IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH Before: Shri Pramod Kumar, Accountant Member and Shri S. S. Godara, Judicial Member ITA No. 454/Ahd/2011 Assessment Year 2004-05 DCIT, Gujarat Maritime Board Gandhinagar Range, GMB Bhavan, Gandhinagar Vs Sector 10A, Opp. Air (Appellant) Force Station, Gandhinagar-382010 PAN: AABCG6676L (Respondent) ITA No. 307/Ahd/2010 Assessment Year 2005-06 Gujarat Maritime Board JCIT, GMB Bhavan, Gandhinagar Range, Sector 10A, Opp. Air Vs Gandhinagar Force Station, (Respondent) Gandhinagar-382010 PAN: AABCG6676L (Appellant) Cross Appeals ITA Nos. 16 & 466/Ahd/2010 Assessment Year 2006-07 I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 2 DCIT vs. Gujarat Maritime Board Gujarat Maritime Board JCIT/DCIT, GMB Bhavan, Gandhinagar Range, Sector 10A, Opp. Air Vs Gandhinagar Force Station, (Respondent/Appellant) Gandhinagar-382010 PAN: AABCG6676L (Appellant/Respondent) ITA No. 2041/Ahd/2012 Assessment Year 2006-07 ACIT, Gujarat Maritime Board Gandhinagar Range, GMB Bhavan, Gandhinagar Vs Sector 10A, Opp. Air (Appellant) Force Station, Gandhinagar-382010 PAN: AABCG6676L (Respondent) Cross Appeals ITA Nos. 1336 & 1406/Ahd/2010 Assessment Year 2007-08 Gujarat Maritime Board JCIT/DCIT, GMB Bhavan, Gandhinagar Range, Sector 10A, Opp. Air Vs Gandhinagar Force Station, (Respondent) Gandhinagar-382010 PAN: AABCG6676L (Appellant) I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 3 DCIT vs. Gujarat Maritime Board Cross Appeals ITA Nos. 2250 & 2767/Ahd/2011 Assessment Year 2008-09 Gujarat Maritime Board ACIT, GMB Bhavan, Gandhinagar Range, Sector 10A, Opp. Air Vs Gandhinagar Force Station, (Respondent) Gandhinagar-382010 PAN: AABCG6676L (Appellant) Revenue by: Mrs. Vibha Bhalla, CIT-D.R. Assessee by: Shri S.N. Soparkar with H.P. Singh, A.R. Date of hearing : 01-09-2016 Date of pronouncement : 27-09-2016 /ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- This is batch of nine cases. First assessment year 2004-05 contains Revenue s appeal ITA 454/Ahd/2011 preferred against order of CIT(A), Gandhinagar, dated 30-11-2010 passed in case no. CIT(A)/GNR/150/2006-07. 2. Second assessment year 2005-06 comprises of assessee s appeal ITA 307/Ahd/2010 arising against order of CIT(A), I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 4 DCIT vs. Gujarat Maritime Board Gandhinagar dated 31-12-2009 passed in case CIT(A)/GNR/292/2008-09. 3. Next assessment year 2006-07 contains three appeals. assessee and Revenue have cross appeals ITA 16 & 466/Ahd/2010 assailing correctness of CIT(A), Gandhinagar s order dated 20- 11-2009 in case no. CIT(A)/GNR/221/2008-09. Latter party s second appeal ITA 2041/Ahd/2012 arises from CIT(A) Gandhinagar s order dated 15-06-2012 passed in case no. CIT(A)/GNR/142/2011-12. 4. Next assessment year 2007-08 involves cross appeals filed by assessee and Revenue ITA no. 1336 & 1406/Ahd/2010 against order dated 26-02-2010 passed by CIT(A), Gandhinagar in case appeal No. CIT(A)/GNR/118/2009-10. 5. Last assessment year 2008-09 contains assessee s and Revenue s cross appeals ITA 2250 & 2767/Ahd/2011 preferred against CIT(A), Gandhinagar s order dated 18-08-2011 passed in case no. CIT(A)/GNR/78/2010-11. 6. We notice that proceedings in all cases are u/s. 143(3) of Income Tax Act, 1961; in short Act. sole exception here is Revenue s appeal ITA 2041/Ahd/2012 for assessment year 2006-07 wherein proceedings are u/s. 143(3) r.w.s. 147 of Act. I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 5 DCIT vs. Gujarat Maritime Board We proceed assessment year -wise for sake of convenience and brevity. ASSESSMENT YEAR 2004-05 Revenue s appeal ITA 454/Ahd/2011 7. Revenue s sole substantive grievance pleaded in instant appeal challenges CIT(A) s order deleing gross addition of Rs. 81,35,885/- comprising of disallowances of expenses relating to assessee s contributions made to Vibrant Gujarat Navratri Festival of Rs. 30 lacs, Vishwa Gujarat Pariwar Gujarat Mahotsav of Rs. 20 lacs, Republic day function contribution of Bhavnagar of Rs. 6,25,885/-, Gujarat State Export Corporation of Rs. 10 lacs and executive engineering training centre of Rs. 15 lacs; respectively; as made by Assessing Officer in assessment order. 8. case file reveals that this is second round of litigation between parties before us. assessee-trust administers, controls and manages minor ports in Gujarat state. It is statutory body governed by Gujarat Maritime Board act, 1981. It enjoys section 12AA registration as well w.e.f. 01-04-2002 as per CIT, Gandhinagar s order dated 15-06-2005 having retrospective effect treating it as entity engaged in advancement of general public utility u/s. 2(15) of act. I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 6 DCIT vs. Gujarat Maritime Board 9. assessee filed its return on 01-11-2004 stating nil income. same was processed on 22-03-2005. Assessing Officer took up scrutiny. He inter alia noticed assessee to have made above five contributions under various heads specified hereinabove. 