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TMI Blog2015 (11) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... stions of usage, custom or courtesy in the conduct of trade and business. The memorandum of association does not permit the profits to be distributed between the members. The profits are provided to be utilised for services of the public utility, would thus clearly fall and will qualify for exemption within the meaning of "charitable purpose", as defined in section 2(15) of the Act. In our view, the question is covered by the judgment of the hon'ble Supreme Court in Delhi Stock Exchange Association Ltd. v. CIT (1997 (3) TMI 11 - SUPREME Court), and CIT v. Andhra Chamber of Commerce (1964 (10) TMI 19 - SUPREME Court ), CIT v. Bar Council of Maharashtra (1981 (4) TMI 8 - SUPREME Court ) - Decided in favour of assessee. - Income Tax Appeal Nos. 111, 82, 112, 113, 340 of 2008, 128, 169 and 242 of 2011. - - - Dated:- 24-2-2015 - SUNIL AMBWANI Actg. and PRAKASH GUPTA, JJ. R. B. Mathur with Nikhil Simlote and Archit Bohra for the appellant. Sanjay Jhanwar with Atul Saxena for the respondent. JUDGMENT 1. We have heard learned counsels appearing for the parties. 2. In all these Income-tax appeals under section 260A of the Income-tax Act, 1961 (for short, the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transacting the same and generally for the good order and government of members of the exchange and from time to time to amend or alter such rules and regulations or any of them and to make any new, amended or additional rules or regulations for the purposes aforesaid. 2. To establish just and equitable principles and to settle points or practice and to decide upon any questions of business usage or cour tesy between or among members of the exchange. 3. To regulate and fix scale of commission and brokerage to be charged by members of the exchange. 4. To protect the members of the exchange amongst persons whose character or circumstances render them unworthy of credit. 5. To erect, construct, extend, and maintain in Jaipur a suitable building to use as a place for the transaction of the business of the exchange or of its members and for such other purposes of the exchange as may be determined upon, and to erect, construct and maintain such other building or buildings as may be considered necessary or desirable for the purposes of the exchange or for the use of the members thereof. 6. To acquire by purchase, taking on lease or otherwise and develop lands and buildings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny body incorporated or unincorporated. 16. To take or otherwise acquire and hold shares in any other com pany having objects altogether or in part similar to those of the exchange or carrying on any business capable of being conducted so as to directly or indirectly to benefit the exchange. 17. To enter into any arrangements with any State Government or other authorities supreme, municipal, local or otherwise company or body that may seem conducive to the objects of the exchange or any of them and to obtain from any such State Government or authority or company or body any rights, privileges and concessions which the exchange may think it desirable to obtain and carry out exercise and company with such arrangements, rights, privileges and concessions. 18. To enter into partnership or into any agreement for sharing profits, union of interests, co-operation, joint ventures, reciprocal concessions or otherwise with any person or company carrying on or engaged in or about to carry on or engage in any business of trans action which the exchange is authorised to carry on or engage in any business or transaction capable of being conducted so as directly or indirectly to benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interests of brokers, dealers, jobbers and investors in stocks, shares and like securities. 26. To petition, if necessary, to the Legislatures or promote depu tation in relation to general and particular measures affecting the business of the exchange, its members or investors in stocks, shares and like securities and to procure changes in law or in practice regarding the same. 27. To promote or oppose legislative and other measures affecting the commercial, industrial and investing interests. 28. To collect, acquire, preserve, disseminate and circulate statistics and other information relating to stocks, shares and like securities and to maintain a library. 29. To print, publish and circulate such papers, periodicals, books and daily and other periodical quotations, lists and circulars as may seem conducive to furtherance of any of these objects of the exchange. 30. To communicate with the Chambers of Commerce and other mercantile bodies throughout the world and consult and promote measures for the protection and advancement of the objects of the exchange. 31. To improve and elevate the technical and business knowledge of persons engaged in or about to be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on) Act, 1956. 38. To use the safe deposit vaults for purposes of storage gratui tously or otherwise letting on hire and otherwise disposing of safes, strong-rooms and other receptacles for money, securities and docu ments of all kinds. 39. To make payments or disbursements out of the funds or other movable property of the exchange for any of the purposes specified in the rules, bye-laws and regulations of the exchange. 