AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1959 (3) TMI 7
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....iation called " The Calcutta Stock Exchange Association " and to carrying on the affairs of the stock exchange which had been founded by that association. The principal object of the respondent company is to facilitate the transaction of business on the Calcutta Stock Exchange. In view of that objective, the company had to make rules and by-laws, regulating the mode and the conditions in, and subject to, which the business of the stock exchange had to be transacted. The company is composed of " members " who may be either individuals or firms, who, except in the case of parties who had been members of the unincorporated association have to be elected as such, and upon such elections have to acquire a share of the company and pay an entrance fee. The members have to pay a monthly subscription according to the by-laws of the company. Under the by-laws of the respondent company, members with a certain standing, are allowed to have " authorized assistants ", up to a maximum of six in number. Such authorized assistants are permitted the use of the premises of the association and to transact business therein in the names and on behalf of the members employing them. The members have to pa....
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....late that a member shall give to the prescribed authority of the company, an immediate notice in writing, of the termination of the employment by him of any authorized assistant, and on such termination, the right of the assistant to use the rooms of the association shall cease, and he shall not be at liberty to transact business in the name and on behalf of his employer. The by-laws also make provision for the supervision of the work of the authorized assistants to see that they function within the limits of their powers, and do not transact business on behalf of persons or firms other than those employing them. During the accounting year 1944-45 (assessment year 1945-46), the respondent company received from its members the sum of Rs. 60,750 as entrance fees, and the sum of Rs. 15,687 as subscription in respect of the authorised assistants. The company also received during the aforesaid year, a sum of Rs. 16,000 as fees for putting the names of companies on the quotations list. Unless a particular company's name is placed on the quotations list, no dealings in respect of the shares of that company are permitted on the stock exchange. An application has to be made by a member to....
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....authorities that the authorised assistants were not members of the company within the meaning of the articles of association of the company, and that their position was analogous to that of the " authorised clerks in Native Share and Stock Brokers' Association at Bombay ". In the course of its order, the Tribunal observed as follows : " The provision made in the regulations of the company by which a member can take advantage of sending his authorized assistants to the company for transacting the business in the member's name is nothing but giving extra facilities to the members. By controlling the institution of authorized assistants the company renders specific services to the members and in particular to the member whose assistants work for him. The amounts received by the company from these sources are clearly covered by the provisions of section 10(6)." At the instance of the assessee, the Tribunal stated a case and referred the following questions of law to the High Court for its decision under section 66(1) of the Act : " (1) Whether on the facts of this case the Income-tax Appellate Tribunal was right in holding that authorized assistants were not members of the compan....
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.... The High Court, in the course of its opinion, observed that though the assessee was undoubtedly a trade association, it did not perform any specific services for its members for remuneration. It then examined in detail the decision of the Bombay High Court in the case of Native Share and Stock Brokers' Association v. Commissioner of Income-tax relied upon by the Department, and observed that the differences pointed out between the case in hand and the cage decided by the Bombay High Court were " not vital, though they are not immaterial " but it was not prepared to take the same view of the facts of this case as had been taken by the Bombay High Court in the case referred to above, or by the Travancore-Cochin High Court in the case of Commissioner of Income-tax v. Chamber of Commerce, Alleppey. The High Court accepted the argument of Dr. Pal, which is also addressed to us, that the words " performing specific services for " were far stronger and more definite than the words " render service to ", and that those words meant the actual doing of definite acts in the nature of services. The court further observed that those words meant " execute certain definite tasks in the interests....
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....the sub-section to see whether the three sums of money in question, or any of them, are or is within the ambit of those terms. The words " performing specific services ", in our opinion, mean, in the context, " conferring particular benefits " on the members. The word " services " is a term of a very wide import, but in the context of section 10 of the Act, its use excludes its theological or artistic usage. With reference to a trade, professional or similar association, the performing of specific services must mean conferring on its members some tangible benefit which otherwise would not be available to them as such, except for payment received by the association in respect of those services. The word " remuneration ", though it includes " wages ", may mean payment, which, strictly speaking, may not be called " wages ". It is a term of much wider import including " recompense ", " reward ", " payment ", etc. It, therefore, appears to us that the learned Chief Justice was not entirely correct in equating " remuneration " with " wages ". The sub-section further requires that the remuneration should be " definitely related " to the specific services. In other words, it should be show....
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....association of having the use of their representative or agent even during their absence. There cannot be the least doubt that this is a very substantial benefit to those members who found it worth their while to engage the services of authorized assistants. A member is not obliged, as indicated above, to have such an assistant, but the fact that he chooses to have such an assistant on payment of the prescribed fee or subscription, itself, is proof positive that a businessman, who ordinarily thinks in terms of money, has found it worthwhile to have, the services of an assistant by making an additional payment to, the association by way of recompense for the benefit thus, conferred upon him. Lastly, the sum of Rs. 16,000 represents fees received from members for allowing their application for enlisting the names of companies not already on the quotations list, so that the shares and stocks of these companies may be placed on the stock market. As already indicated, it is not the company concerned which has directly to pay this fee, but the fee has to be paid by the member who initiates the proposal and, apparently, finds it worth his while to pay that prescribed fee to the associat....
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....ion as such, because the association has to function within the scope of its objects of incorporation. Hence, on a true construction of the provisions of the sub-section in questions we have come to the conclusion that the facts and circumstances of the present case bring the three items of income of the association within the taxing statute. In our opinion, the decision of the Bench of the Bombay High Court, consisting of Stone, C. J., and Kania, J. (as he then was), in the case of Native Share and Stock Brokers' Association v. Commissioner of Income-tax, is correct, and the facts of that case run very parallel to those of the case in hand, though there may be minor differences in the rules and by-laws of the association then before the Bombay High Court. In that case, as in the present one, the rules of the Stock Brokers' Association (the Bombay Stock Exchange) contemplated a definite scheme for allowing members to employ authorized clerks and for the admission, conduct, control and supervision of those clerks, for the benefit primarily of the members who employed them. It was held by the High Court that the income received by the association by way of fees in respect of those ....
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....Court, because, in our opinion, they truly apply the provisions of sub-section (6) of section 10 to associations like the one before us. The other case to which our attention was drawn is Commissioner of Income-tax v. Chamber of Commerce, Alleppey. The facts of that case are not similar to those of the case before us, but the ratio decidendi of that case are relevant. That case referred to the Alleppey Chamber of Commerce. The Chamber inaugurated a produce section with the object of promoting the interests of merchants in general, and of those engaged in the produce trade, in particular ; of acting as arbitrators and collecting and publishing information relating to the produce trade. Members were admitted to the produce section on payment of admission fees, monthly fees and contributions at certain prescribed rates. The question which was referred to the High Court was whether the receipts by way of fees and contributions could be chargeable under section 10(6) of the Act, and it was answered in the affirmative. Though cases in England, by way of precedent for the decision of the case in hand, have not been cited at the bar, apparently because the scheme of the income-tax law in....