9911796707
|
Home
Issues Involved:
1. Whether the income from property owned by the assessee is exempt under section 4(3)(i) of the Income-tax Act. 2. If not exempt, whether the activities of the assessee amount to a trade or business, the profit or loss from which is assessable under section 10 of the Income-tax Act. Issue-wise Detailed Analysis: 1. Exemption under Section 4(3)(i) of the Income-tax Act: The primary issue was whether the income from the property owned by the assessee, an association registered under section 26 of the Indian Companies Act, 1913, is exempt under section 4(3)(i) of the Income-tax Act. Section 4(3)(i) exempts income derived from property held under a trust or other legal obligation wholly for charitable purposes. The term "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. The court examined whether the objects of the assessee association, which aimed to promote and protect trade, commerce, and industry, fell under the category of "advancement of any other object of general public utility." The court noted that the statutory requirement of "charitable purpose" must be interpreted according to the inclusive definition provided in the Act, rather than the popular concept of charity. Referring to precedents like the All-India Spinners' Association v. Commissioner of Income-tax and Trustees of the Tribune Press, the court emphasized that the advancement of trade, commerce, and industry could be considered an object of general public utility. The court stated that the economic prosperity of the country, built on its trade, commerce, and industry, benefits the country as a whole, and thus, falls within the scope of the statutory definition in section 4(3) of the Income-tax Act. The court also addressed the argument that the benefit to individual members of the association does not negate the public utility of the association's objectives. Citing cases like the Institution of Civil Engineers v. Commissioners of Inland Revenue and Trustees of the Charity Fund v. Commissioner of Income-tax, the court concluded that the assessee association's purpose was the advancement of trade, industry, and commerce, which is an object of general public utility. Therefore, the court answered the first question in the affirmative, holding that the income from the property owned by the assessee is exempt under section 4(3)(i) of the Income-tax Act. 2. Assessment under Section 10 of the Income-tax Act: The second issue was to be considered only if the assessee failed on the first issue. Since the court held that the income from the property was exempt under section 4(3)(i), there was no need to address whether the activities of the assessee amounted to a trade or business assessable under section 10. However, the court noted that the Tribunal had previously determined that the other income of the assessee did not fall within the scope of section 10 and that the activities of the association did not amount to "carrying on a trade, profession or vocation." The assessee contended that the other income should be assessed under section 12 of the Act and that it was entitled to set off the net income assessed under section 9 against the deficiency in a computation under section 12. The court referenced the South Indian Planting and Commercial Representation Fund v. Commissioner of Income-tax, which held that subscriptions and donations received by an association could be assessed under section 12. The court agreed that the assessee would be entitled to set off the net income assessed under section 9 against the deficiency under section 12 if the income were assessable. In conclusion, since the court answered the first question in favor of the assessee, confirming the exemption under section 4(3)(i), there was no need to formally address the second question. The assessee was entitled to the costs of the reference.
|