10. assessee s first contribution is of Rs. 30 lacs made to Vibrant Gujarat Indext B Navratri Festival. It inter alia pleaded that state government organizes Vibrant Gujarat Investors Summit at Ahmedabad 28-30 September, 2003 in association with Govt. of India and other trade and commerce associations like FICCI and other forums. state government issued GRS dated 17-03-2003 and 28-03-2003 directing it to contribute for event organization. It took Indext B as nodal agency. This event s aim was to inter alia realise investment potential and bring FDI and domestic investments, facilitate, increase and co-ordinate technology transfer and to provide platform to industries as followed by match making of foreign/domestic companies with those based in Gujarat. assessee further submitted that this summit was not only cultural one but it gave impetus to above industrial objects in line with its clauses and keeping in mind longest coastline of Gujarat state. 11. Assessing Officer in assessment order dated 29-12-2006 did not agree to all these pleas. His view inter alia was that assessee s objectives were nowhere met directly or indirectly or even remotely connected or related to vibrant Gujarat summit, minutes of meeting dated 17-03-2003 did not indicate assessee s role I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 7 DCIT vs. Gujarat Maritime Board therein, it had not occupied any space or stall as it had to pay rather sum of Rs. 5.21 lacs to FICCI. Assessing Officer further observed that all these activities did not keep in mind any attention paid to assessee s port related activities. He held that this amount was spent on extraneous considerations rather than assessee s prime objects/obligations. And also that assessee s participation expenses therein had already been accepted. Assessing Officer thus invoked section 11(1) of Act for making impugned disallowance. 12. assessing authority then dealt with assessee s contribution made to Vishwa Gujarat Pariwar Mahotsav of Rs. 20 lacs and its expense of Rs. 6,25,885/- incurred on Republic day function in cash and payments for tents, electricity and hotel bills. Assessing Officer proceeded on same reasoning hereinabove to hold that both these expenses did not fall in assessee s primary objects or duties. He applied section 11(1) of act for expenses as well. 13. Next came assessee s contributions to Gujarat state Export corporation and executive engineering training centre of Rs. 10 lacs and Rs. 15 lacs ; respectively. Assessing Officer concluded that all these five heads including these two did not have any direct or indirect nexus with assessee s objects or activities. This resulted in impugned five disallowances/additions being made in assessee s hands. I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 8 DCIT vs. Gujarat Maritime Board 14. assessee filed appeal. CIT(A) in his order dated 26- 03-2007 deleted all five disallowances/additions as under:- 3.3. facts of case and submissions have been considered. Appellant had incurred various expenses during conduct of its activities and for promoting its objects. Such expenses have been verified by Assessing Off icer and items listed totaling Rs.81.35 Lakhs have been held to be not eligible for deduction as per provisions of Section 11(1) of IT. Act. In this context, Appellant had furnished detailed justification for incurring of expenses. Assessing Officer had mainly considered fact that such expenses were incurred either commonly or by designated third person under overall supervision and directions of Government of Gujarat. He also pointed out that expenses were not having any direct nexus with activities of Appellant, If at all any benefit was accruing on account of such expenditure, same kind of benefit could have been achieved by lesser expenditure. above observations of Assessing Officer cannot be considered as correct. Appellant is best judge to analyze and weigh various options for achieving its objectives and expenditure incurred as per such judgement cannot be faulted by Assessing Officer as per his understanding or wisdom. fact that Government of Gujarat had influenced Appellant in making expenditure cannot be sole reason for holding that expenses were incurred on extraneous factors other than objects and activities of Trust. Once it is shown that expenses were relevant to objects and activities, it is not necessary to establish one to one nexus between expenditure and objects. In above context, Assessing Officer was not justified in disallowing claim of expenditure. addition made is directed to be deleted. 