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Issues Involved:
1. Whether the Assessing Officer is entitled to probe into the objects of the charitable trust already registered under section 12A of the Income Tax Act. 2. Whether the activities carried on by the assessee can be termed as business activity in terms of Section 11(4A) of the Income Tax Act. 3. Whether the amount of Rs. 30,00,000 and Rs. 5,00,000 given to the two settlor associations can be treated as investment in terms of Section 11(5) of the Income Tax Act. 4. Whether the said advance of Rs. 30,00,000 and Rs. 5,00,000 are hit by the provisions of Section 13(1)(c) read with Section 13(2)(a) of the Income Tax Act. 5. Whether the objects for which accumulation was made under Section 11(2) were for charitable purposes or not. Issue-wise Detailed Analysis: 1. Probing into the Objects of the Trust Registered under Section 12A: It was established that the assessee trust was granted registration under Section 12A of the Income Tax Act from its inception. The Supreme Court in ACIT Vs. Surat City Gymkhana (2008) affirmed that once a trust is registered under Section 12A, the Assessing Officer cannot further probe into the objects of the trust. Thus, the Assessing Officer's detailed analysis of the trust's objects and subsequent denial of exemption under Section 11 was not in accordance with the law. 2. Activities Termed as Business Activity: The term "Business" implies a continuous and systematic exercise of an occupation with the objective of making a profit. The trust's primary objective was to identify, enroll, allot work, and regulate private workers, without any profit motive. The trust's activities were deemed charitable, not commercial, as there was no profit distribution among trustees, and the surplus was retained for the trust's objectives. The activities were also in line with the Major Port Trust Act, 1963. Therefore, the trust's activities could not be treated as business activities. 3. Treatment of Advances as Investment under Section 11(5): The assessee advanced Rs. 30,00,000 and Rs. 5,00,000 to M/s Visakhapatnam Stevedors Association and M/s Visakhapatnam Clearing and Forwarding Agents Association, respectively. As per the Andhra Pradesh High Court in CIT Vs. Polisetty Somasundaram Charities, advancing a loan is not an investment. Hence, these advances did not violate Section 11(5), and the question of violation of Section 11(3) did not arise. 4. Violation of Section 13(1)(c) read with Section 13(2)(a): The advances were made to settlor associations, which were adequately secured and earned adequate interest at 12%. The interest was collected and offered to tax in the year of receipt. The trustees, being office bearers of the settlor associations, did not imply personal benefit, as trade associations are non-commercial legal persons without personal interest. Thus, there was no violation of Section 13(1)(c) read with Section 13(2)(a). 5. Accumulation of Income under Section 11(2): The assessee specified the purposes of accumulation in Form No.10 as building construction and welfare amenities for workers. The Assessing Officer's conclusion that these were not for charitable activities was incorrect, as the objects of the trust had been approved as charitable by the Commissioner. The purposes specified were for advancing the trust's objectives and were not general. Hence, the accumulation was permissible under Section 11(2). Conclusion: The assessee trust was entitled to exemption under Section 11 of the Income Tax Act. The Assessing Officer was directed to re-compute the income in light of the principles stated above. All appeals filed by the assessee were allowed.
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