Holding

The Gujarat Maritime Board is a charitable institution under Section 2(15) and eligible for registration under Section 12A of the Income‑Tax Act, 1961.

Summary

The Gujarat Maritime Board (GMB), a statutory authority created under the Gujarat Maritime Board Act, 1981 to develop minor ports, applied to be registered as a charitable institution under Section 12A of the Income‑Tax Act, 1961 to claim exemption under Section 11. The Commissioner of Income Tax rejected the application, holding that GMB was not a trust and its activities were statutory, not charitable. The Supreme Court examined the definition of "charitable purpose" in Section 2(15) of the Income‑Tax Act, particularly the phrase "advancement of any other object of general public utility", and considered earlier judgments interpreting this provision. It held that GMB's predominant purpose – development of minor ports for the public benefit – qualifies as an object of general public utility, and that the Board’s income is held under a legal obligation to be applied to that purpose, satisfying the trust‑like requirement of Section 11. Consequently, GMB is entitled to registration as a charitable institution under Section 12A. The appeal was dismissed, leaving the High Court’s order in favour of GMB intact.

Issues considered

Whether the Gujarat Maritime Board qualifies as a charitable institution under Section 2(15) and Section 11 of the Income‑Tax Act, 1961.
Whether the Board’s income is held under a trust or legal obligation sufficient to attract exemption under Section 11.
Whether the Board’s status as a statutory authority precludes registration under Section 12A.

Legislation cited

Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970s. 2(d)
Finance Act, 2002
General Clauses Act, 1897s. 3(31)
Gujarat Maritime Board Act, 1981s. 3(2), s. 3(3), s. 73, s. 74, s. 75
Income Tax Act, 1961s. 10(20), s. 11(1), s. 11(4), s. 12A, s. 2(15)
Indian Ports Act, 1908s. 36

Subjects

charitable trustincome tax exemptionpublic utilitystatutory authoritySection 12ASection 11Gujarat Maritime Boardminor portsFinance Act 2002local authority

Judgment

,l
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1-
A COMMISSIONER OF INCOME TAX
v.
GUJARAT MARITIME BOARD

DECEMBER 5, 2007 ~

'

B
[S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ.J
~

Income Tax Act, 1961:

c ss. 2(15), 11 and 12-A-Expression "Charitable purpose " and
"advancement of any other object of general public utility" in
s. 2(15)-Connotation of-Gujarat Maritime Board claiming
registration under s.12-A-HELD: Jf the primary or predominant
ubject ofan institution is charitable any other object which might not
be charitable but which is ancillary or incidental to dominant purpose,
D '
would not prevent institution from being a valid charity-On facts, ~
Gujarat Maritime Board having been established for predominant
purpose of development of minor ports within State of Gujarat,
management and control ofBoard is essential with State Government
and there is no profit motive, as indicated by provisions of ss. 73, 74
E
and 75 ofthe Gujarat Maritime BoardAct-lncome earned by Board
is deployed for development of minor ports in India-Under the
Scheme ofs.11 (I), source ofincome 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 income which arises
F directly and substantially from business held under trust for
development ofminor port in State ofGujarat-Therefore, the Board
is entitled to be registered as "Charitable Trust" under s.12-A of1961
Act-Gujarat Maritime Board Act, 1981-s. 3(3).

G Commissioner of Income Tax, Madras v. Andhra Chamber of
Commerce, [196SJ SS ITR 722 (SC); Addi. Commissioner ofIncome
Tax, Gujarat v. Surat Art Silk Cloth Manufacturers Assn., [1980) 221
ITR 2 (SC) and Commissioner ofIncome Tax, A.P. v. Andhra Pradesh
State Road Transport Corporation, [1986) 1S9 ITR l(SC), relied on.
H 962
J
COMMISSIONER OF INCOME TAX v. GUJARAT 963
MARITIME BOARD

