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TMI Blog1961 (2) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... iation were the subscriptions and donations it received from its members and the rental it received from the tenants who occupied the building it owned at Madras. The principal objects of the association as set out in sub-paragraphs (a), ( b), (c) and (y) of clause 3 of the memorandum of association were : (a) To promote and protect trade, commerce, and industries of India in the Province of Madras and in particular in the Andhra country. (b) To aid, stimulate and promote the development of trade, commerce and industries in India or any part thereof with capital principally provided by Indians or under the management of Indians. (c) To watch over and protect the general commercial interests of India or any part thereof and the interests of the Andhras in particular engaged in trade, commerce or manufacture in India and in particular Andhra Desa. (y) To do all such other things as may be conducive to the preservation and extension of trade, commerce, industries, and manufactures or incidental to the attainment of the above objects or any of them. In paragraph 4 of the statement of the case submitted by the Tribunal it admitted the claim of the assessee-association, that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e objects expressly enumerated in this statutory explanation to section 4(3), relief of the poor, education and medical relief, arises for consideration in this case. The real question for determination is, whether the objects of the assessee association satisfy the statutory test, "the advancement of any other object of general public utility". Is the avowed object of the assessee-association to promote and protect the trade, commerce and industry in the country as a whole an object of general public utility is the question to which we have to address ourselves. It might at first sight appear to be a startling claim, that a trade association like the assessee is a charitable institution or a charitable organisation. It is not, however, the popular concept of what constitutes charity that matters. As has often been pointed out by courts, "charitable purposes" as used in enactments is a term of art. For purposes of income-tax it has to be given the meaning the Act accords to it in the Explanation to section 4(3), which we should emphasise is an inclusive and not an exhaustive definition. The approach the court should adopt in deciding whether in a given case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relieve the Indian courts from their responsibility of applying the language of the Act to the particular circumstances that emerge under conditions of Indian life." At page 488 their Lordships pointed out that the funds and assets of the All-India Spinners' Association constituted property held by that association for its purposes and objects. After referring to the conclusion of the High Court, that the real underlying object of the association was to benefit the poor agriculturists, their Lordships proceeded : "...their Lordships see no sufficient reason to doubt the conclusion that the primary object of the association was the relief of the poor. That would be enough prima facie to satisfy the statute. But there is good ground for holding that the purposes of the association included the advancement of other purposes of general public utility. These last are very wide words... They were applied in the Tribune Press case (supra), without any very precise definition to the production of the newspaper in question under the conditions fixed by the testator's will. The Board stated... that 'the object of the paper might be described as the object of supplyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of general public utility, within the scope of the statutory definition in section 4(3) of the Income-tax Act. In In re Town and Country Planning Act, 1947 : Crystal Palace Trustees v. Minister of Town and Country Planning [1951] Ch. 132 Danckwerts, J., referred to the relevant statutory provisions of the Crystal Palace Act, 1914, and concluded at page 142 : "... it seems to me that the intention of the Act in including in the objects the promotion of industry, commerce and art, is the benefit of the public, that is, the community, and is not the furtherance of the interests of individuals engaging in trade or industry or commerce by the trustees. It appears to me that the promotion of industry or commerce in general in such circumstance is a public purpose of charitable nature ..." When the purpose of the association is the advancement of trade, commerce and industry in the country and that is an object of general public utility, neither the object of the individual members of the association to benefit themselves, nor the fact that they did derive such individual benefit from the activities of the association in the pursuit of its objects should cloud or affect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust is charitable, lies in the competence of the court to control and reform it. I would remind your Lordships that it is the King as parens patriae who is the guardian of charity and that it is the right and duty of his Attorney-General to intervene and inform the court, if the trustees of a charitable trust fall short of their duty. So too it is his duty to assist the court, if need be, in the formulation of a scheme for the execution of a charitable trust." (p 62) It should be noted that section 4(3)(i) of the Income-tax Act covers cases not only of trusts, that is, public charitable trusts, but also cases where there is a legal obligation to spend or accumulate the income for public charitable purposes. In the case of the assessee-association we have pointed out that the legal obligation is that imposed by section 26 of the Indian Companies Act, 1913, as well as by clause 4 of the memorandum of association. That is a legal obligation which the court can and will enforce when called upon to do so. The learned Advocate-General referred to Chamber of Commerce, Hapur v. Commissioner of Income-tax [1936] 4 ITR 397 . The Chamber of Commerce, Hapur, was also an association r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral public utility. We express no opinion of ours on the question, whether a mutual benefit association can never satisfy the requirement of general public utility. As we shall show later the assessee was not such a mutual concern. The question posed by their Lordships in the Tribune's case (supra) , was set out at page 420 of the report : "... the only question for decision is whether that property is held under trust wholly for the advancement of an object of general public utility." The question was answered at page 426 : "They think that the object of the paper may fairly be described as 'the object of supplying the province with an organ of educated public opinion' and that it should prima facie be held to be an object of general public utility." In the present case the question is, whether in utilising its income, from whatever source it was received, property or subscriptions, the assessee-association is under a legal obligation to apply or to accumulate it wholly for charitable purposes. Is the purpose of the association, the advancement and promotion of trade, industry and commerce, an object of general public utility ? We answer thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r form which the association takes is immaterial." This passage was quoted with approval by the Supreme Court in Commissioner of Income-tax v. Royal Western India Turf Club Ltd. [1953] 24 ITR 557.The assessee-association before us does not satisfy that test. South Indian Planting and Commercial Representation Fund's case (supra)is also authority for the position that in the circumstances of this case, the subscriptions and donations the assessee-association received from its members constituted income from other sources which could be assessed under section 12 of the Act. That subscription to an incorporated club did not constitute income was what was laid down in the United Service Club v. The Crown [1921] 1 ITc 113. But that can be no longer considered good law for application to all cases of subscription to an association in view of what the Supreme Court has stated in Royal Western India Turf Club Ltd's case (supra) The contention of the assessee would appear to be well-founded, that had its income been assessable to tax, it was entitled to set off the net income assessed under section 9 of the Act against the deficiency that was bound to result had there been a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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