1978 (8) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Exemption of other income u/s 10(23A) of the I.T. Act, 1961.
2. Exemption of interest on securities u/s 11 of the I.T. Act, 1961.
3. Whether the Bar Council is a body intended to advance any object of general public utility.

Summary:

Issue 1: Exemption of Other Income u/s 10(23A)
The Income Tax Officer (ITO) subjected the Bar Council's income from securities and other sources to income tax for the assessment years 1962-63, 1963-64, and 1964-65. The Appellate Assistant Commissioner (AAC) rejected the Bar Council's claim for exemption of other income u/s 10(23A) on the grounds that the Bar Council was not an association approved by the Central Government. However, the Tribunal accepted the Bar Council's contention for exemption after an order of approval was obtained pursuant to a notification dated August 5, 1966, effective from December 28, 1961.

Issue 2: Exemption of Interest on Securities u/s 11
The AAC also rejected the Bar Council's claim for exemption of interest on securities u/s 11, stating that the investments were not held under trust for objects of general public utility. The Tribunal upheld this view, noting that safeguarding the interests of advocates was not an object of general public utility. The Tribunal remitted the case to the AAC to examine whether the securities were held for educational or other charitable purposes, which would qualify for exemption u/s 11.

Issue 3: Object of General Public Utility
The key question referred to the High Court was whether the Bar Council could be considered a body intended to advance any object of general public utility. The court examined the functions of the Bar Council as enumerated in Section 6 of the Advocates Act, 1961, which include admitting persons as advocates, maintaining the roll of advocates, determining cases of misconduct, safeguarding the rights and interests of advocates, promoting law reform, and providing financial assistance to indigent or disabled advocates. The court concluded that these functions serve the public at large by ensuring competent and respectable legal practitioners, thus constituting an object of general public utility.

Conclusion:
The High Court held that the Bar Council is a body constituted for the advancement of an object of general public utility and that its entire income, including from securities, is exempt from tax u/s 11 of the I.T. Act, 1961. The court answered the referred question in the affirmative, in favor of the assessee, and directed the revenue to pay the costs of the assessee.