1972 (2) TMI 6 - HC - Income Tax

Claim for exemption u/s 11 general public utility - amount/fee received for issuance of certificates for survey and weighment by the assessee - issue of certificates was to obviate delays and help those engaged in trade and commerce exemption granted

Summary

Issues:
Interpretation of "charitable purpose" under section 2(15) of the Income-tax Act, 1961.
Exemption of income under section 11 of the Income-tax Act, 1961 for activities of a Chamber of Commerce and Industry.

Analysis:
The judgment pertains to a reference made by the Commissioner of Income-tax and the Income-tax Appellate Tribunal regarding the exemption of income of the Cochin Chamber of Commerce and Industry under section 11 of the Income-tax Act, 1961. The primary issue revolved around whether the income derived from issuing certificates for survey and weighment by the Chamber should be considered exempt from tax under charitable purposes. The Chamber contended that the income was derived from property held under trust wholly for charitable purposes, thus falling under the purview of section 11(1)(a) of the Act.

In analyzing the concept of "charitable purpose," reference was made to section 2(15) of the Income-tax Act, 1961, which defines charitable purpose to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The court considered previous decisions, including the case of Indian Chamber of Commerce, to determine the interpretation of the phrase "not involving the carrying on of any activity for profit" in relation to charitable purposes.

The court deliberated on the interpretation of the phrase in question and disagreed with the view taken by the Calcutta High Court, emphasizing that if the object is for general public utility and does not involve carrying on any activity for profit, the income derived from such activities should not disqualify it from being considered charitable. In this case, the Chamber's objective was deemed to be the advancement of trade and commerce, which was considered an object of general public utility. The issuance of certificates for survey and weighment was seen as a means to facilitate trade and commerce, and the income generated was not substantial compared to the overall purpose of the Chamber.

Ultimately, the court concluded that the income of the Chamber should be exempted under section 11(1)(a) of the Income-tax Act, 1961, in favor of the assessee and against the department. The judgment highlighted the importance of the object of an organization in determining its eligibility for tax exemption under charitable purposes. The court directed the judgment to be communicated to the Appellate Tribunal as per the requirements of the Income-tax Act, 1961.