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TMI Blog1963 (7) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... e to agricultural income-tax under the provisions of the Mysore Agricultural Income-tax Act? 2. Whether or not, the same derived by the Coffee Board from the farms maintained by the Research Department thereof, are exempt from liability to assessment of agricultural income-tax under section 12(f) of the Mysore Agricultural Income-tax Act? As we propose to answer the second question referred for our opinion in the affirmative and in favour of the assessee, it is unnecessary, as conceded by both the sides, to answer the first question. The assessee is maintaining two research stations--one at Balehonnur in Chickmagalur District and another at Chattahalli in Coorg District. In these stations, coffee and other commercial crops are grown. The primary question for our decision is whether the income realised by the sale of the crops grown in these research stations is liable to be taxed under the Act. Section 12(f) of the Act says that agricultural income-tax shall not be payable on that part of the total agricultural income of a person which is: Any sum derived from land held under a trust or other legal obligation wholly or partly for public purposes of a charitable or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no right to vote. Section 10 provides that when the Board is dissolved for any reason, the unexpended balance of all money in the hands of the Board excepting money in the pool fund has to be disposed of in such manner as the Central Government may direct. The Central Government has also the right to disburse the money in the pool fund in the same manner as the Board would have done had it continued to exist. Section 11 provides for the levy of customs duties on all coffee produced in India and exported out of the country. Section 12 provides for the imposition of excise duty. Section 13(1) is an important section. We shall quote the same in full. 13. (1) The proceeds of the duty of customs and of the duty of excise... levied under this Act (all of which shall form part of the Consolidated Fund of India), reduced by the cost of collection as determined by the Central Government, shall, if Parliament by appropriation made by law in this behalf so provides, be paid to the Board for being utilised for the purposes of this Act. Now, we may go to section 42. This section provides for the general control of the Central Government over the Board. Under section 43 any person ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue it was not contended that the Board has no legal obligation to maintain these research stations. All that was urged on its behalf is that it is not an object of general public utility. It was said that these research stations merely benefit the coffee planters and none else; hence section 12(f) is inapplicable to the present case. We feel constrained to say that the revenue has taken a very narrow view of the matter. Assuming, without deciding, that a section of the public does not come within the scope of the expression general public it is wrong to say that the knowledge gained from these research stations merely benefit the planters. It has a wider impact. The knowledge gathered in these stations is bound to improve the quantity and quality of our coffee crop and thereby give the general public, in the sense in which the revenue wants us to understand that expression, better and cheaper coffee. It is also likely to improve our foreign trade in coffee and thus add to our earnings from foreign trade. The scheme is intended to benefit the producer, the consumer and the country. Section 12(f) is modelled on the basis of section 4(3)(i) of the Indian Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax as to whether this income was liable to be assessed in the hands of the trustees, it was held by the Lahore High Court (per Young C.J. and Addison J. (Tek Chand J. dissenting) that the income in question was not income derived from property held under trust for charitable purposes as that expression is defined in section 4(3) of the Indian Income-tax Act... On appeal to the Privy Council, held, reversing the judgment of the High Court: (i) that the object of the settlor was to supply the province with an organ of educated public opinion and this was prima facie an object of general public utility. Though a trust for conducting a newspaper as a mere vehicle for the promotion of a particular political or fiscal opinion may not be within the exemption, where the object is to disseminate news and ventilate opinion on matters of public interest, the fact that the paper may have, or may acquire, a particular political complexion would not take away its exemption... Their Lordships further laid down: ...that the question whether a particular object is of general public utility, like the question whether a particular trust is charitable, is a question of law, though it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company which obtained registration under the provisions of section 26 of the Indian Companies Act, 1913. Its objects were to promote trade, commerce and industry in general and particularly in the Andhra region. Both section 26 of the Companies Act and the memorandum of the Chamber of Commerce required it to expend its income solely on the promotion of its objects and prohibited it from distributing any portion of its income amongst its members by way of dividend or otherwise. The memorandum further provided that even if the Chamber of Commerce were dissolved or wound up its assets should not be distributed amongst its members but should be transferred to other institutions with similar objects. The principal sources of its income were the subscriptions and donations it received from its members and the rent it received from the tenants who occupied its buildings. The income-tax authorities brought to tax the net income from its buildings under section 9 of the Income-tax Act. The assessee contended that the income was exempt from tax under section 4(3)(i). On a reference, the High Court held that the object of promoting trade, commerce and industry was an object of general public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks of public utility . That being so, it is not possible to say that the fund in question came within the scope of section 4(3) of the Income- tax Act. The next decision to which our attention was invited was the decision of the Allahabad High Court in Chamber of Commerce, Hapur v. Commissioner of Income-tax.[1936] 4 I.T.R. 397. The assessee therein was an association incorporated under section 26 of the Companies Act, as an association limited by guarantee not existing for earning profits and prohibited under the law from declaring any dividends to its members. The question for decision was whether the income realised by that association can be held to be exempt under section 4(3)(i) of the Income-tax Act. Their Lordships held that, before an institution can be held to be charitable within the meaning of this Act, there must be an element of altruism; that is to say, the beneficiaries must not be able to claim the benefit. It was further held that where in a mutual concern institution its members and such outside members as may elect to do business through it are only benefited and it is doubtful whether an object of general public utility is being advanced by the instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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