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Charitable trust registration under section 12A & Condonation of delay in filing of application
Assessee-trust sought condonation of delay in filing of application for registration under section 12A. CIT required assessee to explain reason for the delay. Assessee’s case was that it had been availing exemption from income-tax as a ‘local authority’ under section 10(20). When an Explanation was added under section 10(20) by which ‘local authority’ was defined, the restricted meaning, took the assessee along with some others out of the definition of local authority’ and hence, it became eligible to tax. The assessee then made an application to CIT to register it as a charitable institution as defined under section 2(15). CIT declined the prayer on the ground that, there had been delay of about three years, from the date on which definition of ‘local authority’ was amended and restricted.
Held: In considering condonation of delay CIT had to look at the nature of duties, which assessee had been carrying on, the drastic change in law brought about by introduction of Explanation under section 10(20). The need for registration as a trust carrying on activities of charitable purposes arose only for reason of exemption having been withdrawn. The assessee which was enjoying exemption from Income Tax from its inception was suddenly faced with the prospect of being made liable under the taxing statute. This would have required considerable research and as was rightly pointed out by the assessee, Ports, all over the country had been suddenly deprived of their exemption and had filed applications under section 12AA with considerable delay. Taking all these aspects into account; explanation offered was satisfactory and the delay had to be necessarily condoned.
Decision: In assessee’s favour.
IN THE KERALA HIGH COURT
K. VINOD CHANDRAN & ASHOK MENON, JJ.
CIT v. Cochin Port Trust
I.T.A. No. 51 of 2009
12 December, 2018
Appellant by: Jose Joseph, SC, for Income Tax, Advocate
Respondent by: E.K. Nandakumar (Sr.), Anil D. Nair, K. John Mathai and P. Benny Thomas, Advocates
Vinod Chandran, J.
The following questions arise from the order of the Income Tax Appellate Tribunal :–
(i) Whether in the facts and circumstances of the case, the Tribunal was correct, in having directed the Commissioner to condone the delay in filing the application for registration under section 12A of the Income Tax Act, 1961 (‘IT Act’, for short) and also directing grant of registration section 12A?
(ii) Whether the Tribunal was correct in having entertained the additional ground of a deemed grant of registration under section 12A especially when it was raised at the appellate stage?
An additional ground arises in the course of the pendency of the appeal by reason 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 : 2004 TaxPub(DT) 1388 (SC) [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 dt. 8-1-1952 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 section 10(20) of the Income Tax Act. When an Explanation was added under section 10(20) by which ‘local authority’ was defined, the restricted meaning; took the assessee along with some others out of the definition of ‘local authority’ and hence, was then on exigible to tax under the Income Tax Act.
3. The assessee then made an application to the Commissioner of Income Tax to register it as a charitable institution as defined under section 2(15) of the Income Tax Act. This was for the purpose of claiming exemption as a trust established for charitable purposes in respect of income derived from their properties/businesses as permissible under section 11 of the Income Tax Act. The Commissioner declined the prayer, and in appeal the Tribunal allowed the same. There is also an ancillary question insofar as the delay occasioned of about three years, from the date on which the definition of ‘local authority’ was amended and restricted. Whether the delay was condonable or not and whether there could be a deemed registration under section 12A for reason of the delay in consideration by virtue of section 12AA(2) of the Income Tax Act.
