Gujarat H.C : Allowing registration u/s.12AA to the assessee which was refused by the Commissioner of Income-tax vide his order u/s.12AA(1)(ii) dated 27.4.07

High Court Of Gujarat

CIT-I VS. Kandla Port Trust

Section : 2(15), 12A

Akil Kureshi And Ms. Sonia Gokani, JJ.

Tax Appeal Nos. 575 Of 2009, 1507

& 1511 Of 2011 & 791 Of 2013

April 23, 2014

JUDGMENT

Akil Kureshi, J. – These Tax Appeals are connected. Only Tax Appeal No.575 of 2009 has been admitted for considering the following substantial questions of law:—

“(1) Whether on the facts of the case, the Appellate Tribunal is right in law in allowing registration u/s.12AA to the assessee which was refused by the Commissioner of Income-tax vide his order u/s.12AA(1)(ii) dated 27.4.07 ?

(2) Whether on the facts of the case, the Appellate Tribunal is right in law in allowing registration u/s.12AA to the assessee when the purpose of its creation and the activities carried out indicated that it is not carrying on charitable activities but commercial activities ?

(3) Whether on the facts of the case, the Appellate Tribunal is right in law in allowing registration u/s.12AA to the assessee when exemption u/s.10(2) was withdrawn by the legislature, it will defeat the legislature intent to allow the same under another provision ?”

2. In Tax Appeal No.575 of 2009, respondent assessee is the Kandla Port Trust (“KPT” for short). The respondent applied for registration under section 12A of the Income Tax Act,1961 (“the Act” for short) on 26.2.2006. The Commissioner, however, was not inclined to accept the application. The assessee was given an opportunity. Availing such opportunity the assessee made submissions under letter dated 24.4.2007. Commissioner of Income-tax, Rajkot, however, by an order dated 27.4.2007 rejected the application of the assessee. The assessee carried the matter in appeal. The Tribunal by the impugned judgment dated 20.6.2008 allowed the appeal relying on the decision of the Bangalore Bench of the Tribunal in case of New Manglore Port Trust v. CIT. The Revenue is, therefore, in appeal before us. Questions (1) and (2) pertain to validity of the Tribunal’s decision to grant registration under section 12A of the Act. Question (3) is also directed against the same decision but in the historical background that previously the income of the respondent assessee was exempted under section 10(20) of the Act, which was later on withdrawn. The contention of the Revenue, therefore, is that now granting registration under section 12A would defeat the legislative purpose of taxing the income of such entities. In the third question, therefore, we would read the correct reference to section 10(20) of the Act instead of erroneously referred section 10(2). Once the Tribunal granted such registration, the assessment of the respondent assessee had to be done accordingly. While framing such assessments as directed by the Tribunal in order to keep the issue alive, the Revenue has preferred the other three appeals contending that if ultimately Revenue’s Tax Appeal No.791 of 2012 succeeds and the judgment of the Tribunal granting registration to the respondent assessee is reversed as a consequence thereof, the assessments already made on the basis of such registration of the assessee would also have to be set aside. These three appeals, therefore, are purely consequential in nature and their outcome would depend on the outcome of the main Tax Appeal No.575 of 2009. In other words, if such appeal of the Revenue is dismissed the remaining three appeals would stand automatically dismissed as well. We, therefore, take up the questions framed in such appeal for consideration.

3. Learned counsel Mr. Pranav Desai for the Revenue submitted that the Commissioner on the basis of materials on record came to the conclusion that activities carried on by the respondent assessee were not for charitable purpose. Such activities clearly were in the nature of commercial activities. KPT was, therefore, not entitled to registration, so rightly held by the Commissioner. He relied on the decision of the Supreme Court in case of Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 in which section 2(15) of the Act came up for consideration in context of section 11 of the Act in which it was observed that institution which carries on charitable purpose out of income derived from property held under trust wholly for charitable purpose may still forfeit the claim to exemption in respect of such takings or incomes as may come to it from pursuing an activity for profit.

4. Counsel also relied on the decision of the Uttarakhand High Court in case of CIT v. National Institute of Aeronautical Engg. Educational Society [2009] 315 ITR 428/184 Taxman 264 (Uttarakhand) in which it was observed that mere imparting of education for making profit would not make it a charitable purpose. It was held that the Commissioner while passing the order under section 12AA of the Act is not supposed to allow registration blindly. Expression “charity” in the expression “charitable purpose” is the soul of the expression and mere trade or commerce in the name of education cannot be said to be a charitable purpose.

