The Commissioner Of Income Tax, Madurai v. Tuticorin Port Trust, Harbour Estate, Tuticorin

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE: 03.02.2021 THE HON'BLE MR. JUSTICE M.DURAISWAMYAND THE HON'BLE MRS.JUSTICE T.V.THAMILSELVI T.C.A.No.799 of 2010 The Commissioner of Income Tax,Madurai.... Appellant/RespondentVs.Tuticorin Port Trust,Harbour Estate, Tuticorin.... Respondent/Appellant Appeal preferred under Section 260A of the Income TaxAct, 1961, against the order of the Income Tax AppellateTribunal, Madras, Bench "B" Chennai, dated 30.10.2009 inI.T.A.No.238/Mds/2008, and against the order passed by theIncome Tax Appellate Tribunal, Bench 'B' Chennai dt.08/01/2010made in ITA.No.238/Mds/2008 and against the order passed bythe Commissioner of Income Tax-I, Madurai dt-22/10/2007 madein C.No.464/2/2007-08/CIT-I. For Appellant: Mr.J.Narayanasamy, Senior Standing CounselFor Respondent: Mr.Devanathan JUDGMENT (Judgment was delivered by M.DURAISWAMY, J.) Challenging the order passed in I.T.A.No.238/Mds/2008 onthe file of the Income Tax Appellate Tribunal, Madras, Bench"B" Chennai, the Department has filed the above appeal. 2.It is the case of the assessee that they filed anapplication for registration under Section 12AA of the IncomeTax Act, 1961 on 02.04.2007 claiming it as a CharitableInstitution on the ground that the object and service renderedby the assessee are in the nature of general public utility.The Commissioner of Income Tax rejected the application on22.10.2007 on the ground that the assessee is not involved inany charitable activity to qualify for registration underSection 12AA of the Income Tax. Aggrieved over the same, theassessee preferred an appeal before the Income Tax AppellateTribunal and the Tribunal held that all the requisitehttps://hcservices.ecourts.gov.in/hcservices/conditions are satisfied and directed the Commissioner to grant registration under Section 12AA to the assesseefollowing the decision of the Gujarat High Court and allowedthe assessee's appeal. Aggrieved over the order passed by theTribunal, the Department has filed the above appeal. 3.The above appeal was admitted on the followingsubstantial questions of law:“1)Whether on the facts and in the circumstancesof the case the Income Tax Appellate Tribunal wasright in law in setting aside the order of theCommissioner of Income Tax and direct theCommissioner of Income Tax to grant registrationunder Section 12AA of the Income Tax Act to theassessee valid in law? 2)Whether on the facts and in the circumstancesof the case, the Income Tax Appellate Tribunal wasright in law in directing the Commissioner of IncomeTax to grant registration under Section 12AA of theAct, from the date 01.04.2002, even though disregardto the provisions of Section 12A(a) proviso (ii) ofthe Income Tax Act, according to which registrationcannot be granted from a date earlier than first ofthe financial year in which application was made?” 4.The main contention of the appellant/Department is thatthe assessee – Trust has not established that they areinvolved in charitable activities. Further, the contention ofthe appellant that the claim of the assessee that registrationunder Section 12AA may be granted with effect from 01.04.2000,is not sustainable in view of the provisions of Section 12Aaproviso 2 of the Income Tax Act and that the registrationcannot be granted from a date earlier than the first day ofthe financial year in which the application was made. 5.Countering the submissions made by the learned seniorstanding counsel appearing for the appellant, the learnedcounsel appearing for the assessee submitted that theTribunal, following the decision of the Hon'ble Gujarat HighCourt, rightly decided the issue in favour of the assessee.The learned counsel relied upon the judgment of the Hon'bleGujarat High Court dated 31.07.2006 made in Tax Appeal No.1433of 2005 [CIT Vs.Gujarat Maritime Board], which reads asfollows: 5.Countering the submissions made by the learned seniorstanding counsel appearing for the appellant, the learnedcounsel appearing for the assessee submitted that theTribunal, following the decision of the Hon'ble Gujarat HighCourt, rightly decided the issue in favour of the assessee.The learned counsel relied upon the judgment of the Hon'bleGujarat High Court dated 31.07.2006 made in Tax Appeal No.1433of 2005 [CIT Vs.Gujarat Maritime Board], which reads asfollows: Maintenance and Development of Ports isnecessary for transport of goods and persons bysea. In the present scenario of globalisation ofthe trade and industry, the transport of goods fromone country to other which is mostly through seahas become essential. Therefore, the developmentand maintenance of ports is certainly the object ofgeneral