4. In the present case, the application under section 12AA was made on 9-6-2006 and the order was passed on 10-8-2007. Sub-section (2) of section 12AA also mandates that the application shall be considered and the registration granted or refused before six months from the last date of the month in which the application was received. The Commissioner by Annexure-B order passed after fourteen months refused to grant the registration. The Commissioner, at the first instance, was of the opinion that there was no satisfactory explanation for the delay and what was stated was merely that the delay was not intentional. The assessee was again requested to explain the delay. In a further application, the major contention was that the delay was condoned in similar applications all over the country. The decisions relied on by the assessee were distinguished. The provisions of section 12A was found to necessitate an application for registration before the expiry of one year from the date of creation of the trust or establishment of the institution. The date of notification of the trust being 29-2-1964, the application made on 9-6-2006 after about 42 years was found to be inordinately delayed. Again, it was found that the exemption under section 10(20) was withdrawn with effect from 1-4-2003 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 mala fides 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 12A of the Income Tax Act. The Major Port Trusts Act was found to have merely appointed a Board of Trustees, without any creation of trust as such by a specific provision. The definition of ‘trust’ under the Trusts Act, 1882 was referred to as an obligation annexed to the ownership of the property and arising out of a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. The Commissioner noticed that the Trusts Act would not be applicable to public trusts, but however, the essential ingredients of trust was found to be equally applicable to a public trust. The Commissioner also found from the preamble of the Major Port Trusts Act that the basic purpose is to constitute the Port authorities and to vest in such authorities the administration, control and management of the Port and held that the Act did not create a charitable trust. There was also no discernible transfer of immovable property in favour of the trustees, unless the same is evidenced by a document of transfer. It was found that there is no founder or settlor; nor any specific movable or immovable property, that could be termed as a trust property; nor is there any specified beneficiary indicated in any instrument, which could make Cochin Port Trust a ‘trust’ for the purpose of sections 11, 12 and 12A of the Income Tax Act.
6. On the activities carried on by the Port authorities, it was found that the assessee renders services to the importers and exporters for a price, and hence, functions purely as a commercial organisation. The commercial element, hence, was found to take the assessee away from the definition of ‘charitable purpose’. It was also asserted that, normally, charitable trusts generate funds for their activities from donations from the public, but however, the Port generates its funds through rendering of services on commercial lines. Hence there was in existence no distinction between the assessee and a private Port. The income was found to be generated from Port and dock charges, cargo handling, storage charges, railway earnings and so on and so forth. None of it has been sourced for any charitable activity or even a non-commercial activity or source. The concept of charity denotes altruistic thought and action and it cannot be directed towards benefiting oneself. The Commissioner, hence, found 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 Income Tax 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 26-6-2008. 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 sought permission of the Committee to withdraw the case. The Committee directed that the case may be treated as 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 specific decision having been taken in the case of Mormugao Port Trust to accede to the decision of ITAT granting registration under section 12AA. The minutes of the CoD was on 26-6-2008 and the decision referred to therein is that reported in (2007) 295 ITR 561 (SC) : 2007 TaxPub(DT) 1557 (SC) [Commissioner of Income Tax v. Gujarat Maritime Board]. The assessee also relies on the decisions of the Honourable Supreme Court in (1980) 2 SCC 31 : 1980 TaxPub(DT) 0848 (SC) [Additional Commissioner of Income, Gujarat v. Surat Art Silk Cloth Manufacturers’ Association, Surat] a Constitution Bench decision, and (1986) 2 SCC 391 : 1986 TaxPub(DT) 1395 (SC) [Commissioner of Income Tax v. Andhra Pradesh State Road Transport Corporation].
9. We have heard the learned Senior Counsel, Government of India (Taxes) for the Department and Sri P. Gopinath, learned counsel for the assessee.
10. The Indian Ports Act defines ‘Major Port’ as “any port which the Central Government may by notification in the Official Gazette declare, or may under any law for the time being in force have declared, to be a major port”. As we noticed, the Central Government had issued a notification specifically extending the provisions of the Indian Ports Act to the Port of Cochin. The Major Port Trusts Act, a subsequent enactment, defines a Major Port as having the same meaning as in the Indian Ports Act. The Major Port Trusts Act, specifically by section 1(3), applies the provisions in the first instance, inter alia, to the Major Port of Cochin. Major Port of Mormugao was also brought within the ambit of the Major Port Trusts Act by Notification No. GSR No. 922, dt. 22-6-1964 with effect from 1-7-1964. As far as the assessee-Cochin Port Trust is concerned, the same was brought under the Major Port Trusts Act on 16-10-1963 as found by the Commissioner. However, at that point, there was absolutely no necessity for the assessee to apply under section 12AA, since at that time, they were registered as a local authority and had been entitled to exemption under section 10(20) of the Income Tax Act. The need for a registration as a trust carrying on activities of charitable purposes arose when 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 Income Tax 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 considered under section 12AA.
