1981 (4) TMI 8 - SC - Income Tax

Assessee-Bar Council of Maharashtra-is a body corporate established under the Advocates Act, 1961 -Whether the assessee-council could be taken to be a body intended to advance any object of general public utility falling within s. 2(15) for purposes of S. 11 - held,yes

Issues Involved:
1. Whether the assessee-council qualifies as a body intended to advance an object of general public utility under Section 2(15) for purposes of Section 11 of the Income-tax Act, 1961.
2. Whether the income from securities held by the assessee-council is exempt from tax under Section 11 of the Income-tax Act, 1961.
3. Whether the relief obtained under Section 10(23A) of the Income-tax Act precludes the assessee-council from claiming exemption under Section 11.

Issue-wise Detailed Analysis:

1. Qualification of Assessee-Council as a Body for General Public Utility:
The primary question was whether the assessee-council, the Bar Council of Maharashtra, could be considered a body intended to advance an object of general public utility under Section 2(15) for purposes of Section 11 of the Income-tax Act, 1961. The court examined the obligatory and optional functions of a State Bar Council under Section 6 of the Advocates Act, 1961. It was determined that the council's functions, such as admitting persons as advocates, maintaining the roll, safeguarding the rights, privileges, and interests of advocates, promoting law reform, conducting legal seminars, and organizing legal aid for the poor, are primarily aimed at ensuring quality legal services and promoting legal literacy. The court concluded that these functions serve the general public utility, and any benefit to the lawyer-members is incidental. Therefore, the assessee-council qualifies as a body intended to advance an object of general public utility.

2. Exemption of Income from Securities under Section 11:
The court analyzed whether the income from securities held by the assessee-council is exempt from tax under Section 11 of the Income-tax Act, 1961. Section 11 provides tax exemption for income derived from property held under trust wholly for charitable or religious purposes. The definition of "charitable purpose" under Section 2(15) includes the advancement of any object of general public utility, not involving the carrying on of any activity for profit. The court noted that the assessee-council is not engaged in any profit-making activity, and its functions align with the advancement of an object of general public utility. Consequently, the income from securities held by the assessee-council is exempt from tax under Section 11.

3. Impact of Relief under Section 10(23A):
The revenue contended that the relief obtained under Section 10(23A) precludes the assessee-council from claiming exemption under Section 11. Section 10(23A) exempts income of an association or institution established for the control, supervision, regulation, and encouragement of professions specified by the Central Government, excluding income from interest on securities, house properties, or specific services. The court observed that the Tribunal had previously rejected this contention, noting that Sections 10(23A) and 11 are not mutually exclusive and can operate under different circumstances. The Tribunal's view was that Section 11 is broader in scope and can provide exemption for all sources of income, subject to conditions. The revenue had acquiesced in this view by not challenging the remand order or raising the issue in subsequent proceedings. Therefore, the court did not permit the revenue to urge this contention and proceeded to consider the merits of the case.

Conclusion:
The Supreme Court upheld the High Court's view that the assessee-council is a body constituted for the advancement of an object of general public utility and is entitled to tax exemption under Section 11 of the Income-tax Act, 1961. The appeals were dismissed with no order as to costs.

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