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Issues involved: Interpretation of exemption under section 11(1) read with section 2(15) of the Income-tax Act, 1961 for an association engaged in banking and pawnbrokers' trade.
Summary: The judgment of the High Court of Andhra Pradesh addressed two questions referred under section 256(1) of the Income-tax Act, 1961. The first question was whether the assessee, an association engaged in banking and pawnbrokers' trade, was pursuing objects for public utility without profit. The second question was about the entitlement of the assessee to exemption under section 11(1) read with section 2(15) of the Act for the relevant assessment year. The assessee, A. P. Bankers and Pawn Brokers Association, Secunderabad, was registered under the Companies Act, 1956, with a license granted by the Andhra Pradesh Government. The association's main objective was to promote and protect the interests of the banking and pawnbrokers' trade, with other ancillary objectives mentioned in its memorandum of association. Initially, the Income-tax Officer rejected the assessee's claim for exemption based on a Supreme Court decision. However, on appeal, the Appellate Assistant Commissioner and subsequently the Tribunal held that the income of the assessee qualified for exemption under section 2(15) read with section 11 of the Act. The High Court referred to the principles outlined by the Supreme Court in a relevant case, emphasizing that the test for exemption is whether the predominant object of the activity is charitable, regardless of any resulting profits. It was noted that the banking and pawnbrokers' trade serves societal needs, and as long as the benefit reaches a substantial section of the public, it fulfills the requirement of serving public interest. Considering the registration of the association under the Companies Act and the detailed objectives mentioned in previous assessments, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and against the Revenue department. In conclusion, both questions were answered in the affirmative, supporting the assessee's claim for exemption. No costs were awarded in the judgment.
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