15. Revenue preferred ITA 2842/Ahd/2007 before this tribunal. co-ordinate bench in its order dated 16-10-2009 remitted back to CIT(A) with following directions:- 10. Revenue is now in appeal before us against aforesaid findings of Id. CIT(A). Neither Id. DR nor Id. AR made any specific submissions on issue raised in this ground as to how aforesaid contributions were related to various objects and activities of assessee Board or as to \ whether or not these I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 9 DCIT vs. Gujarat Maritime Board fell with in provisions of sections 73 to 75 of Gujrat Maritime Board Act, 1981. As already observed and .as can be seen from preamble of 1981 Act, Board has been constituted, inter alia, for purposes of development and maintenance of minor ports. Under said Act Maritime Board also renders services like stevedoring, transport of goods, storage, shipping, etc. It is also in- charge of upkeepment of jetties, wharfs, roads, lights, etc. However, main object of said Act is development of minor ports in State of Gujarat. income, accruing to Maritime Board, including reserves and surplus are also required to be deployed and credited to separate Fund to be utilized for development of minor ports within State. In light of these objects and purposes, we find that though Id. CIT(A)observed that' it is shown that expenses were relevant to objects and activities', Id. CIT(A) have not in explicit terms recorded his findings as to how aforesaid contributions were related to objects and activities of trust or were incurred in furtherance of purposes of Gujrat Maritime Board Act, 1981. In fact, impugned order of Id. CIT(A) is not speaking order on issue under consideration. In these circumstances, we consider it fair and appropriate to vacate findings of ld. CIT(A) and restore issue to his file with directions to examine matter in light of various objects and purposes of Gujrat Maritime Board Act, 1981, identifying clearly as to how aforesaid contributions are related to said objects and purpose. Needless to say that while re-deciding issue, learned CIT(A) shall pass speaking order, keeping in mind, inter alia, mandate of provisions of sec. 250(6) of Act. With these directions, ground no. 2 in this appeal is disposed of. 16. CIT(A) thereafter took up consequential lower appellate proceedings. He discusses first of all about assessee s aims and objects and holds all impugned five expenses allowable as follows:- 5.0 I have gone through directions of honourable tribunal, observation and reasoning of assessing officer and contentions of assessee, question has to be decided in two limbs: I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 10 DCIT vs. Gujarat Maritime Board a) What exactly are objects and activities of trust and what can be treated as as furtherance of purposes of Gujarat Maritime Board Act, 1981. b) Examining whether each of expenses had been incurred in furtherance of objects of trust or purposes of Gujarat Maritime Board Act, 1981 A. What exactly are objects and activities of trust and what can be treated as as furtherance of purposes of Guiarat> Maritime Board Act, 1981. GMB as statutory board constituted under Gujarat State Legislative Act viz. "THE GUJARAT MARITIME BOARD ACT, 1981" was "vested with administration, control and management of minor ports in State of Gujarat and for matters connected therewith." Inter alia in order to discharge its avowed objectives, GMB is enabled by Section 74 of GMB Act, 1981, payment of charges enumerated therein with specific sub-sections 74(1)(j) and 74(1)(k) as follows: "74(1)(j) any other expenditure which may be incurred by Board generally for purposes of this Act;" and 74(1)(k) any other charge which may on application of Board or otherwise be specifically sanctioned by State Government or for which Board may be legally liable. Further, in terms of Section 95, reproduced hereinafter, board is bound by directions of State Government, as laid down therein. Gujarat State Legislative Act viz. "THE GUJARAT MARITIME BOARD ACT, 1985 vested with administration, control and management of minor ports in State of Gujarat and for matters connected therewith." important question here is whether entity is entrusted with operations and maintenance of ports only, or is given mandate to build, develop, own and run ports. While I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 11 DCIT vs. Gujarat Maritime Board words control and management may give impression that it is only maintaining and running ports but when mandate to administer is there, and it's activities since inception approved by government of Gujarat are seen; it becomes obvious that it is mandated with work of building, developing, owning assets and running minor ports in state of Gujarat. In last two decades activities have increased lot, and number of minor ports had been built by them which are being owned and run by them. .New, technologies have been introduced and assets under ownership and management; as shown in . their balance sheet have .increased manifold. Therefore, looking to entirety of facts and circumstances; objective of board, when it is said, "vested with administration, control and management of minor ports in State of Gujarat and for matters connected therewith." it means that it is mandated with work of building, developing, owning assets and running minor ports in state of Guiarat. So all above activities can be said to be in furtherance of objectives of act. This leaves Revenue aggrieved. 