w --l. Commissioner of Income Tax, Gujarat-Ill Ahmedabad v. A
Ahmedabad Rana Caste Asson., [1983] 140 ITR l(SC), referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5656 of
2007.
From the Judgment and Order dated 31.07.2006 of the High Court B
' ·~ of Gujarat at Ahmedabad in Tax Appeal No. 1433 of2005.
Mohan Parasaran, A.S.G., D.L. Chidananda, Lakshmi Iyengar, B.V.
Balararn Das, Krishan Mahajan, K.S. Sampath and Rani Chhabra for the
Appellant.
c
Soli Sorabjee and T.R. Andhyarujina, Pritesh Kapur, Hemantika
Wahi, Jesal and Pinky for the Respondent.
The following Order of the Coutt was delivered
ORDER D
Leave granted.
Gujarat Maritime Board is a statutory Authority constituted under
Section 3(2) of Gujarat Martime Board Act, 1981.
Before 13 .11.2002, the Board was registered as "Local Authority" E
as defined under Section 3(31) of the General Clauses Act, 1897 which
was a very wide definition. Prior to 2002, the Board was availing
exemption as Local Authority under Section 10(20) of the 1961 Act.
Accordingly, prior to 2002 the income of the Board was not exigible to
income-tax under Section 10(20) of the Income-tax Act, 1961. F
""1··

By Finance Act, 2002, an Explanation was added in Section 10(20)
by which "Local Authority" was defined. It gave a restricted meaning to
the word "Local Authority". By reason of the said Explanation, the
expression. "Local Authority" was confined to Panchayats, municipality, G
municipal committtee, district board and cantonment board. Thus, Maritime
>
....). Board did not come within the definition of the expression "Local
Authority".
Under the circumstance, Gujarat Maritime Board made an
H
964 SUPREME COURT REPORTS [2007] 12 S.C.R.

A application to the Commissioner for registering it (Board) as a "Charitable J.._

Institution" as defined under Section 2(15) of the Income-tax Act, "
1961 (hereinafter for the sake of brevity as "1961 Act'). Accordingly, they
claimed exemption as Charitable Institution in respect of income derived
from their property/business under Section 11 of the 1961 Act. This has
B been denied by the Department.
The short controversy which we are required to decide in this case
is: whether the Maritime Board is entitled to the status of a Charitable
Institution under Section l l of the 1961 Act. We may clarify that in this
case we are concerned with registration and not with application of
c income.
Before analyzing various provisions of the 1961 Act, we are required
to analyse the provisions of Gujarat Maritime Board Act, 1981 (" 1981
Act" for short).
D As can be seen from the preamble of the 1981 Act, it is clear that
the Board has been constituted, inter a/ia, for purposes of development
and maintenance of minor ports. Under the said Act the Maritime Board
also renders services like stevedoring, transport of goods, storage,
shipping etc. It is also incharge of upkeepment of jetties, wharfs, roads,
E lights, etc. However the main object of the said Act is development of
minor ports in the state of Gujarat. the income, accruing to the Maritime
Board, including reserves and surplus are also required to be deployed
and credited to a separate fund to be utilized for development of minor
ports within the State. In this connection, we quote Sections 73, 74 and
F 75 of the 1981 Act hereinbelow which read as under:
. ,.
"73. All moneys recieved by or on behalf of a Board under the
provisions of this Act and all moneys received by it as the
Conservators of the Ports and of their approaches or as the body
appointed under Section 36 of the Indian Ports Act, 1908 shall
G
be credited to a fund called the General Account of the Minor
Ports. {

