TaxTMI 
TaxTMI 
2015 (11) TMI 396
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....stock exchange registered as public limited company under the Companies Act, 1956, and is alleged to be a charitable institution under section 12A of the Act within the meaning of the Income- tax Act, 1961. The Jaipur Stock Exchange Ltd. is recognised by the Securities and Exchange Board of India (SEBI) under the Securities Contracts (Regulation) Act, 1956. 4. The objects set out in the memorandum of association, for which the company (Jaipur Stock Exchange Ltd.) was established, are as follows : "A. The main objects of the exchange to be pursued by the exchange on its incorporation are : 1. to support and protect the character and status of brokers, dealers and jobbers in stocks, shares and like securities and to further the interests of both brokers and the public dealing in Jaipur and else where in Rajasthan and in India in stocks, shares and like securities and to maintain high standards to commercial honour and integrity to promote honourable practice, to discourage and to suppress mal practices, to settle disputes amongst brokers, dealers and jobbers to decide all questions of usage, custom or courtesy in conducting the business of brokers, dealers and jobbers ; and 2. to....
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.... of the exchange upon such terms and in such manner and with or without such securities, as may be determined, and in particular by the issue of debentures charged upon all or any of the properties of the exchange existing or to be acquired in future. 10. To subscribe for, become a members and co-operate with any other association, whether incorporated or not, whose objects are altogether or in part similar to those of this exchange and to procure from and communicate to any such association such information as may be thought likely to further the objects of this exchange or to promote measures for the protection of the trade or any interest therein. 11. To invest the money of the exchange not immediately required, in such securities as may from time to time be thought fit. 12. To remunerate any person, firm or company for services ren dered in placing or assisting to place or guaranteeing the placing of any debenture or other securities of the exchange. 13. To establish and support or aid in the establishment and sup port of associations, institutions, funds, trusts, conveniences calcu lated to benefit members or employees or ex-employees of the exchange or ex-members of the e....
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....change or part thereof for such consideration as the exchange may think fit and in particular for shares, debentures or securities of any other company having objects altogether or in part similar to those of the exchange. 21. To carry on business as financiers, promoters, concessionaires, managers, secretaries, treasurers, agents or managing agents and any other business which may be conveniently carried on with the above. 22. To encourage the settlement of disputes by arbitration, to act as or to nominate arbitrators or umpires on such terms and in such cases as may seem expedient and to provide for arbitration of all disputes in respect of all transactions relating to or arising out of or pertaining to transactions in securities and including arbitration of disputes between members and persons who are not members and to provide arbitration tribunals, boards, courts and subject to the provisions of the Securities Contracts (Regulation) Act, 1956, and the rules framed thereunder to make rules, bye-laws and regulations in relation to all such arbitration proceedings and to regulate the procedure with regard to the same and for enforcement of awards. 23. To make, draw, accept, en....
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....posits from the public, it shall be in accordance with section 58A of the Companies Act, 1956, and the rules thereunder and as per the directions of the Reserve Bank of India from time to time ; provided further that the exchange, how ever, shall not carry on any banking or insurance business. 33. To make advances on the security of any bonds, shares or real or personal property of any kind and on such terms as the exchange may deem fit. 34. To undertake or to act as clearing house for delivery and pay ment of shares, stocks, debentures, Government securities and other wise both for members as well as for the investing public and do all acts either banking or financial which may be required to be done in connection with the clearing house and to perform and carry out the various kinds of business incidental to and connected therewith. 35. To do all or any of the above things in any part of the world and as principals, agents contractors, trustees or otherwise and by or through trustees, agents or otherwise and either alone or in conjunc tion with other. 36. To take over all the assets and liabilities of the Jaipur Stock Exchange and pass necessary resolutions, to approve all th....
