AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1964 (10) TMI 19
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....rests of the Andhras in particular engaged in trade, commerce or manufacture in India and in particular the Andhra Desa. (d) To do all such other things as may be conducive to the preservation and extension of trade, commerce, industries and manufactures or incidental to the attainment of the above objects or any of them. Clauses (e) to (x) are incidental to the principal objects. By clause 4 of the memorandum of association it was provided that the income and property of the assessee shall be applied solely towards the promotion of its objects as set forth therein and no portion thereof shall be paid or transferred, directly or indirectly, by way of dividends, bonuses or otherwise howsoever by way of profit to its members. On December 2, 1944, the assessee purchased a building and made substantial alterations, additions and improvements therein. The assessee then moved its offices into that building on May 14, 1947, and let out to tenants the portion not required for its use. The income of the assessee is obtained from subscriptions and donations collected from its members and rent received from the building. The following table sets out in columns 3 and 4 the net annual v....
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....ome-tax Appellate Tribunal. The Tribunal held that the assessee was not exempt within the meaning of section 4(3)(i) from liability to pay income-tax, because the activities of the assessee were intended for the benefit primarily of its members and "embraced only collective action on behalf of all its constituent members" which " could not be said to be the result of any trade or business or vocation carried on by it. " At the instance of the assessee the Tribunal referred the following questions to the High Court: " (1) Whether the aforesaid income from property owned by the assessee is exempt under section 4(3)(i) for the aforesaid six years of assessment ? (2) If the answer to the above question is in the negative, whether the activities of the assessee amount to a trade or business, the profit or loss from which is assessable under section 10 ? " The High Court answered the first question in the affirmative and did not record a formal answer on the second question. Against the order of the High Court, these appeals are preferred by the Commissioner of Income-tax, with certificate granted by the High Court under section 66A(2) of the Indian Income-tax Act. We are conce....
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.... the development of trade, commerce and industries in India or any part thereof. By the achievement of these objects, it is not intended to serve merely the interests of the members of the assessee. Advancement or promotion of trade, commerce and industry leading to economic prosperity enures for the benefit of the entire community. That prosperity would be shared also by those who engage in trade, commerce and industry but on that account the purpose is not rendered any the less an object of general public utility. It may be remembered that promotion and protection of trade, commerce and industry cannot be equated with promotion and protection of activities and interests merely of persons engaged in trade, commerce and industry. In Commissioners of Inland Revenue v. Yorkshire Agricultural Society an association called the Yorkshire Agricultural Society was formed with the object of holding annual meetings for the exhibition of farming stock, implements, etc., and for the general promotion of agriculture. All prizes were open to competition in the United Kingdom, but certain privileges were attached to membership of the society. The income of the society was derived from entry fe....
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....titution was established, but being incidental to and consequent upon the way in which the institution carries out the charitable purpose for which alone it was established. In the promotion of trade, commerce and industries of India the public is vitally interested and if by the activities of the assessee that object is achieved, it would be within the meaning of section 4(3)(i) of the Act an advancement of an object of general public utility. In enacting the last paragraph of section 4(3) the legislature has used language of great amplitude. " Charitable purpose " includes not only relief of the poor, education and medical relief alone, but advancement of other objects of general public utility as well. The clause is intended to serve as a special definition of the expression " charitable purpose " for the Act : it is again inclusive and not exhaustive or exclusive. Even if the object or purpose may not be regarded as charitable in its popular signification as not tending to give relief to the poor or for advancement of education or medical relief, it would still be included in the expression " charitable purpose " if it advances an object of general public utility. The express....
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....ly, but the benefit to its members to carry on their business more profitably. In the further alternative, relying upon clause 3(g) of the memorandum of association, counsel contended that the objects of the assessee were political, it being open to the assessee to appropriate the entire income for political purposes. But the primary objects of the assessee are to promote and protect trade, commerce and industries and to aid, stimulate and promote the development of trade, commerce and industries and to watch over and protect the general commercial interests of India or any part thereof. These objects are not vague or indefinite as objects of general public utility. An object of general public utility, such as promotion, protection, aiding and stimulation of trade, commerce and industries need not, to be valid, specify the modus or the steps by which the objects may be achieved or secured. It cannot be said that if called upon to administer an institution of which the objects are of the nature set out, the court would decline to do so merely on the ground that the method by which trade, commerce or industry is to be promoted or protected, aided or stimulated or the general commer....
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....ise substituting " moral " for " religious ". These trusts were, it was held, not for charitable purposes only. The case arose under the Stamp Act of 1891, and it was contended that the trust being charitable, stamp duty at a lower rate was chargeable. The House of Lords held that the trust was not charitable. It was observed by Lord Simonds that " the moral, social, and physical well-being of the community or any part of it is a laudable object of benevolence and philanthropy, but its ambit is far too wide to include purposes which the law regards as charitable. " These cases have, in our judgment, no bearing on the interpretation of the language used in the memorandum of association of the assessee. The argument that it is only for the benefit of the members or the trading classes in Andhra Desa that the funds of the assessee could be utilised does not stand scrutiny. It is clear from the diverse clauses in paragraph 3 of the memorandum of association that the objects were not merely to benefit the members of the assessee or even the trading community of Andhra Desa. Reliance was placed upon the membership clause in the articles of association and it was submitted that only p....
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.... to the primary objects of promotion or protection of trade, commerce and industries, or to aid, stimulate and promote the development of trade, commerce and industries or to watch over and protect the general commercial interests. The expression " object of general public utility " in section 4(3) 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 thereby if it includes the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture. If the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g., promotion of or opposition to legislation concerning that purpose, is contemplated. In In re Trustees of the Tribune the Judicial Committee of the Privy Council was called upon to consider whether a trust created under a will to maintain a printing press and newspaper in an efficient condition, and to keep up the liberal policy of the newspaper, devoting the surplus income of the press and ne....
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....ed as an unregistered association by a resolution of the All India Congress Committee for the development of village industry of hand-spinning and hand-weaving. The association was established as an integral part of the Congress Organisation, but it had independent existence and powers unaffected and uncontrolled by politics. The objects of the association, amongst others, were to give financial assistance to khaddar organisations by way of loans, gifts or bounties, to help or establish schools or institutions where hand-spinning is taught, to help and open khaddar stores, to establish a khaddar service, to act as agency on behalf of the Congress to receive self-spun yarn as subscription to the Congress and to issue certificates and to do all the things that may be considered necessary for the furtherance of its objects, with power to make regulations for the conduct of affairs of the association of the council and to make such amendments in the present constitution, as may be considered from time to time. The funds of the association consisted mostly of donations and subscriptions, and out of the funds charkas and handlooms were purchased and supplied to the inhabitants free of ch....
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....h departs in its material clause from the definition judicially supplied in Pemsel's case and decisions of English courts, which proceed upon interpretation of language different from the Indian statute; have little value. We, therefore, do not propose to deal with the large number of English cases cited at the Bar, except to mention three, which declared trusts for political purposes invalid. In Rex v. Special Commissioners of Income Tax: Ex parte Headmasters' Conference and Rex v. Special Commissioners of Income Tax: (Ex parte Incorporated Association of Preparatory Schools it was held that a conference of headmasters incorporated under the Companies Act as an association limited by guarantee, of which under the memorandum of association income was to be applied towards the promotion of its expressed objects, one of which was the promotion of, or opposition to, legislative or administrative educational measures, the holding of examinations, etc., was not a body of persons, established for charitable purposes only within the meaning of the Income Tax Acts. Similarly, an incorporated association of preparatory schools incorporated under the Companies Act as an association limited....