74. (1) The moneys credited to the general account under section
73 shall be applied by the Board in payment of the following
H charges, namely:-
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COMMISSIONER OF INCOME TAX v. GUJARAT 965
MARITIME BO ARD
', .... (a) the interest and instalments of principal due in respect of A
any loan that may have been raised or obtained by the Board or
for the repayment of which the Board may be liable and payments
,. to the sinking fund established for such loan;
(b) the salaries, fees, remunerations, allowances, pensions,
B
'-~ gratuties, compassionate allowances or others moneys due to-
(i) the Chairman, and other member of the board;
(ii) the employees of the Board; and
(iii) the surviving relatives, if any, of such employees. c
(c) the contributions, if any, payable to the Central Government
or any State Government on account of the pension and leave
allowance of any officer lent to the Board by such Government;
(d) the cost and expenses, if any, incurred by the Board in the D
-; conduct and administration of any provident or welfare fund or loan
or special fund established by the Board;
(e) the contributions, if any, duly authorized to be made by
regulations made under this Act to any such fund as is referred to
in clause (d); E

· (f) such sums as may, from time to time, be agreed upon by the
Board and the State Government or the Central Government or
any other authority, as a reasonable contribution payable by the
Board towards the expenses in connection with the watch and ward
F
functions of the Police Force or the Central Industrial Security
Force or any other Force which the State Government or the
Central Government or any other authority, as the case may be,
may establish and maintain for the protection of the port and the
docks, warehouses and other property of the Board;
G
j -}
(g) the cost of repairs and maintenance of the property belonging
to or vested in the Board and all charges upon the same and all
working expenses;
(h) the cost of the execution and provision of any new work or
H
966 SUPREME COURT REPORTS [2007] 12 S.C.R.

A appliance specified in section 25 which the Board may detennine
to charge to revenue;
(i) any expenditure incurred under Section 26; Q) any other
expenditure which may be incurred by the Board generally for the
B purpose ofthis Act;
(k) any other charge which may on the application of the Board
or otherwise be specially sanctioned by the State Government or
for which the Board may be legally liable.
c (2) All moneys standing at the credit of the Board which cannot
immediately be applied in the manner or for the purposes specified
in sub-section (1) shall-
(a) be deposited in the State Bank of India or any
corresponding new bank as defined in clause (d) of section 2 of
D the Banking Companies Acquisition and Transfer of Undertaking
Act, 1970 [or in any corporation or financial institution controlled
and managed by the State Government], as the Board may decide,
or
E (b) be invested in such public securities as may be determined
by the Board and the said securities shall be held in trust by the
Board for the purposes of this Act.
75. The Board may, with the previous sanction of the State
Government, apply any sum out of the moneys credited to the
F general account of the port towards meeting deficits, if any, in the
particular or specified account such as pilotage account, if so
maintained or transfer the whole or part of any surplus funds in
such particular account to the general account of the port."
G Coming to the provisions of the 1961 Act, the most important
provision for the purpose of this decision is Section 2(15) and Section
11(1) & (4) of the 1961 Act. The said sections are quoted hereinbelow
which read as under;
"2. (15) "charitable purpose" includes relief of the poor, education,
H
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COMMISSIONER OF INCOME TAX v. GUJARAT 967
MARITIME BOARD
medical relief, and the advancement of any other object of general A
public utility.
11. (1) Subject to the provisions of Sections 60 to 63, the following
income shall not be included in the total income of the previous
year of the person in receipt of the income-
B
'
-~ (a) income derived from property held under trust wholly for
charitable or religious purposes, to the extent to which such income
is applied to such purposes in India; and, where any such income
is accumulated or set apart for application to such purposes in
India, to the extent to which the income so accumulated or set apart c
is not in excess of twenty five per cent of the income from such
property.
(b) income derived from property held under trust in part only
for such purposes, the trust having been created before the
'

i
I
commencement of this Act, to the extent to which such income is D
applied to such purposes in India; and, where any such income is
finally set apart for application to such purposes in India, to the
extent to which the income so set apart is not in excess of twenty
five per cent of the income from such property;
E
(c) income derived from property held under trust--
(i) created on or after the Ist day of April, 1952, for a
charitable purpose which tends to promote international welfare
in which India is interested, to the extent to which such income
is applied to such purposes outside India, and F
(ii) for charitable or religious purposes, created before the Ist
day of April, 1952, to the extent to which such income is
applied to such purposes outside India:
Provided that the Board, by general or special order, has G
directed in either case that it shall not be included in the total
_\
> ' income of the person in receipt of such income;
(d) income in the form of voluntary contrubutions made with
a specific direction that they shall form pait of the corpus of
the trust or institution. H
968 SUPREME COURT REPORTS [2007] 12 S.C.R.