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.... of the objects set forth hereinabove, and no portion thereof shall be paid off by way of dividend, bonus or profits to any of the members. IV. The liability of the members is limited. V. Every member of the exchange undertakes to contribute to the assets of the exchange in the event of its being wound up while he is a member, or within one year after he ceases to be a member, for payment of the debts and liabilities of the exchange contracted before he ceased to be a member, and costs, charges and expenses of wind ing up and for the adjustment of the rights of the contributories among themselves, such amount as may be required, not exceeding Rs. 2,500 (rupees two thousand five hundred) only." 5. The Jaipur Stock Exchange-the assessee claimed exemption under section 11(2) and section 11(1)(a) of the Act and had declared the taxable income in all the assessment years as "nil". It was submitted that the primary object of the assessee, as per the memorandum of association, quoted as above, is to regulate and control the transaction of business on the stock exchange, and to establish and provide for, and manage clearing house for the transactions by the members. The assessee is not ....
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....s in CIT v. Maharana of Mewar Charitable Foundation [1987] 164 ITR 439 (Raj), CIT v. Plot Swetamber Murti Pujak Jain Mandal [1995] 211 ITR 293 (Guj) and in the case of Gonvindu Naicker Estate v. Asst. DIT [2001] 248 ITR 368 (Mad), allowed the exemption under section 11 of the Act. 10. Learned counsel appearing for the Income-tax Department submits that a close perusal of the objects, as set out in the memorandum and articles of associations of the Jaipur Stock Exchange Ltd. would show that the assessee is not engaged, nor is carrying out any activity, as provided under section 2(15), for relief of the poor, education, medical relief, and the advancement of any other object of general public utility. Section 11 provides that the income from property held for charitable or religious purposes, shall not be included in the total income of the assessee. Section 12 gives the benefit of exemption to the income of trusts and institutions. Section 12 provides for conditions for registration of trusts, etc. The assessee, on the basis of the comparative reading of sections, does not fall under any of the category of charitable institutions and is as such not entitled to claim exemption under....
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....High Court was right in holding that the assessee could not claim exemption under section 11 read with section 2(15) of the Act." 12. It is submitted that in the case of trusts, for finding out whether a trust is entitled to claim exemption, on the dominant purpose of the trust. If the dominant purpose was for religious and charitable purposes, even if the money was spent for non-charitable purpose and whether it was open to the trustees to utilise income for any of the objects of the trust, in exclusion to other objects, the trust property by itself cannot be said to be utilised for religious and charitable purposes, under section 4(3)(1) of the Indian Income-tax Act, 1922. 13. Learned counsel appearing for the assessee submits that unlike the memorandum of association of the Delhi Stock Exchange Ltd., in which there was a provision for distribution of profits, and it was found that there was no bar for distribution of profits, prior to the amendment of the articles of association in December, 1973, the Delhi Stock Exchange Ltd. was not under any legal obligation, prohibiting it from distributing the income derived by it, by way of dividends, amongst its shareholders, and in tha....
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....f the Act. 16. A similar view was taken in CIT v. Bangalore Stock Exchange Ltd. [1978] 115 ITR 493 (Karn). The High Court of Karnataka, after examining the memorandum of association and considering the principal objects of the Bangalore Stock Exchange Ltd., held that the objects of the stock exchange are of general public utility. There being no element of profit in the admission fees, membership fees and listing fees, the exemption is available, in respect of income thereof. The mere possibility of an activity, which is not charitable, will not deny the exemption. 17. In CIT v. Bar Council of Maharashtra [1981] 130 ITR 28 (SC), the "charitable purpose" defined in section 2(15) of the Act was explained. It was held that the clause is a restrictive clause. The exemption must depend upon the nature and character of the activities, which the Council can undertake under the relevant provisions of the Advocates Act, 1961, under which it is constituted. The dominant purpose being to ensure quality of service of competent lawyers to the litigating public, to spread legal literacy, law reforms, etc., and the benefit accruing to lawyer member, being only incidental, the dominant purpose i....