12. Yet again; on the question of whether the assessee is a trust or not, we see that the Commissioner laboured on the definition of Trust in the Indian Trusts Act, without avail and misunderstood the true import of the definition. We find that all the ingredients which have been referred to by the Commissioner is available, insofar as the present assessee is concerned. The statute as has been found by the Commissioner constitutes a Board of Trustees under Chapter-II, section 3 & 4 and designates it to be a body corporate having perpetual succession and a common seal, by section 5. Section 29 of Chapter IV vests; the property, assets and funds for the purposes of the Port, vested in the Central Government or any other authority before the appointed day, on the Board constituted under the Act. Section 29 also, by the various sub-clauses transfers the debts, obligations and liabilities of, the non-recurring expenditures incurred by, all sums due to, all suits and legal proceedings by or against and every employee connected with the affairs of the Port, under; the Central Government or any authority, to be thereafter the responsibility or liability of the Board. The necessity for a document transferring the same from the settlor to the Trustees is also present in the form of a statute and the notifications brought out, which the Commissioner failed to take note of. As to the beneficiary not being specifically pointed out, we have to notice the Commissioner’s own finding that the Port is intended for facilitating imports and exports which activities are definitely in furtherance of public good and is in advancement of general public utility. The beneficiary as we discern from the various provisions of the Major Port Trusts Act is the general public, the citizenry of the Country.
13. The works and services to be provided by the Ports has also been delineated in Chapter V of the Port Trust Act. Section 35 confers power on the Board to execute such works and provide within or without the limits of the Port such appliances as it may deem necessary to further the objects of the Port. The works and appliances include wharves, quays, docks, stages, jetties, piers and appliances include buses, railways, locomotives, rolling stock, sheds, hotels, warehouses and other accommodation for passengers and goods as also other appliances for carrying 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 mulcted with the responsibility for loss etc., of the goods on board, which it has taken charge under the provisions of the Act, by section 43. The Board has also the responsibility to provide accommodation to the Customs Officers of the Central Government under section 44.
14. The functions as seen from Chapter V in fact specifically commends us to find a public utility service being carried on by the Board, facilitating the movement of goods into and without the country. The Ports enable commerce and economy of the country, trading with foreign countries and checks and balances of goods exported and imported, all in the larger national interest. It also advances the collection of revenue and facilitates easy movement of goods and services across the seas. Now the question arises as to whether the activities carried on would fall under definition of charitable purposes as has been defined under sub-section 2(15). We are conscious of the fact that there have been amendments to the definition clause at various points. The provision as available from 1984 to 2009, which applies for the purposes of this appeal, since the application was filed in the year 2006 and declined in the year 2007 is as extracted here under :–
“(15) “charitable purpose” includes relief of the poor, education, medical relief and the advancement of any other object of general public utility.”
15. To understand the definition we first refer to the decision of the Supreme Court in Andhra Pradesh State Transport Corporation (hereinafter referred as APSRTC). The Corporation was constituted under the Road Transport Corporation Act and claimed exemption as an activity carried on for charitable purposes. The application was filed in the year 1958 on the commencement of its activities in that year. The Corporation approached the High Court of Andhra Pradesh, contending that the property and income is of a State exempted from Union taxation under article 289. The Corporation failed to get an exemption under article 289(1), up to the Hon’ble Supreme Court. Later, having filed a return for the assessment years 1960-61 and 1961-62, it claimed exemption from income tax under section 4(31) of the Indian Income Tax Act, 1922 for the first year and under section 11 of the Income Tax Act, 1961 for the second year. The material provisions of both the statutes granting exemption at that time, included charitable 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 trust or institution. It is then that the inhibition of the exclusionary clause would be attracted. This appears to us to be a more plausible construction which gives meaning and effect to the last concluding words added by the legislature and we prefer to accept it. Of course, there is one qualification which must be mentioned here and it is that if the constitution of a trust or institution expressly provides that the purpose shall be carried out by engaging in an activity which has a predominant profit motive, as, for example, where the purpose is specifically stated to be promotion of sports by holding cricket matches on commercial lines with a view to making profit, there would be no scope for controversy, because the purpose would, on the face of it, involve carrying on of an activity for profit and it would be non-charitable even though no activity for profit is actually carried on or, in the example given, no cricket matches are in fact organised.