public utility. While taking this view, wederive support from the decision of the Hon'blehttps://hcservices.ecourts.gov.in/hcservices/Apex Court in the case of CIT Vs. AP State Roadnecessary for transport of goods and persons bysea. In the present scenario of globalisation ofthe trade and industry, the transport of goods fromone country to other which is mostly through seahas become essential. Therefore, the developmentand maintenance of ports is certainly the object ofgeneral public utility. While taking this view, wederive support from the decision of the Hon'blehttps://hcservices.ecourts.gov.in/hcservices/Apex Court in the case of CIT Vs. AP State Road Transport Corporation 159 ITR 1. It is also not indispute that the assessee institution is genuinelyengaged in the activities of development andmaintenance of Ports in the State of Gujarat.Therefore, in our opinion, the assessee dulyfulfills both the conditions of sec.12AA which arenecessary for the registration of the institutionu/s 12A. We therefore, direct the CIT to registerthe trust u/s 12A w.e.f. 1.4.02. 35.The status of the assessee is parallel tothe Gujarat Maritime Board. So similar treatmentwill have to be given to the assessee. 36.Moreover, there is hardly any country todayin which the Government is not engaged actively anddirectly in the setting up and management ofeconomic and industrial enterprises. Stateparticipation in industry is an established featureof the state economy in many countries of theworld. In India, prior to independence, theadministration of two of the biggest commercialundertakings, namely the Railways and the Post andTelegraphs, have been exclusive State control askey sectors of the industry. 37.In the present scenario of globalization oftrade and industry, the transport of goods from onecountry to another, which is mostly by sea, hasbecome essential. Therefore, development andmaintenance of Ports are of 'general publicutility'. It is also not in dispute that theassessee institution is genuinely engaged in theactivities of development and maintenance ofMormugao Port. Therefore, the assessee dulyfulfills both the conditions u/s.12AA which arenecessary for the registration of the institutionu/s.12A. The predominant objectives of MPT beingcharitable in nature, we are unable to agree withthe view taken by the CIT Panaji that the assesseeis not eligible to be registered as an institutionwithin the meaning of Sec.12A of the Act. Since allthe requisite conditions are satisfied, we directthe CIT to register the Mormugao Port Trust as aninstitution u/s.12A from the first day of FinancialYear in which the application was made i.e. from 1[st]April, 2005.” In the above judgment, the Hon'ble Gujarat High Court heldthat the development and maintenance of Ports is certainly theobject of general public utility. While taking this view, theGujarat High Court derived support from the decision of theHon'ble Apex Court in the case of CIT Vs. AP State RoadTransport Corporation reported in 159 ITR 1. Further, thelearned counsel relied upon the judgment reported in 295 ITR561 (SC) [Commissioner of Income Tax Vs. Gujarat Maritimehttps://hcservices.ecourts.gov.in/hcservices/ Board] wherein the Hon'ble Supreme Court held as follows:“... We have perused number of decisions of thisCourt which have interpreted the words, in Section 11(15), namely, "any other object of generally publicutility". From the said decisions it emerges that thesaid expression is of the widest connotation. Theword "general" in the said expression meanspertaining to a whole class. Therefore, advancementof any object of benefit to the public or a sectionof the public as distinguished from benefit to anindividual or a group of individuals would be acharitable purpose [Commissioner of Income-tax,Gujarat-III, Ahmedabad v. Ahmedabad Rana Casteassociation, (1983) 140 ITR 1 SC]. The saidexpression would prima facie include all objectswhich promote the welfare of the general public. Itcannot be said that a purpose would cease to becharitable even if public welfare is intended to beserved. If the primary purpose and the predominantobject are to promote the welfare of the generalpublic the purpose would be charitable purpose. Whenan object is to promote or protect the interest of aparticular trade or industry that object becomes anobject of public utility, but not so, if it seeks topromote the interest of those who conduct the saidtrade or industry [Commissioner of Income-tax Madrasv. Andhra Chamber of Commerce, - (1965) 55 ITR 722SC]. If the primary or predominant object of aninstitution is charitable, any other object whichmight not be charitable but which is ancillary orincidental to the dominant purpose, would not prevantthe institution