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TMI Blog1962 (3) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Income-tax Officer at ₹ 5,893. It was stated amongst other things in the memorandum of association, under which this association is formed, that the income arising out of the said house property was to be spent, amongst other activities, of running dispensary, schools, etc., in the village Ked in Rajasthan, from which place all the Kedias came. The memorandum of association is annexure "A" hereto forming part of the case. The assessee claimed that the income from the house property mentioned supra was exempt under section 4(3)(i) of the Indian Income-tax Act on the plea that the said amount was utilised for religious or charitable purposes. 4. The Income-tax Officer disallowed the said claim of the assessee on the footing that the association was formed for the benefit only of a section of the community and that in the absence of specific property being bound and set apart by a trust or legal obligation there was no question of any exemption under section 4(3)(1). The order of the Income-tax Officer is annexure "B" hereto forming part of the case. 5. When the matter came before the Appellate Assistant Commissioner, he held that the income to be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property which was assessed by the Income-tax Officer at ₹ 5,893. The claim of the assessee that it was entitled to exemption under section 4(3)(i) was negatived by the Income-tax Officer. In appeal to the Appellate Assistant Commissioner that order was varied and it was held that a part of the income from this house property was devoted to charitable objects only. As such, a portion of the income was exempt under section 4(3)(i). On a further appeal to the Income-tax Appellate Tribunal this claim to partial exemption was overruled. According to the Tribunal whether the objects of the society were charitable or not, had to be gathered from the memorandum of association and if the association or its executive committee was entitled to spend amounts under any of the clauses of the objects clause, some of which were charitable in nature and others not, the only conclusion to come to was that the institution was not solely for the purpose of charity. Unfortunately it is recorded in the statement of case: "that the income arising out of the said house property was to be spent amongst other activities of running dispensary, schools, etc., in the village Ked in Rajasthan, fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a purpose which is not "charitable", within the meaning of the expression in the Indian Income-tax Act. There has been some alteration in the Income-tax Act in the year 1952 and for our purpose the provision as it stood before that date governs the situation. Under section 4(3)(i) "any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application thereto" was to be exempt from taxation. Charitable purpose has been defined by the section itself. The definition is not exhaustive but provides as follows: "In this sub-section 'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act that part of the income from property held under a trust or other legal obligation for private religious purposes which does not enure for the benefit of the public." The objects of the society as give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be paid or divided amongst any of its members or invested in their interest." Rule 40 provides: "On dissolution of the society for any reason whatsoever no part of its funds and assets shall be divided amongst its members and the whole of it shall be given and made over to such charitable institutions as the society in its extraordinary general meeting specially called for the purpose may decide upon by 75 per cent. votes of the members present. On the clear understanding that all the funds and assets would be spent in the welfare of the Kedia community only according to rules and regulations of the society such meeting shall be called by giving one month's notice to all the members of the society residing in Calcutta or outside Calcutta." The main argument before us on behalf of the assessee was that clause (a) of the objects clause must be taken to be the primary object of the society and the other objects must be treated as if they were ancillary or subsidiary to the first clause. Reference was made to certain English decisions bearing on the objects clause of the memorandum of association of a company where it had been held by the learned judges that wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and philanthropy, but its ambit is far too wide to include only purposes which the law regards as charitable". Lord Somervell said: "The word 'well-being', though qualified by 'religious' as well as 'social and physical', means primarily, in my opinion, a happy or contented state. Social well-being would be promoted when people were happy together--an important factor in institutional life. Physical well-being is promoted by exercise or recreation and the health and contentment which normally follow. Social training is an ambiguous expression and may well be too vague. Its meaning to me is training in social behaviour, in manners...On this view the trust, limited as it is, is plainly not a charity,..." In my opinion, it is difficult to distinguish portions of clause (a) from the clause as given in the House of Lords case. The relevant portion of clause (a) in our case is "to promote the social, moral, physical and material condition of the Kedia community." The word "material condition" does not find a place in the judgment of the House of Lords. How improving the material condition of a community can be a charitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... religious ceremonies a fortiori cannot be so. Under sub-clause (j) the society can establish funds for preservation and erection of monuments already existing or to be erected commemorating the memory of the great men of the community and celebrated events in the community. Certainly these objects may be laudable in themselves as cherishing memories of people whom the public ought to remember. But the establishment of funds for preservation and erection of monuments would not be a charitable purpose within the meaning of the expression used in the Income-tax Act. Lastly, doing acts, deeds and things for the welfare of the Kedia community would not necessarily be charitable. In the result, as the income derived from the property is not held under a trust or other legal obligation wholly for religious or charitable purposes, it cannot be exempt under the provisions of section 4(3)(i) mentioned above. Learned counsel for the assessee did not press his case with regard to the second portion of section 4(3)(i) and in this view of the matter, the answer to the question must be in the negative. The assessee must pay the costs of this reference. LAIK J.--I agree. Question answered in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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