SUPREME COURT OF INDIA

Commissioner of Income-tax

v.

Gujarat Maritime Board

Section 11, read with sections 2(15), 10(20) and 12A, of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under - Whether assessee, a Statutory Authority established under provisions of Gujarat Maritime Board Act, 1981 for predominant purpose of development of minor ports within State of Gujarat, management and control of which was essentially with State Government having no profit motive, was not precluded from claiming exemption under section 11(1) in light of definition of words ‘charitable purposes’ as defined under section 2(15), even if it had ceased to be a local authority under section 10(20) - Held, yes - Whether, therefore, assessee was entitled to be registered as charitable trust under section 12A - Held, yes

Words and phrases: ‘any other object of general public utility’ as occurring in section 2(15) of the Income-tax Act, 1961.

FACTS

In the instant appeal filed by the revenue, the question that arose for consideration before the Supreme Court as to whether the assessee, a Statutory Authority constituted under the provisions of the Gujarat Maritime Board Act, 1981, was entitled to the status of a charitable institution under section 11 after it ceased to be a local authority under section 10(20).

HELD

Section 10(20) and section 11 operate in totally different spheres. Even if the assessee had ceased to be ‘Local Authority’, it was not precluded from claiming exemption under section 11(1), therefore, one has to read section 11(1) in the light of the definition of the words ‘charitable purposes’ as defined under section 2(15). [Para 13]

The words, in section 2(15), namely, ‘any other object of general public utility’ is of the widest connotation. The word ‘general’ in the said expression means pertaining to a whole class, therefore, advancement of any object or 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. [Para 13]

Applying the ratio Supreme Court’s decision in CIT v. Andhra Pradesh State Food Transport Corpn. [1986] 159 ITR 1/25 Taxman 63A, it was found that, in the instant case, the assessee was established for the predominant purpose of development of minor ports within the State of Gujarat, the management and control of which was essentially with the State Government and there was no profit motive, as indicated by the provisions of sections 73, 74 and 75 of the 1981 Act. The income earned by it was deployed for the development of minor ports in India. [Para 16]

Under the scheme of section 11(1), the source of income must be held under trust or under other legal obligation. Applying the said test, it was clear, that the assessee was under legal obligation to apply the income which would arise directly and substantially from the business held under trust for the development of minor port in the State of Gujarat. Therefore, it was entitled to be registered as ‘charitable trust’ under section 12A. [Para 17]

Therefore, there was no infirmity in the impugned judgments of the High Court and Tribunal and, consequently, appeal would stand dismissed. [Para 18]