2007 (12) TMI 7 - SC - Income Tax

Charitable purpose - Assessee involve in developing and maintaining minor ports in the state of Gujarat applied for registration as a charitable institution - Held that assessee entitle for the registration as charitable institution

Summary

Issues Involved:
1. Whether the Gujarat Maritime Board qualifies as a "Charitable Institution" under Section 11 of the Income-tax Act, 1961.
2. Interpretation of the expression "advancement of any other object of general public utility" under Section 2(15) of the Income-tax Act, 1961.
3. Whether the Gujarat Maritime Board is entitled to registration under Section 12A of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Whether the Gujarat Maritime Board qualifies as a "Charitable Institution" under Section 11 of the Income-tax Act, 1961:

The Gujarat Maritime Board, constituted under the Gujarat Maritime Board Act, 1981, was initially registered as a "Local Authority" under Section 3(31) of the General Clauses Act, 1897, and availed exemption under Section 10(20) of the Income-tax Act, 1961. However, the Finance Act, 2002, redefined "Local Authority," excluding the Maritime Board from this definition. Consequently, the Board applied for registration as a "Charitable Institution" under Section 2(15) of the Income-tax Act, 1961, claiming exemption under Section 11. The Department denied this, arguing that the Board was not a trust and did not hold property under trust, hence not qualifying for registration as a Charitable Institution.

2. Interpretation of the expression "advancement of any other object of general public utility" under Section 2(15) of the Income-tax Act, 1961:

The Court examined the inclusive definition of "charitable purpose" under Section 2(15), which includes "relief of the poor, education, medical relief, and the advancement of any other object of general public utility." The crucial phrase "advancement of any other object of general public utility" was interpreted broadly. The Court referenced several precedents, including CIT v. Ahmedabad Rana Caste Association and CIT v. Andhra Chamber of Commerce, establishing that any object benefiting the public or a section of the public qualifies as a charitable purpose. The primary and predominant object must promote public welfare, and any ancillary object does not negate the charitable nature.

3. Whether the Gujarat Maritime Board is entitled to registration under Section 12A of the Income-tax Act, 1961:

The Court noted that Section 10(20) and Section 11 operate in different spheres. Even if the Board ceased to be a "Local Authority," it could still claim exemption under Section 11(1) if it meets the definition of "charitable purposes" under Section 2(15). The Court referenced the case of Commissioner of Income-tax, A.P. v. Andhra Pradesh State Road Transport Corporation, where it was held that an organization established for public welfare without a profit motive, even if it earns income, is not liable to income-tax. Applying this ratio, the Court found that the Gujarat Maritime Board, established for developing minor ports in Gujarat and controlled by the State Government, with no profit motive as per Sections 73, 74, and 75 of the 1981 Act, qualifies for registration under Section 12A. The Board's income is deployed for the development of minor ports, fulfilling the legal obligation to apply income for charitable purposes.

Conclusion:

The Supreme Court found no infirmity in the High Court and Tribunal's judgments, concluding that the Gujarat Maritime Board is entitled to registration as a "Charitable Trust" under Section 12A of the Income-tax Act, 1961. The civil appeal was dismissed with no order as to costs.