17. ………The Finance Minister explained the reason for introducing this exclusionary clause in the following words :–
“The definition of ‘charitable purpose’ in that clause is at present so widely worded that it can be taken advantage of even by commercial concerns which, while ostensibly serving a public purpose, get fully paid for the benefits provided by them namely, the newspaper industry which while running its concern on commercial lines can claim that by circulating newspapers it was improving the general knowledge of the public. In order to prevent the misuse of this definition in such cases, the Select Committee felt that the words ‘not involving the carrying on of any activity for profit’ should be added to the definition.”
It is obvious that the exclusionary clause was added with a view to overcoming the decision of the Privy Council in the Tribune case (1939) 7 ITR 415 (PC) : 1939 TaxPub(DT) 0054 (Privy Council) where it was held that the object of supplying the community with an organ of educated public opinion by publication of a newspaper was an object of general public utility and hence charitable in character, even though the activity of publication of the newspaper was carried on commercial lines with the object of earning profit. The publication of the newspaper was an activity engaged in by the trust for the purpose of carrying out its charitable purpose and on the facts it was clearly an activity which had profit making as its predominant 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 the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realisation but would also reflect unsound principle 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 of the activity carried on by the respondent Corporation was one of general public utility. What was submitted was that such activity was carried on for profit as shown by section 22 under which the respondent Corporation was enjoined to act on business principles. It was further submitted that the respondent Corporation could issue shares even to the members of the public and that dividend would be paid to the shareholders and, therefore, profit would be made from the activity of the respondent Corporation by its owners, namely, the shareholders. We are unable to accept these submissions.
10. The submission founded upon section 22 is based upon a misunderstanding of what that section provides. A Road Transport Corporation cannot be expected or be required to run at a loss. It is not established for the purpose of subsidizing the public in matters of transportation of passengers and goods. The objects for establishing a Road Transport Corporation are those set out in section 3 of the RTC Act which we have already reproduced above. Section 18 shows that it is the duty of a Read Transport Corporation to provide, secure and promote the provision of an efficient, adequate, economical and properly co-ordinated system of road transport services in the State. No activity can be carried on efficiently, properly, adequately or economically unless it is carried on business principles. If an activity is carried on business principles, it would usually result in profit, but as pointed out by this Court in the Surat Art Silk Cloth Manufacturers’ Association case (1980) 2 SCC 31 : 1980 TaxPub(DT) 0848 (SC), it is not possible so to carry on a charitable activity that the expenditure balances the income and there is no resultant profit, for to achieve this would not only be difficult of practical realization but would reflect unsound principles of management. What section 22, therefore, does when it states that it shall be the general principle of a Road Transport Corporation that in carrying on its undertakings it shall act on business principles is to emphasize the 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 Silk Cloth Manufacturers’ Association case (1980) 2 SCC 31 : 1980 TaxPub(DT) 0848 (SC) and the Bar Council of Maharashtra case (1981) 3 SCC 308 : 1981 TaxPub(DT) 0948 (SC) 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 we found earlier, the Cochin Port Trust, the assessee herein, facilitates imports and exports of goods by maintaining the port and also provides services and facilities for the importers and exporters. As was held in the aforesaid decisions, public utility services cannot be expected to make no profits and generate no income in which event, they would eventually fold up. The establishments thus providing services for the benefit of the general public cannot also, be expected to always balance their income and expenditure. To meet the specific ground taken by the Commissioner as to the commercial activities carried on by the Board generating income, we refer to the Constitution Bench decision aforecited and also the decision of a Division Bench of this Court in CIT v. Dharmodayam Company (1974) 94 ITR 113 (Ker) : 1974 TaxPub(DT) 0087 (Ker-HC).