A 11. (4) For the purposes of this section "property held under trust''
includes a business undertaking so held, and where a claim is made
that the income of any such undertaking shall not be included in
the total income of the persons in receipt thereof, the "Assessing
Officer shall have power to determine the income of such
B undertaking in accordance with the provisions of this Act relating
to assessment; and where any income so determined is in excess t
of the income as shown in the accounts of the undertaking, such
excess shall be deemed to be applied to purposes other than
charitable or religious purposes."
c According to Section 2(15), the expression "charitable purpose" has
been defined by way of an inclusive definition so as to include relief to
the poor, education, medical relief and advancement of any other object
of general public utility. In this case we are concerned with the
interpretation of the expression "advancement of any other object of
D general public utility". ' '

Under Section 11(1) income from property held for charitable
purpose is not includible and does not form part of total income: Section
l l(I) has three sub-sections (a), {b) and (c). In all the three sub-sections
E the words used are "income derived from property held under trust wholly
for charitable purposes". Under Section 11(4) the expression "property
held under trust" includes a business undertaking so held. In other words,
income from business undertaking held for charitable purposes can fall
under Section I I subject to such income fulfilling the requisite conditions
F of that section.
One of the objections raised on behalf of the Department was that
Gujarat Maritime Board is not entitled to the benefit of Section I I of the
I 961 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
G 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 Charitable Institution. It was the case of
the Department that the Board was performing statutory functions.
H Development of minor ports in the state of Gujarat cannot be termed as
J
COMMISSIONER OF INCOME TAX v. GUJARAT 969
MARITIME BOARD

+ the work undertaking for charitable purposes and in the circumstances A
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.
B
At the outset, we may point out that Section 10(20) and Section
'·
-~ 11 of the 1961 Act operate in totally different spheres. Even ifthe 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. c
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 D
{ 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 E
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. F
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
ofCommerce, - (1965) 55 ITR 722 SC]. If the primary or predominant
G
object of an institution is charitable, any other object which might not be
;> --l
charitable but which is ancillary or incidental to the dominant purpose,
would not prevant the institution from being a valid charity- [Addi.
Commissioner of Income-tax, Gujarat v. Surat Art Silk Cloth
Manufacture Association, (1980) ITR SC].
H
970 SUPREME COURT REPORTS [2007] 12 S.C.R.

A The present case in our view is equarely covered by the judgment .i.-
of this Court in the case of Commissioner of Income-tax, A.P. v.
Andhra Pradesh State Road Transport Corporation, (1986) 159 ITR
l SC in which it has been held that since the Corporation was established
for the purpose of providing efficient transport system, having no profit
B motive, though it earns income in the porcess, it is not liable to income-
tax.
Applying the ratio of the said judgment in the case of Andhra
Pradesh State Road Transport Corporation (supra), we find that, in
the present case, Gujarat Maritime Board is established for the
C predominant purpose of development of minor ports within the State of
Gujarat, the management and control of the Board is essesntially 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.
D In the circumstances. in our view the judgment of this court in Andhra
Pradesh State road Transport Corporation (supra) squarely applies
to the facts of the present case.
Before concluding we may mention that under the scheme of Section
E 11 ( l) 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. Thererore, they are
F 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
judgment'> of the High Court and Tribunal and consequently civil appeal
stand dismissed with no order as to costs.
G
RP. Appeal dismissed.