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TMI Blog1947 (2) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... sly regulating their disposal. In pointing this out, I do not overlook that in the case of most, if not of all, companies registered without the word "limited," the profit making motive of the company is subordinate to, and more often than not wholly displaced by, its more beneficent objects. But this does not alter the fact that it can make "profits". The assessee has, in this case, been assessed to tax as, and according to the scale applicable to, a company, as defined by Section 2(6) of the Indian Income- tax Act, for the two assessment years 1938-39 and 1939-40 respectively. The first question of law referred to us by the Appellate Tribunal in this respect is:- "(1) Whether the Upper India Chamber of Commerce, Cawnpore, was rightly treated as a company within the meaning of Section 2(6) of the Income-tax Act and assessed as such to income-tax for the assessment years 1938-39 and 1939-40." The argument in support of the view that the assessee should not have been treated as a "company" for the purpose of assessment rests on the ground that, inasmuch as the assessee never contemplated, embarking on any business in a commercial sense, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own offices and in the remainder housed rent free its secretary, Mr. H.W. Morgan. Apart from the dividends and interest derived from its securities and deposits and so much of the annual value of its Cawnpore premises as was taxable, it had no other income except the subscriptions of its members (with which it is agreed that we are not concerned), and a very small item of ₹ 987 gross in 1938-39 and ₹ 660 in 1939-40 the bulk of which was received from "non-members for managing their affairs" and the balance (a sum of ₹ 162 in 1938-39) on the registration of trade marks. With these I deal later. The Income-tax Officer assessed the assessee in the years in question:- (1) in respect of its interest on securities and deposits, under Section 6(ii) and Section 8 of the Indian Income-tax Act; (2) in respect of the entire annual value of its property, under Section 6(iii) and Section 9(1) of the Act, without making any apportionment in respect of any portion thereof occupied for the purpose of "any business, profession or vocation carried on" by the assessee "the profits of which were assessable to tax", on the simple ground that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was carrying on a "business" under section 10(6) of the Act and as such was entitled to the benefit of Section 9(1). The Appellate Tribunal, for the reasons set out in their order of the 6th March, 1942, did not concede this, but said:- "Exception is taken out to" (semble, 'to that') "course, but we find no justifiable reason to interfere. Admittedly the company is not carrying on business in the sense that expression has been defined in Section 2(4) as including any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. No exception can be taken on that account under Section 10(2)(i). It is admittedly not a deduction that can be made under section 9". It is fair to say that, notwithstanding the repeated use by the members of the Tribunal of the word "admittedly", there is no suggestion that the assessee ever admitted that it was not carrying on "business". The next stage has been, as the statement of the case points out, that the assessee has again somewhat shifted its ground by contending now that its activities constitute a "vocation", and as such entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r yet been raised. I have, therefore, to consider, I think, first whether these are not really questions of fact, bearing in mind that if they are and so far as they have already been pronounced upon by the Appellate Tribunal, they are not open to us for reconsideration here. We are not entitled, if there was any evidence before the Tribunal on which it might have based its finding of fact, to substitute our own judgment for theirs, even though it might be our view that the Appellate Tribunal was wrong. None of these cases which require questions of law to be distinguished from questions of fact is very easy, and I think myself that authorities dealing with particular circumstances are apt to become misleading when applied to other circumstances. The problem here is whether the question, whether the assessee was, in the assessment years, "occupying" any part of the Cawnpore premises "for the purpose of any business, profession or vocation carried on by him the profits of which are assessable to tax," is one of fact, or is one involving a question of law. Now, what does the answer to it require? It requires the ascertainment first of what the assessee was doing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of that section as well. Finally, as regards the question of a "vocation", there is involved what to my mind is undoubtedly a question of law so far as company is concerned, that is to say whether a corporation can have a "vocation", at all (In re The Calcutta Stock Exchange Association Ltd. [1935] 3 I.T.R. 105 ; 62 Cal. 547). What may be the true answer to that question, I do not know, but at least it seems to me to involve a question of law, and, if a question of law is involved in any case as to one part of the composite expression "business, profession or vocation", it is difficult to hold that no question of law arises out of the words taken as a whole. Moreover, the words to be construed in Section 9(1) of the Income-tax Act are not simply "business" or "vocation". They are "business..............or vocation, the profits of which are assessable to tax", that is to say a business or vocation of a particular kind, namely one producing profits to which the Income-tax Act applies. This again appears to involve a question of law. In my judgment, therefore I am inclined to the view, thought not without some h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "vocation" in the context of the Indian Income-tax Act, there must be some real, substantive and systematic course of business or conduct, before it can be said that a business or vocation exists the profits of which are taxable as such under the Act, so as to render the assessee's property occupied for the purpose of a business or vocation, the profits of which are assessable to tax, within the meaning of the Act. If this were not so, it would be open to this and other assessees similarly placed, by some single ad hoc transaction of the value of ten rupees to qualify themselves annually for exemption of the annual value of their premises under Section 9 of the Act as the carriers on of businesses or vocations, whereas in truth and in reality they were nothing of the kind. The question is not, I think, whether the assessee company can legally and properly perform certain isolated functions under its memorandum; but whether those particular isolated activities (which in this case, it, of course, had a perfect right to perform) constitute in the particular circumstances of the case a "business or vocation carried on" by it, so that it is entitled to say