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Issues Involved:
1. Claim of exemption u/s 11 of the Income-tax Act, 1961. 2. Retrospective effect of amendments in Rules. 3. Impact of registration u/s 12A. 4. Applicability of the doctrine of res judicata. 5. Interpretation of Rule 4(x) regarding non-charitable objects. Summary: Claim of Exemption u/s 11: The central issue in these appeals is the claim of exemption u/s 11 of the Income-tax Act, 1961, which was rejected by the tax authorities. The assessee, an unregistered association of stock brokers, argued that their primary objective of controlling and developing the stock market qualifies as a charitable purpose u/s 2(15) of the Income-tax Act. The Tribunal held that the dominant objective of the assessee-exchange is a charitable object, entitling it to exemption u/s 11. Retrospective Effect of Amendments in Rules: The tax authorities contended that amendments made in Rules 4, 74, and 121 of the assessee-exchange in 1998 cannot have retrospective effect. However, the Tribunal found these amendments to be clarificatory in nature, emphasizing that both the Governing Board and the General Meeting did not have powers to distribute profits among the members even before the amendments. Therefore, the amendments were held to have retrospective effect. Impact of Registration u/s 12A: The Tribunal noted that once registration is granted u/s 12A by the Commissioner of Income-tax, the Assessing Officer cannot deny exemption on the ground that the objects of the trust are not charitable. The Tribunal cited various judicial pronouncements supporting the view that registration u/s 12A is not an empty formality and implies scrutiny of the charitable nature of the institution. Applicability of the Doctrine of Res Judicata: The Tribunal emphasized that the assessee had been granted exemption for many years, and there was no justification for a departure from this position. Although the doctrine of res judicata does not strictly apply to income-tax proceedings, the principle of finality and certainty in litigation should prevail. The Tribunal found no new facts justifying a different view for the assessment years under appeal. Interpretation of Rule 4(x): The tax authorities argued that Rule 4(x), which allows the establishment of funds for the benefit of members or employees, is non-charitable. The Tribunal rejected this contention, stating that such clauses are ancillary to the primary objective of the association and do not negate its charitable nature. The Tribunal cited various judicial precedents to support this view. Conclusion: The Tribunal held that the assessee is entitled to exemption u/s 11 of the Income-tax Act, 1961, provided other conditions regarding the application of income are satisfied. The appeals were allowed, recognizing the assessee as a charitable institution.
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