5. Counsel further submitted that the Tribunal reversed the findings of the Commissioner without any discussion of facts merely relying on the decision of the Bangalore Bench in case of another port trust.

6. On the other hand, learned counsel Shri J.P. Shah for the respondent opposed the appeal contending that KPT is constituted under the Major Ports Trusts Act, 1963 (hereinafter referred as “the Act of 1963). Its activities are governed by the provisions contained in the Act of 1963. In particular, our attention was drawn to Chapter VIII of the Act of 1963, which pertains to the revenue and expenditure. He contended that the activities of the port trust were for the benefit of the general public and were covered under the definition of charitable purpose under section 2(15) of the Act. Registration was, therefore, wrongly refused by the Commissioner.

7. Counsel further submitted that while ascertaining the purpose of the trust what is to be seen is dominant purpose for which the trust is constituted. Even if incidental activity involves profit making, the same would not take the trust out of the expression “charitable purpose”. Counsel drew our attention to the decision of the Panaji Bench of the Income Tax Appellate Tribunal in case of Mormugao Port Trust v. CIT [2007] 109 ITD 303 (Panaji) in which, after detailed discussion, the Tribunal held as under:—

“13. Referring to the above, the ld.AR pointed out that all the above activities tantamount to creating and maintaining variable and much needed infrastructure for the Nation. Ports greatly facilitate trade and commence and contribute significantly to the development of not only the hinterland which they serve directly, but also to the growth and development of the national economy. Advancement of an object of General Public Utility has been held to be a charitable purposes. The provisions in the Major Port Trusts Act as regards the works and services to be provided by the assessee and the manner of utilization of the funds as laid down in Chapter VIII, highlight inherent charitable nature of activities of the Port Trusts. As per the decisions in the case of Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704(SC) and in the case of CIT v. Ahmedabad Rana Caste Association [1973] 88 ITR 354 (Guj.) it was held that every object of general public utility is a charitable object according to the definition in the Indian statute. The concept of charitable purpose, according to the Indian law, is, therefore, definitely very wide. It is well-settled by now that an object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object should be to benefit the whole of mankind or all persons in a particular country or State. It is sufficient if the intention to benefit a section of the public, as distinguished from a specified individual, is present. According to the ld. AR this view was affirmed by the Supreme Court in the case of CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1.”

8. Our attention was drawn to the decision of this Court in the case of CIT v. Gujarat Maritime Board [2007] 289 ITR 139 (Guj) in which the High Court confirmed the decision of the Tribunal that the said Board was entitled to registration under section 12A of the Act.

9. It was pointed out that the decision of this Court in the case of Gujarat Maritime Board was carried in appeal by the Revenue before the Supreme Court. The Supreme Court in the decision rendered in case of CIT v. Gujarat Maritime Board [2007] 295 ITR 561/166 Taxman 58 after detailed discussion dismissed Revenue’s appeal.

10. We may notice that section 2(15) of the Act which defines the term “charitable purpose” has undergone changes from time to time. We would, therefore, refer to the said provision as it stood at the relevant time, which reads as under:-

‘2(15) “charitable purpose” includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility;’

11. Section 11 of the Act pertains to the income from property held for charitable or religious purposes. Sub-section (1) thereof provides inter alia that subject to the provisions of sections 60 to 63 the incomes provided in clauses (a) to (d) shall not be included in the total income of the previous year of the person in receipt of the income. Section 12 of the Act pertains to the income of the trusts or institutions from contributions. Sub-section(1) thereof provides that any voluntary contributions received by the trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes not being contributions made with a specific direction that they shall form part of the corpus of the trust, shall for the purposes of section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes.

12. Section 12A of the Act pertains to conditions as to registration of trusts and reads as under:

“12A. Conditions as to registration of trusts, etc.— The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:—

(a)
the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA:

Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,—

(i) from the date of creation of the trust or the establishment of the institution if the Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons;

(ii) from the 1st day of the financial year in which the application is made, if the Commissioner is not so satisfied:

(b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds fifty thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section(2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed from duly signed and verified by such accountant and setting forth such particulars as may be prescribed.”

13. Section 12AA of the Act provides the procedure for registration. Sub-section (1) thereof which is relevant reads as under:—

“12AA Procedure for registration.— (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) of section 12A, shall-

(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he-

(i) shall pass an order in writing registering the trust or institution;

(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant:

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.”