that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose that the second question set before us by the Appellate Tribunal ought to be answered in the negative. Iqbal Ahmad, C.J. I have had the advantage of reading the judgment of my brother Braund, and I agree that (1) the answer to the first question referred by the Income-tax Appellate Tribunal to this Court should be in the affirmative and (2) the second question referred by the Tribunal does raise a question of law and is therefore entertainable by us. My learned brother has, in the course of his judgment, given reasons in support of these conclusions, and I respectfully adopt those reasons. I, however, regret that I am unable to share the view of my brother that the assessee is not entitled to exemption from income-tax with respect to the annual value of a portion of the building used as the premises of the Chamber, and that the answer to the second question should be in the negative. The assessee is a company limited by guarantee registered under Section 26 of the Indian Companies Act. Its main object as disclosed by its memorandum of association was "to promote and protect the trade, commerce and manufactures of India, and in particular, the trade commerce and manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner, other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax..............." The answer to the second question referred to us most obviously depend on the answer to the question, whether or not the portion of the building as regards which exemption from tax was claimed was occupied by the assessee "for the purposes of any business, profession or vocation carried on by him the profits of which are assessable to tax." A reference to the assessment order for 1938-39 printed at page 21 of the statement of the case shows that the assessee received in all a sum of ₹ 987 from the Indian Sugar Producers' Association, Tanners' Federation of Indian and by registration of trade marks. The Income-tax Officer declined to treat this income as income from business and taxed it as income from "other sources" on two grounds. Firstly, he observed that "it will be seen that only a small income is received from the non-members for managing their affairs" and, secondly, he remarked that "the main income of the Chamber is from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and it is impossible to prepare or to attempt an exhaustive catalogue of such circumstances. It is equally impossible to define the distinctive characteristics of business or vocation. I, however, venture to suggest that as the legislature has used two different words, "business" and "vocation", in one and the same section, it must be deemed, in the absence of cogent reasons to the contrary, to have used the two words in distinct sense. I say to because I feel that the legislature must be credited with a desire not to use superfluous or redundant words or expressions. Be that as it may, the activity in question of the assessee does, in my judgment, amount either to business, or to vocation within the meaning of Section 9(1) of the Act. It is not necessary, for the purposes of the present case, to decide whether that activity was business or vocation, and I am therefore, relieved from the discussion of that question. Business or vocation in ordinary parlance does, to my mind, connote activities in which a "person" is engaged with a set purpose, and the frequency or the repetition of the activity, though at times a decisive factor, is by no means an i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quot; trade. I, therefore, am inclined to the view that the amount earned by the assessee by the registration of trade marks was a profit made by it by transaction of the business or vocation that fell within the scope of its memorandum. I need hardly add that the fact, that the amount received by the assessee under this head was comparatively small, is wholly irrelevant in a consideration of the question under discussion. The acts done or the services rendered by the assessee that brought to its coffers the amounts paid by the Indian Sugar Producers' Association and the Tanners' Federation of Indian do not appear from the "statement of the case". I am, however, prepared to assume, as found by the Income- tax Officer, that the amounts received under this head by the assessee represented the wages paid to it for managing the affairs of the Sugar Association and the Tanners' Federation. The management of the affairs of other bodies engaged in trade or business is a step that prima facie is calculated to protect trade and such management is, therefore, in my opinion, included in the objects of the assessee company. It follows that the amount received by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the limits allowed by its memorandum of association. It owns a building in the city of Cawnpore and occupies a portion of that building and its offices are located in that portion. The Income-tax Department have included the annual value of that portion of the building also in the total income of the assessee. The assessee claims exemption in respect of that portion of the building under that part of Section 9(1) of the Act which says: "Other than such portions of such property as he may occupy for the purposes of any business, profession or vocation carried on by him, the profits of which are assessable to tax". The Income-tax authorities have rejected that claim. I have heard learned counsel for the parties at great length and have carefully considered the reasons given by my Lord the Chief Justice and by my brother Braund for their respective views, and find myself in agreement with the conclusion at which my Lord the Chief Justice has arrived. As I agree with almost all the reasons given by him, it is not necessary for me to state those reasons over again. At the very outset Mr. Pathak pointed out that the question referred to this Court by the Appellate Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion". It appears to me, therefore, that the word "vocation" is a word of wider import than the word "profession". That the assessee's activities in question are within the scope of paragraph 3-parti- cularly clauses (1) and (21)-of its memorandum of association cannot be denied. I do not agree with Mr. Pathak's contention that if these activities of the assessee did not amount to a "business", then they could not amount to a "vocation". If the contention is accepted, it would be tantamount to holding that "business" and "vocation" are interchangeable words. That cannot be correct. In the first place, if that had been so, the legislature would not have deliberately and repeatedly used both the words. In the second place, the two words are not synonymous. I am also unable to accept his argument that the activities which brought into the coffers of the assessee the sums of money in question-managing the affairs of certain non-members, to wit, Indian Sugar Producers' Association and Tanners' Federation of India, and registration of trade marks-were isolated acts. It appears to me that the very fact that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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