from being a valid charity- [Addl.Commissioner of Income-tax, Gujarat v. Surat Art SilkCloth Manufacture Association, (1980) ITR SC]. The present case in our view is equarely covered bythe judgment of this Court in the case ofCommissioner of Income-tax, A.P. v. Andhra PradeshState Road Transport Corporation, (1986) 159 ITR 1 SCin which it has been held that since the Corporationwas established for the purpose of providingefficient transport system, having no profit motive,though it earns income in the process (sic), it isnot liable to income-tax. Applying the ratio of the said judgment in the caseof Andhra Pradesh State Road Transport Corporation(supra), we find that, in the present case, GujaratMaritime Board is established for the predominantpurpose of development of minor ports within theState of Gujarat, the management and control of theBoard is essesntially with the State Government andhttps://hcservices.ecourts.gov.in/hcservices/there is no profit motive, as indicated by the provisions of Sections 73, 74 and 75 of the 1981 Act.The income earned by the Board is deployed for thedevelopment of minor ports in India. In thecircumstances. in our view the judgment of this courtin Andhra Pradesh State road Transport Corporation(supra) squarely applies to the facts of the presentcase. Before concluding we may mention that under thescheme of Section 11(1) of the 1961 Act, the sourceof income must be held under trust or under otherlegal obligation. Applying the said test it is clear,that Gujarat Maritime Board is under legal obligationto apply the income which arises directly andsubstantially from the business held under trust forthe development of minor port in the State ofGujarat. Therefore, they are entitled to beregistered as "Charitable Trust" under Section 12A ofthe 1961 Act.” Before concluding we may mention that under thescheme of Section 11(1) of the 1961 Act, the sourceof income must be held under trust or under otherlegal obligation. Applying the said test it is clear,that Gujarat Maritime Board is under legal obligationto apply the income which arises directly andsubstantially from the business held under trust forthe development of minor port in the State ofGujarat. Therefore, they are entitled to beregistered as "Charitable Trust" under Section 12A ofthe 1961 Act.” In the above judgment, the Hon'ble Supreme Court interpretedthe words in Section 11(15) namely “any other object ofgenerally public utility” and held that advancement of anyobject of benefit to the public or a section of the public asdistinguished from benefit to an individual or a group ofindividuals would be a charitable purpose. Further, the ApexCourt held that the said expression would prima facie includeall objects which promote the welfare of the general public.The Apex Court also held that when an object is to promote orprotect the interest of a particular trade or industry thatobject becomes an object of public utility, but not so, if itseeks to promote the interest of those who conduct the saidtrade or industry. The Apex Court applying the ratio laid downin Commissioner of Income Tax Vs. Andhra Pradesh State RoadTransport Corporation reported in (1986) 159 ITR 1 (SC) heldthat when the control of the Board is essentially with theState Government and there is no profit motive, would comewithin the meaning of “any other object of generally publicutility”. In these circumstances, the Hon'ble Supreme Courtfound that the Gujarat Maritime Board is entitled to beregistered as charitable trust under Section 12A of the Act. 6.The learned Senior Standing Counsel for the Departmenthas not produced any contra judgments on this aspect beforeus. 7.From a reading of the judgments cited supra, it isclear that even if the assessee is engaged in the category ofactivity of “object of general public utility”, they areentitled for registration under Section 12A. Therefore, we areof the considered view that the assessee can claimregistration under Section 12A by categorising the activity ofthe assessee as “object of general public utility”. In thesecircumstances, we do not find any error or irregularity in thehttps://hcservices.ecourts.gov.in/hcservices/order passed by the Income Tax Appellate Tribunal. We find no ground much less any substantial question of law to interferewith the order passed by the Income Tax Appellate Tribunal.The appeal is liable to be dismissed. Accordingly, the TaxCase Appeal is dismissed. No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar va To1.The Income Tax Appellate Tribunal, Madras, Bench "B", Chennai.2.The Commissioner of Income Tax, Madurai.3.The Commissioner of Income Tax-I, Madurai.+1cc to MR.N.Devanathan, Advocate SR.5990.T.C.A.No.799 of 2010CA(CO)CB(23/02/2021)