S. 12AB Reg of TN Maritime Board Rejected on Alleged Commercial Grounds: ITAT Orders Fresh Examination of its Functions [Read Order]

The Income Tax Appellate Tribunal (ITAT),Chennai Bench, has set aside the rejection of registration under Section 12AB and sent the matter back for fresh consideration.

The assessee, Tamil Nadu Maritime Board, is a statutory body constituted under the Tamil Nadu Maritime Board Act, 1995, and functions as an agency of the Government in relation to regulation and development of minor ports. It had obtained provisional registration and later applied for regular registration.

The Commissioner of Income Tax (Exemptions) [CIT(E)] rejected the application, taking the view that the Board’s activities did not qualify as a charitable institution and that it was functioning on commercial lines akin to business, mainly because it collected fees and charges.

Before the Tribunal, the assessee submitted that it performs statutory functions in relation to port regulation and infrastructure, and that collection of fees is part of carrying out those functions. It also pointed out that its role is tied to public interest, including coastal safety and regulation.

The Revenue supported the rejection, maintaining that the nature of activities and the manner in which income is generated did not justify grant of registration.

The Tribunal, comprising Ms. Padmavathy S (Accountant Member) and Manu Kumar Giri (Judicial Member), noted that the application had been rejected mainly on the ground that the Board collects fees, without examining the overall character of its functions. It found that there was no clear finding on how the activities fall outside the scope of “general public utility” under Section 2(15).

The Tribunal also noted that the approach adopted did not take into account the position explained by the Supreme Court in ACIT (Exemptions) v. Ahmedabad Urban Development Authority, where statutory bodies carrying out public functions were considered within the scope of general public utility even if they generate revenue in the process.

The matter was remanded to the CIT(E) to re-examine the claim after properly considering the nature of the Board’s functions and the legal position. The assessee is to be given an opportunity to place its case on record.

The appeal was allowed for statistical purposes.

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