14. It can thus be seen that for a trust to claim exemption under section 11 of the Act from the property held wholly for charitable or religious purposes it has to apply for registration under section 12A and such application has to be considered by the Commissioner as per the procedure laid down under section 12AA of the Act. It is in this context that the term “charitable purpose” assumes significance for our purpose. We may recall that section 2(15) as it stood at the relevant time defined charitable purpose to include relief of the poor, education, medical relief and advancement of any other object of general public utility.

15. In case of Addl. CIT v. Surat Art Silk Cloth Mfg. Association [1980] 121 ITR 1/[1979] 2 Taxman 501 (SC), in the context of expression “charitable purpose” and the object of general public utility not involving any activity for profit held that the test to be applied is of the predominant activity. It is not necessary that profit making must be specifically excluded in the constitution of the trust. The test which should be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to sub-serve 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.

16. In case of CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC), it was observed as under:—

‘In the promotion of trade, commerce and industries of India the public is vitally interested and if by the activities of the assessee that object is achieved, it would be within the meaning of S. 4(3)(i) of the Act an advancement of an object of general public utility. In enacting the last paragraph of S. 4(3) the legislature has used language of great amplitude. “Charitable purpose” includes not only relief of the poor, education and medical relief alone, but advancement of other objects of general public utility as well. The clause is intended to serve as a special definition of the expression “charitable purpose” for the Act : it is again inclusive and not exhaustive or exclusive. Even if the object or purpose may not be regarded as charitable in its popular signification as not tending to give relief to the poor or for advancement of education or medical relief, it would still be included in the expression “charitable purpose” if it advances an object of general public utility. The expression “object of general public utility” however is not restricted to objects beneficial to the whole mankind. An object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or province. It is sufficient if the intention be to benefit a section of the public as distinguished from specified individuals. Observations to the contrary made by Beaumont C.J., in Commissioner of Income-tax v. Grain Merchants’ Association of Bombay that “an object of general public utility means an object of public utility which is available to the general public as distinct from any section of the public” and that objects of an association “to benefit works of public utility confined to a section of the public, i.e. those interested in commerce” are not objects of general public utility, do not correctly interpret the expression “objects of general public utility”. The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature: where there is no common quality uniting the potential, beneficiaries into a class, it may not be regarded as valid.’

17. In case of CIT v. Andhra Pradesh State Road Transport Corpn. [1986] 159 ITR 1 (SC) while considering whether a State Road Transport Corporation was carrying the activity of profit, it was observed as under:—

‘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 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 Road 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] 120 ITR 1 (SC), it is not possible so to carry on a charitable activity in such a way 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 out in section 18 is to be performed. It is now firmly established by decisions of this Court in the Surat Art Cloth Manufacturers Association’s case [1980] 120 ITR 1(SC) and the Bar Council of Maharashtra’s case [1981] 130 ITR 28 (SC) that the test is “What is the pre-dominant object of the activity -whether it is to carry out a charitable purpose or to earn profit?” If the pre-dominant 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.’

18. Bearing in mind these principles if we revert back to the facts of the case, we may recall that the respondent assessee is constituted under the Act of 1963. The said Act was enacted to make provision for the constitution of port authorities for certain major ports in India and to vest the administration, control and management of such ports in such authorities and for matters connected thereof. The Act of 1963 besides providing for the constitution of the Board of trustees and committees thereof further provides under section 29 that from the appointed day in relation to any port, all property, assets and funds vested in the Central Government or any other authority shall vest in the Board. Chapter V of the Act of 1963 pertains to works and services to be provided at ports. Section 35 thereof provides for power of the Board to execute such works and provide appliances. Section 35(1) provides that the Board may execute such works within and outside the limits of the port and provide such appliances as deemed necessary or expedient. Sub-section (2) provides that such works and appliances may include:—

“(a) wharves, quays, docks, stages, jetties, piers and other works within the port or port approaches or on the foreshore of the port or port approaches, with all such convenient arches, drains, landing places, stairs, fences, roads, railways, bridges, tunnels and approaches and buildings required for the residence of the employees of the Board as the Board may consider necessary;

(b) buses, railways, locomotives, rolling stock, sheds, hotels, warehouses and other accommodation for passengers and goods and other appliances for carrying passengers and for conveying, receiving and storing goods landed, or to be shipped or otherwise;

(c)moorings and cranes, scales and all other necessary means and appliances for loading and unloading vessels;

