1979 (11) TMI 38 - HC - Income Tax

Summary

Issues involved:
1. Whether the objects of the assessee constituted 'charitable purpose' as defined in section 2(15) of the Income-tax Act, 1961, entitling it to exemption under section 11 of the said Act, for the assessment years 1968-69, 1970-71 and 1971-72?
2. Whether, on the facts and in the circumstances of the case, the income derived by the assessee-chamber by way of services rendered by it to its members is not liable to be charged to tax under section 28(iii) of the Income-tax Act, 1961, for the assessment years 1968-69, 1970-71 and 1971-72?

Judgment Details:

Issue 1:
The assessee-chamber, a society formed under the Societies Registration Act, aimed to encourage and develop the film industry, protect members' rights, and provide various services. The Income Tax Officer (ITO) rejected the claim for tax exemption, stating the activities were for profit. The Appellate Tribunal later ruled in favor of the assessee, citing the Supreme Court's decision in CIT v. Andhra Chamber of Commerce. The High Court affirmed the exemption under section 11, emphasizing that the activities were not profit-oriented and fell within the definition of 'charitable purpose.'

Issue 2:
The second question revolved around whether the income derived by the assessee from services provided to its members should be taxed under section 28(iii). The Tribunal held that since the income was exempt under section 11, section 28(iii) did not apply. The High Court further analyzed the provisions of the Income-tax Act, emphasizing that in cases like the present assessee, which existed for a charitable purpose, the income should be considered in conjunction with section 2(15) and section 11. The Court concluded that the assessee was not liable to tax on the income in question, as it was not earned from activities designed for profit but for achieving charitable objectives.

In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the assessee on both issues. The assessee was entitled to costs amounting to Rs. 500.