1970 (9) TMI 13 - HC - Income Tax

Assessee is the Indian Chamber of Commerce - Whether the Tribunal was right in holding that the activities carried on by the assessee from which it derived, (a) arbitration fees, (b) fees for certificate of origin, and (c) its share of profit from Messrs. Calcutta Licensed Measurers, were not activities carried on for profit within the meaning of section 2(15) of the Income-tax Act, 1961, and, accordingly, the income derived from such activities was exempt from tax u/s 11

Issues Involved:
1. Whether the activities from which the assessee derived income were carried on for profit within the meaning of section 2(15) of the Income-tax Act, 1961.
2. Whether the income derived from such activities was exempt from tax under section 11 of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Activities Carried On for Profit
The primary issue was whether the activities from which the assessee derived income, namely arbitration fees, fees for certificates of origin, and the share of profit from Messrs. Calcutta Licensed Measurers, were activities carried on for profit within the meaning of section 2(15) of the Income-tax Act, 1961.

- Facts and Arguments: The assessee, Indian Chamber of Commerce, argued that its activities were for charitable purposes under section 2(15) of the Income-tax Act, 1961, specifically "advancement of any other object of general public utility not involving the carrying on of any activity for profit." The memorandum and articles of association of the Indian Chamber of Commerce were invoked to emphasize that the objects were to promote and protect trade, commerce, and industries in India.

- Tribunal's Decision: The Tribunal allowed the appeal based on the Supreme Court decision in Commissioner of Income-tax v. Andhra Chamber of Commerce, concluding that the main objects of the assessee were of general public utility and thus entitled to exemption under section 11 of the Income-tax Act, 1961.

- High Court's Analysis: The High Court disagreed with the Tribunal, stating that the expression "the advancement of any other object of general public utility not involving the carrying on of any activity for profit" indicates that it is the advancement of that object which must not involve profit-making activities. The court emphasized that the income from arbitration fees, certificates of origin, and the share of profit from Messrs. Calcutta Licensed Measurers were indeed activities for profit, thus falling outside the scope of charitable purposes as defined in section 2(15).

Issue 2: Tax Exemption Under Section 11
The second issue was whether the income derived from these activities was exempt from tax under section 11 of the Income-tax Act, 1961.

- Facts and Arguments: The assessee contended that the income derived from the activities should be exempt under section 11, which excludes income derived from property held under trust wholly for charitable or religious purposes.

- High Court's Interpretation: The court clarified that for income to be exempt under section 11, the property must be held under trust wholly for charitable purposes. The court noted that section 11(4) includes a business undertaking held under trust. However, the court found that the income from the three sources did not arise from any property held under trust by the assessee. The court further explained that the proper interpretation of section 2(15) should be consistent with sections 11 and 28 of the Income-tax Act, 1961, which indicate that specific services performed for members by trade associations are chargeable to income tax.

Conclusion:
The High Court concluded that the activities carried on by the assessee, from which it derived arbitration fees, fees for certificates of origin, and the share of profit from Messrs. Calcutta Licensed Measurers, were activities carried on for profit within the meaning of section 2(15) of the Income-tax Act, 1961. Consequently, the income derived from such activities was not exempt from tax under section 11 of the Income-tax Act, 1961. Each party was ordered to bear its own costs.

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