40. To facilitate the transaction of business of the exchange by establishing, providing for and maintaining clearing house for the members. 41. To apply any surplus funds available with the exchange in pro moting its objects and not to distribute the same as dividend or in any other form to the members. 42. To do all such other things as are incidental or conducive to the attainment of the above objects. C. Other objects are : nil. And it is hereby declared that the objects set forth in any sub- clause of this clause shall not, except where the context expressly so requires be in any way limited or restricted by reference to or infer ence from the terms of any other sub-clause or by the name of the exchange. None of the sub-clauses of this clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other object of general public utility : Provided that the advancement of any other object of general pub lic utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity : Provided further that the first proviso shall not apply if the aggre gate value of the receipts from the activities referred to therein is twenty-five lakhs rupees or less in the previous year. 6. It was contended that the objects of the stock exchange are of general public utility. The stock exchange is not carrying out any business, nor is earning profits, for distribution to its members. 7. The Assessing Officer was not satisfied with the explanation, and held that the assessee's ancillary objects show that it is involved in carrying on the business. The clauses in the memorandum and articles of association, may not permit the applicant to distribute income but that all the clauses and obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the authorised agents, for earning profits, and thus, the meaning of charitable purpose , cannot be extended to the assessee, to make the purpose of exemption irrelevant. The exemption clause must be strictly construed, and that, unless and until the assessee specifically falls under that category, the benefit of exemption cannot be extended. Learned counsel appearing for the Department has relied on the judgments of the Supreme Court in Yogiraj Charity Trust v. CIT [1976] 103 ITR 777 (SC), Addl CIT v. Ahmedabad Millowners' Association [1977] 106 ITR 725 (Guj), Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) and Delhi Stock Exchange Association Ltd. v. CIT [1997] 225 ITR 235 (SC) in support of his submissions. He submits that in Delhi Stock Exchange Ltd. (supra), the Supreme Court, after considering the objects of the Delhi Stock Exchange Ltd. and the purpose of giving exemption under section 11, held in paragraph 7, as follows (page 240 of 225 ITR) : What is, therefore, required is that there must be an obligation created to spend the money exclusively and essentially on charity. In the present case, as found by the High Court, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge Association Ltd. [2001] 248 ITR 258 (Delhi) ; [2001] 119 Taxman 91 (Delhi) held that the Delhi Stock Exchange Ltd. was entitled to exemption under section 11 of the Act. 14. It is submitted by the learned counsel appearing for the assessee that in almost all the cases of stock exchanges, considering the objects of assessment in the memorandum and articles of associations of the stock exchanges, as well as in the analogous cases of Bar Councils and Chambers of Commerce, the Supreme Court and the High Courts have consistently held that where the objects of the association are for general public utility, namely, to regulate the activities of the business, or profession, with no profit earning motive, nor are there any provisions for distribution of profits amongst the members, the activity is a charitable activity, which qualifies for exemption under section 11 of the Act. 15. In Hyderabad Stock Exchange Ltd. v. CIT [1967] 66 ITR 195 (AP), the High Court of Andhra Pradesh held that the object of the stock exchange is not only to further the interests of both the brokers and dealers but also of the public interested in securities, to assist, regulate and control the trade or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and dealers but also the public interested in securities, to assist, regulate and control the trade or business in securities, to maintain high standards of commercial honour and integrity, to promote and inculcate honourable practices, and just and equitable principles of trade and business, to discourage and to suppress malpractices, to settle disputes, and to decide all questions of usage, custom or courtesy in the conduct of trade and business. The memorandum of association does not permit the profits to be distributed between the members. The profits are provided to be utilised for services of the public utility, would thus clearly fall and will qualify for exemption within the meaning of charitable purpose , as defined in section 2(15) of the Act. 19. In our view, the question is covered by the judgment of the hon'ble Supreme Court in Delhi Stock Exchange Association Ltd. v. CIT (supra), and further, in the judgments of the Supreme Court in CIT v. Andhra Chamber of Commerce (supra), CIT v. Bar Council of Maharashtra (supra) ; the judgment of the Delhi High Court in CIT v. Delhi Stock Exchange Association Ltd. (supra), the Andhra Pradesh High Court in Hyderabad Sto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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