1944 (10) TMI 1 - HC - Income Tax

Summary

Issues:
Assessment of remuneration received by the Assessee Association in relation to specific services performed for its members under Section 10(6) of the Indian Income-tax Act, 1939.

Analysis:
The judgment pertains to a reference under Section 66(1) of the Income-tax Act concerning the Native Share and Stock Brokers' Association of Bombay, commonly known as the Bombay Stock Exchange. The question revolves around whether the remuneration received by the Association for authorised clerks and sub-brokers' fees is definitely related to specific services performed for its members, as per Section 10(6) of the Act. The remuneration in question amounts to fees paid by members for authorizing clerks, granting them privileges within the exchange building. The Association argues that the fee is for granting facilities, not for performing services. However, the Commissioner contends that the rules show a definite scheme for admission and supervision of authorised clerks, benefiting members who pay the fees. The rules lay down a structured arrangement controlled by the Association, providing identifiable services for its members. The Court holds that the services performed are specific, as they form a clear scheme benefiting the members, and the remuneration is directly related to these services.

The judgment further delves into the interpretation of Section 10(6) and the rules of the Association. It emphasizes that if an association renders specific services for its members for a stated remuneration, it is deemed to carry on business in respect of those services and becomes liable to tax. The rules of the Association establish a system for authorised clerks, benefiting members who pay the remuneration. The services rendered by the Association, such as registration, supervision, and good behavior monitoring of clerks, are considered specific services for the paying members. The remuneration paid by members initiates the existence of authorised clerks, to whom the subsequent services are directly related. Therefore, the Court affirms that the Association performs specific services for the benefit of members paying the fees, meeting the criteria under Section 10(6) of the Act.

In conclusion, the judgment upholds that the remuneration received by the Association for authorised clerks' fees is definitely related to specific services performed for its members, as outlined in the rules of the Association. The Court rules in favor of the Commissioner, holding that the Association is liable to tax for carrying on business in respect of these services. The judgment answers the reference in the affirmative, with the Assessee directed to pay the costs of the reference.