mere 22. We are also not convinced that the mere delay would have affected the registration beinggranted. Clause (a) of Section 12A provides anapplication to be filed in the prescribed form andin the prescribed manner to the Commissioner beforethe first day of July, 1973 or before the expiry ofa period of one year from the date of creation ofthe trust or the establishment of the institution.The proviso also makes it clear that if there is adelay occasioned and the Commissioner is satisfiedthat there were sufficient reasons for not havingfiled an application within the time provided under clause (a), then the registration would beapplicable from the date of creation of the trustor establishment of the institution. Even if thedelay is not condoned for reason of no satisfactoryexplanation having been offered, the registration;if enabled, would be applicable from the first dayof the financial year in which the application is made. What assumes relevance is the fact that theassessee herein was entitled to exemption underSection 10(20) by virtue of its registration as alocal authority and the same was taken away by anamendment of 13.11.2002, which came into effectfrom 01.04.2003; when the exemption was withdrawn.We notice that there has been a delay of about 3years. In considering condonation of delay one hasto look at the nature of the duties, which theassessee has been carrying on, and the drasticchange in law brought about by the introduction ofthe Explanation under Section 10(20). The need forregistration as a trust carrying on activities ofcharitable purposes arose only for reason of theexemption having been wi