17. The Division Bench decision of this Court was upheld by the Hon’ble Supreme Court in (1977) 109 ITR 527 (SC) : 1977 TaxPub(DT) 0937 (SC) CIT v. Dharmodayam Company. However, the Hon’ble Supreme Court in Indian Chamber of Commerce v. CIT (1975) 101 ITR 796 (SC) : 1975 TaxPub(DT) 0347 (SC) took a different view and doubted the findings of the Division Bench of this Court. The Constitution Bench above cited however held that the view expressed in Indian Chamber of Commerce was incorrect and held so in paragraph 14 :–
14. We have already examined the language of section 2 clause (15) and pointed out how the plain natural meaning of the words used by the legislature in that definitional clause does not accord with the contention of the Revenue. We have said enough on the subject and nothing more need be said about it. It is enough to point out that in a subsequent decision in CIT v. Dharmodayam Company (1977) 4 SCC 75 : 1977 TaxPub(DT) 0937 (SC) which came by way of an appeal from the judgment of the Kerala High Court (1974) 94 ITR 113 (Ker.) : 1974 TaxPub(DT) 0087 (Ker-HC), this Court itself has, in effect and substance, departed from this view and adopted the same construction which has commended itself to us. The question which arose in this case was whether the income from business of conducting kuries carried on by the assessee was exempt from tax. The contention of the Revenue was that since the assessee was an institution established for promoting an object of general public utility and this purpose was sought to be achieved out of the income of the business of conducting kuries, the last concluding words of section 2 clause (15) were attracted and the income 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 Iyer, J. and that the test applied by Kerala High Court was held by him to be wrong on the assumption that the case fell under the last clause of section 2 clause (15) but, in fact, this assumption was invalid, as Dharmodayam case was not one falling under the last part of the definition clause. The finding of the Kerala High Court was that the business of conducting kuries was a business held under trust for applying its income to the charitable purpose and it was not carried on as a matter of advancement of the primary purpose of the trust or in the course of carrying out such purpose and it could not, therefore, be said that the primary purpose of the trust involved the carrying on of an activity for profit within the meaning of the last concluding words in section 2 clause (15). This Court thus held in no uncertain terms that if a business is held under trust or legal obligation to apply its income for promotion of an object of general public utility or it is carried on for the purpose of earning profit to be utilised exclusively for carrying out such charitable purpose, the last concluding words in section 2 clause (15) would have no application and they would not deprive the trust or institution of its charitable character. What these last concluding words require is not that the trust or institution whose purpose is advancement of an object of general public utility should not carry on any activity for profit at all but that purpose of the trust or institution should not involve the carrying on of any activity for profit. So long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be met and it is immaterial how the monies for achieving or implementing such purpose are found, whether by carrying on an activity for profit or not. We may point out that even in Sole Trustee, Loka Shikshana Trust v. CIT (1976) 1 SCC 254 : 1975 TaxPub(DT) 0344 (SC), a decision which, as we shall presently point out, does not commend itself to us on another point, the same interpretation has been accepted by this Court. (Underlining by us for emphasis and future reference)
18. In Dharmodayam Company, the Department had taken a contention that the purpose or object of the Company was conducting kuries which is a business with eye on the profits derived. A distinction was sought to be drawn between the provisions of the 1922 and 1961 enactments. 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 Supreme Court in Commissioner of Income Tax v. Gujarat Maritime Board (2007) 295 ITR 561 (SC) : 2007 TaxPub(DT) 1557 (SC), a later decision on identical circumstances. Gujarat Maritime Board was also entitled to exemption under section 10(20) being registered as a local authority. After the exemption was taken away by reason of the restriction provided in the definition of local authority they applied for registration under section 12A. A reading of the judgment indicates that the activities carried on by the Board were almost analogous to the activities carried on by the assessee herein. The extracted definition under section 2(15) came up for specific consideration before the Hon’ble Supreme Court. The Hon’ble Supreme Court specifically found that section 10(20) and 11 operate in different spheres and when a particular entity has ceased to be local authority it does not preclude them from claiming exemption under section 11. Relying on CIT v. Ahmedabad Rana Caste Association (1983) 140 ITR 1 (SC) : 1983 TaxPub(DT) 0334 (SC) the expression charitable purposes was found to prima facie include all objects which promote the welfare of the general public. It was categorically held that “when an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry (CIT v. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC) : 1965 TaxPub(DT) 0190 (SC)). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity (Addl. CIT v. Surat Art Silk Cloth Manufacturers Association).”