17. We have heard both parties reiterating their respective stands. There is no dispute that Assessing Officer in instant case had invoked impugned five disallowances by quoting section 11(1) of act on two counts i.e. assessee was influenced by external factors (state government directions) and all these heads of expenditure hereinabove did not have any direct or indirect nexus with its objects. Learned co-ordinate bench in first round has restricted scope of instant lis to latter issue only. case file demonstrates that this assessee is statutory body constituted under Act of state legislature vesting with it all matters of administration, control and management of minor ports in Gujarat I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 12 DCIT vs. Gujarat Maritime Board state as well as all connected matters thereto. Section 74(1)(j &k) envisages payment of charges qua any expenditure which may be incurred by this board generally for provisions of this act followed by any other charges which may, on application of board or otherwise be specifically sanctioned by state government or for which board may be legally liable. Section 95 of this very act postulates that assessee is bound by state government s directions in this regard. We notice that assessee is not only vested with administration, control and management of minor ports but for all other ancillary matters as well. 18. Revenue s first argument seeks to narrowly interpret above clauses so as to get CIT(A) s view reversed holding assessee to have been set up in order to build, develop, own and run state s ports. This plea fails to impress upon us in view of latter crucial expression for matters connected thereto . We observe that these words incorporated in Gujarat Maritime Board Act, 1981 have to be used in wider sense since containing general expressions in order to supplement former limb of legislation. We accordingly hold that Ld. CIT(A) has not committed any error in interpreting clause or in coming to conclusion that assessee is mandated with work of building, developing own ports apart from administration, control and management thereof. Revenue s first argument thus fails. I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 13 DCIT vs. Gujarat Maritime Board 19. Revenue s second argument is that Assessing Officer had rightly disallowed assessee s five contributions (supra) since they were found to have not been indicated any direct or indirect nexus with its objects. There is no quarrel between parties that assessee has followed all due procedures involving sanction of state government functionaries concerned. Take for instance, its meeting dated 17-03-2003 being chaired upon by Principle Secretary (Industry and Mines) as followed by GR dated 28-03- 2008 directing it to contribute Rs. 30 lacs for vibrant Gujarat Navratri Festival. We are thus of view that there is no irregularity in all five contributions held. We further observe that mere fact that assessee has acted as per government directions as stipulated in Maritime Act does not disentitle it from claiming impugned exemption. Revenue s second argument is accordingly declined. 20. This leaves us Revenue s last argument that assessee s expenses do not have any direct or indirect nexus of its objects hereinabove of building, developing, administration, running of state s ports with all ancillary matters thereto. We find no force in this plea as well. We deem it appropriate to observe that once assessee has been specifically set up by way of Act (supra), it is supposed to act in furtherance to its objects and to make it sure that same are duly served. We find that its impugned five contributions made to vibrant Gujarat Navratri festival, Vishwa Gujarat Pariwar Mahotsav, Republic day function expenses, Gujarat I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 14 DCIT vs. Gujarat Maritime Board state export corporation and executive engineering training centers involving sums of Rs. 30 lacs, Rs. 20 lacs, Rs. 6.25 lacs, Rs. 10 lacs and Rs. 15 lacs respectively clearly have nexus with all its port related activities. We come to