(d) reclaiming, excavating, enclosing and raising any part of the foreshore of the port or port approaches which may be necessary for the execution of the works authorised by this Act, or otherwise for the purposes of this Act;

(e) such breakwaters and other works as may be expedient for the protection of the port;

(f) dredgers and other machines for cleaning, deepening and improving any portion of the port or port approaches or of the foreshore of the port or port approaches;

(g) lighthouses, lightships, beacons, buoys, pilot boats and other appliances necessary for the safe navigation of the port and of the port approaches;

(h) vessels, tugs or other boats for use within the limits of the port or beyond those limits, whether in territorial waters or otherwise, for the purpose of towing or rendering assistance to any vessel, whether entering or leaving the port or bound elsewhere, and for the purpose of saving or protecting life or property and for the purpose of landing, shipping or transhipping passengers or goods under section 42;

(i) sinking of tube-wells, and equipment, maintenance and use of boats, barges and other appliances for the purpose of the supply of water at the port;

(j) engines and other appliances necessary for the extinguishing of fires;

(k) construction of models and plans for carrying out hydraulic studies;

(l) dry docks, slipways, boat basins and workshops to carry out repairs or overhauling of vessels, tugs, boats, machinery or other appliances.”

Section 36 pertains to power of the Board to undertake certain works. Section 50 of the Act of 1963 authorizes the Board from to time to frame consolidated scale of rates for any combination of service specified in section 48 or for any combination of such service or services with any user or permission to use any property belonging to or in the possession or occupation of the Board. As per section 52, such rates are to be fixed with the prior sanction of the Central Government. Section 76 authorizes the Board to make regulations for the purposes specified therein. Chapter VIII of the Act of 1963 pertains to revenue and expenditure. Section 86 pertains to general account of port. Section 88 pertains to application of moneys in general account. Sub-section (1) provides inter alia that the money credited to the general account under section 87, shall, subject to the provisions of section 89 of this Act and section 36 of the Indian Ports Act be applied by the Board in payment of charges specified therein which includes the interest on installments of the principal amount due on the loan taken by the Board, salaries, fees, allowances, pensions, gratuity etc. to the employees, cost and expenses incurred by the Board in the conduct and administration of any provident or welfare fund, cost of repairs and maintenance of the property belonging to or vested in the Board etc.

19. Section 90 of the Act of 1963 pertains to the establishment of reserve funds. Section 90 reads as under:—

“90. Establishment of reserve funds.—(1) A Board may, from time to time, set apart such sums out of its surplus income as it thinks fit, as a reserve fund or funds for the purpose of expanding existing facilities or creating new facilities at the port or for the purpose of providing against any temporary decrease of revenue or increase of expenditure from transient causes or for purposes of replacement or for meeting expenditure arising from loss or damage from fire, cyclones, shipwreck or other accident or for any other emergency arising in the ordinary conduct of its work under this Act:

Provided that the sums set apart annually in respect of, and the aggregate at any time of, any such reserve fund or funds shall not exceed such amounts as may, from time to time, be fixed in that behalf by the Central Government.

(2) Any such reserve fund or funds may be invested in public securities or in such other securities as the Central Government may approve in this behalf.”

20. Section 92 of the Act of 1963 requires prior sanction of Central Government to charge expenditure to capital. Section 93 pertains to works requiring sanction of Board or Central Government. Sub-section (1) of section 96 provides that subject to conditions as may be specified by the Central Government, if the Board is of the opinion that any amount due or any loss incurred by the Board is irrecoverable, the Board may with the previous approval of the Central Government sanction the writing off finally of the said amount or loss. It can thus be seen that the Act of 1963 was enacted with a specific purpose of constitution of port authorities and to vest the administration of major ports, its control and management in such authorities constituted under the Act of 1963.

21. Various provisions noted above leave no manner of doubt that the port trust under the said Act would control the activities at a major port for utilizing and creating facilities. Agencies utilizing such facilities would pay charges to the port trust at the rates specified with prior sanction of the Government. It would be open for the Board to utilize the money credited to the general account for the purposes mentioned in sub-section (1) of section 88. Such purposes include the administrative expenses and salary and other benefits to be paid to the employees and also the cost of repairs and maintenance of the property of the Board and other expenses. The Board would also be allowed to create reserve fund for the purpose of replacement or for meeting expenditure arising from loss or damage from fire, cyclones, shipwreck or other accident or for any other emergency arising in the ordinary conduct of its work under this Act. Thus creating an autonomous body under the Major Port Trusts Act still envisages the involvement of the Central Government in important decision making. For example under section 92 the Board would have to take prior sanction of the Central Government to charge expenditure to capital. Under section 96 before writing off any loss as irrecoverable the Board would have to obtain prior approval of the Central Government.

