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TMI Blog1997 (3) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... d to claim exemption in payment of income-tax under section 11 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the reason that the income of the assessee was derived from property held under trust for charitable purposes. The appeals relate to the assessment years covering the period prior to December, 1973. The assessee is a company limited by shares. It was incorporated in the year 1947 with a view to acquire and take over, as a going concern the activities, functions and business of the Delhi Stock and Share Exchange Limited and the Delhi Stock and Share Brokers' Association Ltd. The object for which the assessee was established was generally that of conducting a stock exchange and thus to promote and regulate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner in which the surplus derived from the activity could be disposed of and the absence of any prohibition for dividend to the share holders and specific provision for creating funds for the benefit of share holders, employees or their relations clearly showed that the surplus of the activity carried on by the assessee was definitely for the benefit of the shareholders, employees or their relations and could not by any manner or means be treated as held for charitable purpose. According to the Tribunal, the mere fact that no dividends were declared or that the assessee did not carry on an object of general public utility, did not in any manner establish the trust for using the income for charitable purpose inasmuch as the income could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire profits among its members and to have set apart or utilised no part of it for charitable purposes. That the company did not, in fact, distribute any dividends would not, in the view of the High Court, be of any help to the assessee as the requirement for the purposes of exemption is not the factual position, but whether in law the company is under any obligation to devote its profits only to religious or charitable purposes. Referring to the letters of the Central Government dated August 28, 1963, and March 1, 1973, wherein objection had been taken to presents being given by the assessee to its members on the ground that such presents amounted to distribution of dividends in specie, the High Court has observed that the said letters w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruing the definition of the expression "charitable purposes" in section 2(15) of the Act, the following test laid down by Beg J. (as the learned Chief Justice then was) in Sole Trustee, Loka Shikshana Trust v. CIT [19751 101 ITR 234 (SC), has been approved : " Does the purpose of a trust restrict spending the income of a profitable activity exclusively or primarily upon what is 'charity' in law ? If the profits must necessarily feed a charitable purpose, under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose tested by the obligation created to spend the money exclusively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for depreciation, reserve and other funds under section 29, a Corporation may utilise such percentage of its net annual profits as may be specified in this behalf by the State Government for the provision of amenities to the passengers using the road transport services, welfare of labour employed by the Corporation and for such other purposes as may be prescribed with the previous approval of the Central Government, (and out of the balance such amount as may, with the previous approval of the State Government and the Central Government, be specified in this behalf by the Corporation, may be utilised for financing the expansion programmes of the Corporation and the remainder, if any, shall be made over to the State Government for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no obligation on the part of the assessee not to distribute the profits by way of dividend among the shareholders. As regards the provisions of the Securities Contracts (Regulation) Act, 1956, it is no doubt true that the said Act makes provision for recognition of a stock exchange. The expression "stock exchange" has been defined in section 2(j) to mean any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. We, however, do not find any provision in the said Act which imposes an obligation on a recognised stock exchange not to distribute any part of its profits by way of dividend to its shareholders. In so fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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