assessee s contribution of executive engineering training centre on random basis. Revenue does not lead any evidence in case file to repel assessee s contention that same was meant for development project inter alia envisaging link between Ghogha sub-port to Dahej port in order to reduce travelling distance. Assessee s contribution to Gujarat Export Corporation Limited appears to be for purpose of organizing trade fair in order to give impetus to industry, trade and commerce for enhancing its port related turnover. We keep in mind all these facts and assessee s activities to conclude all five impugned contributions in question do have nexus with its objects. Revenue s arguments supporting its sole substantive are rejected. Its appeal ITA 454/Ahd/2009 fails. 21. We now come to assessment years 2005-06, 2006-07, 2007- 08 and 2008-09 involving total 8 appeals/cross appeals except ITA 2041/Ahd/2012. Both parties inform us that assessee has filed modified grounds in all of its four appeals in said A.Ys. that both lower authorities have wrongly assessed it u/s. 11(1) as well as u/s. 11(4) of Act. Learned representatives highlight fact that co-ordinate bench of this tribunal in assessee s own case ITA 2933/Ahd/2009 for assessment year 2003-07 has adjudicated very issue on 27/04/2016 in it s favour as under:- I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 15 DCIT vs. Gujarat Maritime Board Section 11(4) of Act, we are able to understand that Section 11(4) of Act is applicable when "property held under trust" includes business undertaking so held and Assessing Officer have power to determine income of such business undertaking in accordance with provisions of Act and where any such income so determined is in excess of income as shown in accounts of undertaking, then such excess income shall be deemed to have been not applied for charitable purposes. However, in case of assessee, we have already decided that assessee is carrying on charitable activities without profit motive and income is to be calculated as per provisions of Section 11(1) of Act and therefore, Id. CIT(A) has erred in calculating income u/s 11(1) and 11(4) of Act and therefore, in our view, subject to our adjudication of other grounds of this appeal, income of assessee is to be assessed as per provisions of Section 11(1) of Act. Accordingly, this ground of Assessee is also allowed. 22. Learned representative points out at this stage that assessing authority has to re-frame assessment u/s. 11(1) of act due to this fundamental issue. Their further case is that CIT(A) s findings on merits forming subject matter of eight corresponding cross appeals except Revenue s appeal ITA 2041/Ahd/2012 deserves to be remitted back to assessing authority for fresh adjudication. We accordingly restore issue for afresh decision for assessee s assessment u/s. 11(1) of Act. It shall be afforded adequate opportunity of hearing. Learned Assessing Officer shall ensure that judicial consistency is followed as per law on various issues on merits. All these eight cross appeals i.e. assessee s appeal ITA 307, 16, 1336/Ahd/2009 and ITA 2252/Ahd/2011 along with Revenue s appeals ITA 466, and 1406/Ahd/2010 and ITA 2767/Ahd/2011 shall be treated as accepted for statistical purposes. I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 16 DCIT vs. Gujarat Maritime Board 23. This leaves us Revenue s remaining appeal ITA 2041/Ahd/2012 for assessment year 2006-07 seeking to restore disallowance of excess depreciation of Rs. 20,32,087/- made by Assessing Officer and deleted in lower appellate proceedings. There is no dispute in that tax effect in this appeal comes to be less than Rs. 10 lacs. We find that Central Board of Direct Taxes; hereafter Board has issued circular no. 21/2015 dated 10-12-2015 clearly envisaging therein that department s pending appeals before tribunal/high courts are to be withdrawn/not pressed as per above stated circular. same has been declared to be having retrospective effect in other words. We take into consideration above stated Board s circular and dismiss instant appeal accordingly for invoking low tax effect. 24. To sum up, assessee s appeals ITA Nos. 16, 307 and 1336/Ahd/2010 along with ITA 2250/Ahd/2011 are accepted for statistical purposes. Revenue s appeal ITA 454/Ahd/2011 is dismissed. Its appeals ITA Nos. 466, 1406/Ahd/2010 and 2767/Ahd/2011 are allowed for statistical purposes. Its appeal ITA 2041/Ahd/2012 is dismissed. Order pronounced in open court on 27-09-2016 Sd/- Sd/- (PRAMOD KUMAR) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 27/09/2016 I.T.A Nos. 454,307,16,466,2041,1336,1406,2250 & 2767 Page No 17 DCIT vs. Gujarat Maritime Board ak / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ , / , DCIT, Gandhinagar Range, Gandhinagar v. Gujarat Maritime Board