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TMI Blog1967 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide means of social intercourse amongst them ; (c) to consider and discuss all questions affecting the interests of motorists and the alteration or administration of the law and all police and municipal rules and regulations relating to or in any way affecting them ; (d) to promote an interest in the knowledge and use of automobiles of every kind by lectures, discussions, books and correspondence. The services rendered by the Association to its members, inter alia, are : (i) Free legal advice and defence in approved cases. (ii) Free road breakdown service in Calcutta, Patna and Asansol. (iii) Free touring itineraries. (iv) Free tax and licence " reminder " and " renewal " services. (v) Free services of car attendants at parking places. (vi) Supply of engineers for examination of cars at nominal fees. (vii) Introduction of drivers on no fee basis. (viii) Driving tuition at nominal fees. (ix) Associate Membership of the R. A. C. England at reduced fee. Entrance fee waived. (x) Full privileges of the A. A., England, at reduced fee. Entrance fee waived. (xi) Reciprocal privilege of Western India A. A., A. A. of Upper India, A. A. of Southern India, U. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit to the appellant and was tainted with commerciality. Thereupon, the assessee Association preferred a second appeal before the Income-tax Appellate Tribunal. The Tribunal also agreed with the order made by the Appellate Assistant Commissioner with the following observation : " We agree with the Appellate Assistant Commissioner that such advertisement charges are liable to tax in view of the specific provision of section 10(6) which provides : 'A trade, professional or similar association performing specific services for its members for remuneration definitely related to those services shall be deemed for the purpose of this section to carry on business in respect of those services, and the profits and gains therefrom shall be liable to tax accordingly '. The advertisement charges from members are definitely related to the specific services rendered by the Association in bringing their goods, etc., to the notice of the other members of whom the number is legion. The appellant claims that the entire costs of the production of the magazine should in any case be deducted from the advertisement receipts. We cannot accept the claim. The Income-tax Officer has allowed ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a stand, facility to watch the races and to bet on the horses in the races, use of the totalisator in that stand and facilities for refreshments. The daily ticket fee for admission into the members' enclosure was the same as that for admission into the public enclosure. The assessee claimed that in computing its total income, the following items of receipts arising from, (1) season admission tickets front members, (2) daily admission gate tickets from members, (3) use of private boxes by members, and (4) income from entries and forfeits received from the members whose horses did not run in the races during the season, should be extended. The High Court held that the first three items were not taxable either under section 10(1) or section 10(6) and that the fourth item was taxable under both the sub-sections. On appeal to the Supreme Court by the Commissioner, it was held that as there was no mutual dealing between the members inter se in the nature of mutual insurance, all the items of receipts from members were received by the assessee from business with its members within the meaning of section 10(1) and that they were therefore assessable to tax. In the course of that judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner that the income from advertisement was chargeable to tax, invoked section 10(6) of the Act, which may not have been right. He submitted that in such circumstances it was proper for this court to reframe the question properly and then answer the same. In support of this contention he strongly relied on the judgment of the Bombay High Court in Ismailia Grain Merchants Association Limited v. Commissioner of Income-tax in which Chagla C. J. and Tendolkar J. observed : "...... The real controversy between the assessee and the taxing department is whether the assessee is liable to tax. Even though he may not be liable to tax under one provision of the Act, if he is liable under another provision and that liability clearly arises from the facts stated in the statement of the case, then it is open to us to say that we disagree with the view of the Tribunal that the assessee is liable under section 10(6), but that he is liable under some other provision of the Act. " Mr. Mukherjee submitted that, for the purpose of refraining the question, the facts as in the statement of the case would be sufficient and no further fact would have to be examined and in the fitness of things, the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of assessability on the short ground that the income had not arisen in Baroda but in British India. That aspect of the matter has not been touched by the Bombay High Court. The latter has, on the other hand, considered whether the Concessions Order applied to the assessee, a matter not touched by the Tribunal. Thus, though the result is the same so far as the assessment is concerned, the grounds of decision are entirely different. The High Court felt that the question framed by it comprehended both the aspects and perhaps it did. But the two matters were neither co-extensive, nor was the one included in the other. The question of accrual of income was to be decided under the Income-tax Act, and has but little to do with the Concessions Order. That question can be adequately decided on the facts of this case without advertence to the Concessions Order. It cannot, therefore, be said to be either co-extensive with or included in the decision of the question actually considered by the High Court, to wit, whether the Concessions Order applied or not. If this be so, it is manifest that the Tribunal decided something which stands completely outside the decision of the Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering the case whether the advertisement charges received by the assessee-Association from members should be included in the income of the assessee-Association. The same question is being agitated before us, with this modification that even if the advertisment charges received from members be deemed to be the income of the assessee, the same cannot be taxed under section 10(6) of the Act. The contention of the revenue before us is that the advertisement charges received from members is income in the hands of the assessee-Association even though the same may not be taxed under section 10(6), the assessee not being a trade association. We are thus not called upon to consider a case which was a stranger before the Tribunal. We, therefore, accept the contention of Mr. Mukherjee, that in the facts and in the circumstances of the case, we should reframe the question in the following manner : " Whether, on the facts and in the circumstances of the case, the advertisement charges received by the assessee from its members are liable to tax ? " and then answer the same. Mr. S. R. Banerjee, for the assessee-Association, submitted that if we choose to reframe the question, the answer sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, which brings into being a legal entity separate from its constituent members, is to be disregarded always and that the legal entity can never make a profit out of its own members. Mr. Banerjee submitted that cent. per cent. indentity between the contributors and participators was not necessary. In the instant case he submitted all members had the right to advertise in the magazine ; the fact that only some of them exercised the right or availed of the privilege would not make any difference and the money collected from advertisement charges by the assessee, a mutual concern, in furtherance of the object of the association, would not become business income. In making the above submission Mr. Banerjee strongly relied upon a judgment of the Madras High Court in Kumbakonam Mutual Benefit Fund Ltd. v. Commissioner of Income-tax. In that case, " the object of the assessee, Mutual Benefit Fund, inter alia, was to enable its shareholders to save money, to invest the shareholders' savings in a prescribed manner, to advance loans at favourable interest, to receive deposits and to borrow if need be. Article 5 of the articles of association of the assessee laid down that it shall hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough its range of customers is limited to its shareholders. If a railway company makes a profit by carrying its shareholders, or if a trading company, by trading with shareholders--even if it is limited to trading with them--makes a profit, that profit belongs to the shareholders, in a sense, but it belongs to them qua shareholders. It does not come back to them as purchasers or customers. It comes back to them as shareholders upon their shares. Where all that a company does is to collect money from a certain number of people--it does not matter whether they are called members of the company, or participating policy holders--and apply it for the benefit of those same people not as shareholders in the company, but as the people who subscribed it, then, as I understand the New York case, there is no profit. If the people were to do the thing for themselves, there would be no profit, and the fact that they incorporate a legal entity to do it for them makes no difference, there is still no profit. This is not because the entity of the company is to be disregarded, it is because there is no profit, the money being simply collected from those people and handed back to them, not in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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