ASSISTANT DIRECTOR OF INCOME-TAX(EXEMPTION), TRIVANDRUM vs. KERALA INDUSTRIAL INFRASTRUCTURE DEV.CORPORATION, TRIVANDRUM

We are informed in this backdrop that the tribunal’s earlier learned co-ordinate bench had directed the Assessing Officer to carry out his afresh factual verification. The assessee preferred its Tax Appeal ITA 196/2015 and 71/2016 against the same before hon’ble jurisdictional high court in both these assessment years. Their lordships detailed discussion in the above lead case (AY 2010-11) remanded the same back to the tribunal, as under:-

The Assessing Authority decided against the assessee. As rightly noted by the First Appellate Authority, that decision of the Assessing Authority was obviously without analysing the facts as well as merits of the case, particularly in relation to the factors which were projected by the assessee. The First Appellate Authority deleted the disallowance made by the Assessing Authority. The Department carried the matter before the Income Tax Appellate Tribunal, which, in turn, made reference to the contentions of the parties and the arguments advanced by the respective learned counsel and referred to the judgments, particularly that rendered by the Orissa High Court in CIT v. M.P.Bajaj I(1993) 200 ITR 131] and thereby noticed that the question raised could be treated as one covered by the decision of the Co-ordinate Bench of the Income Tax Appellate Tribunal rendered in Greater Cochin Development Authority in & 793/ Coch/2013. By this time, the verdict 'in GCDA's case has found its approval through the judgment in ITA Nos.208/2014 and 210/2014 rendered by this Court on 19.12.2014. It is noticed that the Special Leave Petition filed by the GCDA before the Apex Court has been dismissed and thereafter, on an issue, which is totally different from what we are now addressing, this Court also dismissed an application for review of the judgment in GCDA's case.

Hearing the learned Senior Counsel for the assessee and the learned Senior Counsel for the department, we see that one of the prime issues that is germine for consideration is what is the quality of the holding of land by the appellant and as to how the said authority constituted under the KIID Act came into possession of land which was given by the Government partially and therefore, what would be the manner in which any income generated through that property could be dealt with for the purpose of Income Tax Act. It is also to be noted that the fundamental contention of the appellant is particularly on the issue relatable to the income generated by way of premium and attendant income from that property and utilisation of that parcel. The question whether the proviso to Section 2(15) would apply is something that has to be decided on the basis of the activity or activities during a particular year which would fall for consideration at the hands of the Assessing Authority.

We are of the firm view that the decision rendered by this Court in GDA's case cannot be treated as a wholesome precedent for reasons more than one. Firstly, we may notice that the GCDA's case was decided on the basis of the facts, materials and circumstances of that case. It is fundamental that in deciding an issue relating to the applicability of Section 2(15) to a particular assessee or transactions of an assessee, the decision making ought to be on the basis of the transactions and such quality of the activity which may bring the income either to the liability or exemption from the provisions of the Income Tax Act. Secondly and more particularly, we may note that the learned Senior Counsel for the appellant made reference to the decisions of the Apex Court in Shri Ramtanu Co-operative Housing Society Ltd. and another v. State of Maharashtra and others [AIR 1970 SC 1771] and M.D., J.S.I.D.C. & Ors.

Mr.Syal invites our attention to case law ACIT v. Ahmedabad Urban Development Authority (2022) 449 ITR 1 (SC) settling the instant legal question of applicability of sec.2(15) first proviso as follows:-

The assessee’s counsel reiterates that the assessment years before us are 2009-2010 and 2010-2011 i.e. between the time period from 01.04.2003 to 01.04.2011 and as per CIT v. Gujarat Maritime Board (2007) 295 ITR 561 (SC), it is entitled for the impugned relief as follows:- “12. One of the objections raised on behalf of the Department was that Gujarat Maritime Board is not entitled to the benefit of section 11 of the 1961 Act as the said Board was not a trust under Public Trust Act and, therefore, it was not entitled to claim registration under section 12A of the 1961 Act. The Department's case was that the Maritime Board was a statutory authority. It was not a trust. Its business was not held under a trust. Its property was not held under trust. Therefore, the Board was not entitled to be registered as a & 287/Coch/2014. Kerala Industrial Infrastructure Development Corpn. Charitable Institution. It was the case of the Department that the Board was performing statutory functions. Development of minor ports in the State of Gujarat cannot be termed as the work undertaking for charitable purposes and in the circumstances the Commissioner rejected the Board's application under section 12A of the 1961 Act in the light of the above case of the Department, we are required to consider the expression 'any other object of general public utility' in section 2(15) of the 1961 Act.

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.

We have perused number of decisions of this Court which have interpreted the words, in section 2(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- CIT v. Ahmedabad Rana Caste Association (1983] 140 JTR L (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-CIT 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 v. Surat Art Silk Cloth Mfrs. Association (1980) 121 ITR 1(SC).

The present case in our view is squarely covered by the judgment of this Court in the case of CIT v. Andhra Pradesh State Road Transport Corpn. [1986] 159 ITR 1 in which it has been held that since the Corporation was established for the purpose of providing efficient transport system, having no & 287/Coch/2014. Kerala Industrial Infrastructure Development Corpn. profit motive though it earns income in the process, it is not liable to income-tax.

Applying the ratio of the said judgment in the case of Andhra Pradesh State Road Transport Corpn. (supra), 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 Corpn.'s case (supra) squarely applies to the facts of the present case.

Before concluding we may mention that under the scheme of section 11(1) of the 1961 Act, the source of income must be held under trust or under other legal obligation. Applying the said test it is clear, that Gujarat Maritime Board is under legal obligation to apply the income which arises directly and substantially from the business held under trust for the development of minor port in the State of Gujarat. Therefore, they are entitled to be registered as 'Charitable Trust' under section 12A of the 1961 Act.

For the aforestated reasons, we see no infirmity in the impugned judgments of the High Court and Tribunal and consequently Civil Appeal stand dismissed with no order as to costs.”

Learned Counsel accordingly submits that in case of a statutory corporation or an authority established under the state law, for the period from 01.04.2003 to 01.04.2011, it is still governed by the principle of application wherein it has to demonstrate that the receipts collected in carrying out the normal activities are duly applied in carrying out the charitable objects concerned.

Learned CIT-DR on the other hand submits that the question as to whether the assessee having applied its income for the purpose of carrying out the statutory charitable objects & 287/Coch/2014. Kerala Industrial Infrastructure Development Corpn. under the State Act, requires afresh factual verification by the Assessing Officer in above terms. Faced with this situation, assessee sought to rebut that even in the latter assessment years; and more particularly in assessment year 2021-22, the Assessing Officer has himself accepted it’s very exemption claim. It is in these peculiar facts we deem it appropriate to restore its instant appeals ITA No.452/Coch/2014 & Assessing Officer for his limited exercise / factual verification in foregoing terms as per law subject to the rider that the taxpayer itself shall plead and prove its case within three effective opportunities only; at its own risk and responsibility, in consequential proceedings. Ordered accordingly.

To sum up, this Revenue’s appeal 2010-2011 is partly allowed for statistical purposes. Coming to the assessee’s appeal arising against the CIT’s 263 revision order (supra). We make it clear before parting that we have upheld his order in principle. Ordered accordingly. A copy of these common order be placed in the respective case files.