22. Thus the fact that the respondent is involved in an activity which is of general public utility is doubtless. Further the fact that there is no profit making or motive to make profit is equally clear from the said provisions of the Act of 1963. This is precisely what the Tribunal in case of Mormugao Port Trust (supra) analyzed and came to the conclusion. In somewhat similar statutory scheme, the Supreme Court in case of Gujarat Maritime Board (supra) held that the activities of Gujarat Maritime Board would be covered under section 2(15) of the Act. The Gujarat Maritime Board was constituted under the Gujarat Maritime Board Act of 1981 (hereinafter referred to as “the Act of 1981”). Such Act was enacted to make provisions for constitution of a Maritime Board for minor ports in the State of Gujarat and to vest administration, control and management of such ports in that Board and for matters connected therewith. The Act in addition to the establishment of the State Maritime Board made provisions similar to the Act of 1963 for giving management and control of minor ports to the Board so constituted. For example under section 20 it was provided that from the appointed day in relation to any port all property, assets and funds and all rights to levy rates vested in the State Government shall vest in the Board. Chapter V pertains to works and services to be provided at minor ports by the Board. Chapter VI pertains to imposition and recovery of rates at ports. Chapter VIII pertains to revenue and expenditure and in sections 73,74 and 75 made provisions similar to those contained in sections 87,88, 90 etc. of the Act of 1963.

23. It was in this background that the Supreme Court in case Gujarat Maritime Board (supra) referring to the various provisions under the Act of 1981 and in particular sections 73,74 and 75 thereof held and observed as under:—

’14. We have perused number of decisions of this court which have interpreted the words, in Section 11(15), namely, “any other object of generally public utility”. From the said decisions it emerges that the said expression is of the widest connotation. The word “general” in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose [Commissioner of Income-tax, Gujarat-III, Ahmedabad v. Ahmedabad Rana Caste association, (1983) 140 ITR 1 SC). The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. 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 [Commissioner of Income-tax Madras v. Andhra Chamber of Commerce, – (1965) 55 ITR 722 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, Gujarat v. Surat Art Silk Cloth Manufacture Association, (1980) 121 ITR 1 (SC).

15. The present case in our view is squarely covered by the judgment of this Court in the case of Commissioner of Income-tax, A.P. v. Andhra Pradesh State Road Transport Corporation, (1986) 159 ITR 1 (SC) in which it has been held that since the Corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income-tax.

16. Applying the ratio of the said judgment in the case of Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1(SC), we find that, in the present case, 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 Sections 73, 74 and 75 of the 1981 Act. The income earned by the Board is deployed for the development of minor ports in India. In the circumstances, in our view, the judgment of this court in Andhra Pradesh State road Transport Corporation [1986] 159 ITR 1 squarely applies to the facts of the present case.’

24. The Court also held that section 10(20) of the Act and section 11 operate in different spheres. Even if the Board has ceased to be a “local authority”, it is not precluded from claiming exemption under section 11(1) of the Act. It was held as under:—

’13. At the outset, we may point out that Section 10(20) and Section 11 of the 1961 Act operate in totally different spheres. Even if the Board has ceased to be a “local authority”, it is not precluded from claiming exemption under section 11(1) of the 1961 Act. therefore, we have to read Section 11(1) in the light of the definition of the words “charitable purposes” as defined under Section 2(15) of the 1961 Act.’

25. In our opinion, decision of the Supreme Court in the case of Gujarat Maritime Board (supra) would completely cover the situation in the present case also.

26. In the result, all the questions are answered against the Revenue. Tribunal’s judgment is upheld.

27. Above observations are made in the context of the assessee’s application for registration under section 12A of the Act. Whether the conditions for exemption under section 11 are satisfied or not, are the issues which need to be examined only at the time of assessment. However, the assessee in the facts of the present case cannot be denied registration under section 12A of the Act.

28. When we are in the process of rejecting the Tax Appeal No.575 of 2009, rest of the Tax Appeals would automatically have to meet with the same result.

In the result, all Tax Appeals are dismissed.

[Citation : 364 ITR 164]