20. The Hon’ble Supreme Court found the case of Gujarat Maritime Board to be squarely covered by the decision in APSRTC. We extract Paragraph 16 :–
“Applying the ratio of the said judgment in the case of Andhra Pradesh State Road Transport Corporation, we find that, in the present case, the Gujarat Maritime Board is established for the predominant purpose of development of minor ports within the State of Gujarat, the management and control of the Board is essentially with the State Government and there is no profit motive, as indicated by the provisions of section 73, 74 and 75 of the 1981 Act. The income earned by the Board is deployed 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 being granted. Clause (a) of section 12A provides an application to be filed in the prescribed form and in the prescribed manner to the Commissioner before the first day of July, 1973 or before the expiry of a period of one year from the date of creation of the trust or the establishment of the institution. The proviso also makes it clear that if there is a delay occasioned and the Commissioner is satisfied that there were sufficient reasons for not having filed an application within the time provided under clause (a), then the registration would be applicable from the date of creation of the trust or establishment of the institution. Even if the delay is not condoned for reason of no satisfactory explanation having been offered, the registration; if enabled, would be applicable from the first day of the financial year in which the application is made. What assumes relevance is the fact that the assessee herein was entitled to exemption under section 10(20) by virtue of its registration as a local authority and the same was taken away by an amendment of 13-11-2002, which came into effect from 1-4-2003; when the exemption was withdrawn. We notice that there has been a delay of about 3 years. In considering condonation of delay one has to look at the nature of the duties, which the assessee has been carrying on, and the drastic change in law brought about by the introduction of the Explanation under section 10(20). The need for registration as a trust carrying on activities of charitable purposes arose only for reason of the exemption having been withdrawn. The assessee which was enjoying exemption from Income Tax from its inception was suddenly faced with the prospect of being made liable under the taxing statute. This would have required considerable research and as was rightly pointed out by the assessee, the Ports, all over the Country had been suddenly deprived of their exemption and had filed applications under section 12AA with considerable delay. Taking all these aspects into account; we find that the explanation offered is satisfactory and the delay has to be necessarily condoned. We agree with the Tribunal on the condonation of delay.
23. We also notice Berger Paints India Ltd. and find that the Department is not justified in taking different stances in the State of Maharashtra with respect to Mormugao Port Trust and in the State of Kerala with respect 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 12-7-2018. We hence specifically directed the learned Standing Counsel, Government of India (Taxes) to get instruction as to the document produced, by interim order dated 20-7-2018. 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 Mormugao Port Trust case is not known to him he is aware of the proceedings at Ext.R1(a). The Commissioner also expresses helplessness insofar as he being not competent to take a decision on the aspect of taking a similar decision in the case of Cochin Port Trust. It is also brought to our notice that by virtue of the later decision of the Hon’ble Supreme Court in Electronics Corporation of India Ltd., v. Union of India and others (2011) 332 ITR 58 (SC) : 2011 TaxPub(DT) 0928 (SC), the Committee on Disputes is no longer functioning. Berger Paints is in a similar situation where the Department took contrary stance with respect to similarly placed persons in different parts of the country. We extract Paragraph 12 of the aforesaid judgment —
“In view of the judgments of this Court in Union of India v. Kaumudini Narayan Dalal (2001) 249 ITR 219 (SC) : 2001 TaxPub(DT) 0902 (SC), CIT v. Narendra Doshi (2002) 254 ITR 606 (SC) : 2002 TaxPub(DT) 0496 (SC) and CIT v. Shivsagar Estate (2002) 257 ITR 59 (SC) : 2002 TaxPub(DT) 0101 (SC) the principle established is that if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause.”
24. We are further fortified in dismissing the appeal on the basis of the principles as laid down herein above.
25. We hence answer the questions framed against the Revenue and in favour of the assessee upholding the order of the Tribunal, condoning the delay in filing the application under section 12AA and directing the registration to be granted as a trust established for the purpose of charitable purpose, eligible for exemption under section 11 & 12A of the Income Tax Act. We however, deem it fit not to answer the question framed with respect to the deemed grant of registration on the delay occasioned in passing a final order on the application under section 12AA since we find the delay having been satisfactorily explained. We also answer the additional questions framed by us, though not arising from the order of the Tribunal following Berger Paints in favour of the assessee and against the Revenue.
The IT appeal would stand dismissed. No order as to costs.