TaxTMI 
TaxTMI 
2010 (2) TMI 722
X X X X Extracts X X X X
X X X X Extracts X X X X
....rative Societies Act, 2002. Their object and functioning not confined to one State and serving the interests of members in more than one State, to facilitate the voluntary formation and democratic functioning of co-operative as people's institutions based on self-help and mutual aid and enable them to promote their economic and social betterment within autonomy incidental thereto. (3) Thus, as said above appellant is busy in social and charitable activities moreover members of the board of directors are also busy to conduct and fulfil the abovesaid social work in different States. (4) That, therefore till the members' governing body/board of directors do not get together and resolve to make appeal against impugned order and pass the resolution of the same and authorized somebody to look after this case, it cannot be decided by any one member. Hence the filing of appeal been delayed and falls under the Limitation Act. (5) That, due to the above circumstances, the delay caused in filing this appeal is as appellant is busy in social work, which is neither intentional nor by negligence. (6) That the appeal is under merit and for the sake of brevi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ociety, the bye-laws containing objects are reproduced hereunder:- Bye-laws:- Objects:- (ii) To promote the economic interest of its members including their affiliated societies vis-a-vis national Federation to obtain work from work awarding agencies and executing through labour co-operatives, to improve the financial position of National Federation and to provide the regular work to member labour co-operatives round the year. (iv) To assist in marketing, import or export and carry on agency business or every kind to produce, store and distribute material required or manufactured by the member societies and/or their affiliated units. Share capital:- (1) Share certificate:- Every society admitted as member shall be entitled to receive a share certificate gratis stating the number of shares and their distinctive numbers. The share certificates shall be signed by the chairman, or any director duly authorized and the managing director. The share certificate shall bear the seal of National Federation. (3) Lien of shares, dividends and deposits:- The National Federation shall have the first and paramount lien or charge....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The balance of the net profit may be utilized for all or any of the following purposes:- (a) Payment of dividend to members on their paid-up capital at the rate of 2 per cent; (b) Any other privileges to members, if any as specified in the bye-laws; (c) Contribution to the education fund at the rate of 5 per cent or more and not exceeding 10 per cent. The fund may be utilized for the education and training of members, directors and employees as approved by the board of directors; (d) Donation for the development of the co-operative movement or charitable purpose as defined is s. 2 of the Charitable Endowment Act, 1980 not exceeding 5 per cent; (e) Payment of ex gratia amount to employees as approved by the board of directors; (f) The remaining undisbursed profit shall be added to reserve fund." Having examined the material on record, it is evident that the object and the application of the utilization of the receipts of the assessee are not in consonance with the scope and object defined under the provisions of s. 2(15) of the Act for which the assessee is neither covered in the residuary clause namely....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nstitution is not eligible for grant of exemption and consequently it cannot be given registration also under s. 12A of the Act. Wherever there is a clause of distribution of profit in any manner in the document through which such institution is established, the institution cannot be said to be wholly for charitable or religious purposes. This position of law has been made very clear by the decision of Hon'ble Supreme Court in the case of Delhi Stock Exchange Association Ltd. vs. CIT (1997) 139 CTR (SC) 455 : (1997) 225 ITR 235 (SC) and the relevant observations of their Lordships from the said decision describing this position of law are as under:- "Shri Harish N. Salve, learned senior counsel appearing for the assessee, has urged that the nature of the activities of the assessee have to be considered as a whole. The submission is that since the objects of the assessee have been found to be of general public utility and that no dividend has been declared by the assessee, it should be held that the income derived by the assessee is from properties held for charitable purposes. Learned counsel has placed reliance on the letters of the Central Government objecting to the gi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o legal obligation prohibiting it from distributing the income derived by it by way of dividends amongst its shareholders. On the view of the matter, it must be held that the High Court was right in holding that the assessee could not claim exemption under s. 11 r/w s. 2(15) of the Act." 8. In the above case, the assessee was a limited company incorporated in 1947 with a view to acquire and takeover a going concern, the activities, functions and business of the Delhi Stock and Share Exchange Ltd. and the Delhi Stock and Share Brokers Association Ltd. The object for which the assessee was established was general, that of conducting a stock exchange and that to promote and recall the business in stocks, shares, debentures and other securities to frame the rules and bye-laws for regulating the conditions subject to which business in stock exchange could be transacted and the like. The assessee derived income by way of membership fee, rent from property and interest on security. The claim of the assessee for exemption under s. 11 was rejected by the AO. After considering the memorandum and articles of association of the assessee, it was found by Hon'ble Supreme Court that the....