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TMI Blog1981 (7) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... r legal obligation for charitable purposes. In the alternative, the assessees submitted that their other activities had resulted in losses during these assessment years. These were business losses and they were entitled to set off these losses against the income which they derived from the immovable property. Both these contentions were rejected by the ITO. He, accordingly, levied tax on the property income earned by the assessees for the above assessment years and ignored the losses suffered by the assessees during these years in respect of their other activities. Being aggrieved by these orders the assessees went up in appeal to the AAC. In respect of the first two assessment years, namely, 1960-61 and 1961-62, the assessees contended that the ITO had erred in not exempting the appellants' income from the immovable property from taxation, because according to the assessees this income was derived from the property held under trust and/or under a legal obligation for charitable purposes. In respect of the two subsequent assessment years, namely, 1962-63 and 1963-64, the assessees appealed against the order only to the extent that it disallowed the assessees' claim for set-off. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto: ...... In this sub-section 'charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act that part of the income from property held under a trust or other legal obligation for private religious purposes which does not enure for the benefit of the public. " The I.T. Act, 1961, applies to the assessment years 1962-63 and 1963-64. Under s. II (1)(a) of the said Act also income derived from property held under trust for charitable or religious purposes, to the extent to which such income is applied to such purposes in India, is excluded from the total income of the assessee for the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction between such merchants inter se and between them and their constituents. (c) To further the cause of unity and friendliness amongst and to preserve and improve the interests of merchants dealing in the aforesaid commodities in India and preferably as well as particularly in the Bombay Presidency. (e) To collect and disseminate statistical and other information, t make efforts for the spread of commercial and economic knowledge. (f) To prescribe the principles of framing contracts in the aforesaid commodities with a view to eliminate temptation or the possibility of speculative manipulation. (g) To frame regulations and bye-laws for the conduct of sales and purchases of seeds including linseed, rape seed, sesamum and all other kinds of seeds and wheat and other grains and hundis between merchants dealing-in the same, and to adjust all differences and obstacles in the way of smooth dealings between them. (h) In case of mutual disputes "arising between merchants in the aforesaid business to act as mediators or arbitrators between the members of the Chamber and their constituents in all sales and purchases and in all matters of differences or disputes arising between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... create a Fund to be called 'Commercial and Technical Education Fund'and shall in its discretion set aside and transfer to the credit of such Fund the whole or any part of the amount for the time being standing to the credit at the foot of the Hospital Fund, the Refugee Relief Fund and/or the Charity Fund. The Board shall also add to such Fund any contribution or contributions made towards this Fund either by members or non-members of the Chamber. The Board may further in its discretion after the end of every year set aside and transfer to the credit of such Fund any sum out of the surplus appearing in the income and expenditure account, and whenever there shall be sufficient amount in the above Fund, and when the Board thinks proper, the Board shall get such Fund registered under the provisions of the Public Charitable Trusts Act. 26(b) The Board may utilise the whole or any part of the amount standing to the credit of the Commercial and Technical Education Fund for the spread of commercial and economic knowledge through the medium of Rashtra Bhasha. To achieve the object, the Board may employ the available Fund or a part thereof- (1) to advance and promote commercial and technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases of these commodities and provision has to be made for adjustment of all differences in order to ensure smooth dealings between merchants and their constituents in these commodities. In order to pave the way for smooth dealings in these commodities the chamber, under sub-cl. (h), is entitled to act as a mediator or arbitrator in respect of any disputes between merchants doing business in these commodities, and under sub-cl. (1) the chamber is required to promote friendly feelings amongst the members with a view to promote the welfare of the trade and the members of the chamber. An analysis of the other clauses which have been set out earlier also shows that the chamber is formed for promoting trade and commerce in the commodities which have been specifically referred to in the objects clause. Thus, under sub-cl. (e), the chamber is entitled to disseminate statistical and other information and to make efforts for the spread of commercial and economic knowledge. It is entitled to consider any question relating to any custom or tradition in the business of these commodities and to provide any decision which may be used as a precedent in future. It is entitled to take measures for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Andhra Chamber of Commerce [1965] 55 ITR 722 (SC) has been subsequently reiterated by the Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1. The same test has been followed in number of judgments of various High Courts. In the case of CIT v. Ahmedabad Rana Caste Association [1973] 88 ITR 354 (Guj), Bhagwati C.J. (as he then was), had observed as follows (p. 364) : " ........ the only question would be whether they are purposes covered by the expression 'advancement of any other object of general public utility'. 'General' means pertaining to a whole class; 'public' means the body of people at large including any class of the public; 'utility' means usefulness. Therefore, the advancement of any object of benefit to the public or a section of the public as distinguished from an individual or group of individuals would be a charitable purpose. Applying this test, can it be said that the purposes set out in subclauses (4) and (5) of clause 3 and sub-clause (4) of clause 8 are charitable purposes. Are they purposes which are useful and beneficial to the Rana community or which promote the welfare of the Rana community ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommerce in these commodities. Such an object cannot be considered as an object of general public utility. He relied upon a decision of the Gujarat High Court in Addl. CIT v. Ahmedabad Millowners' Association [1977] 106 ITR 725. A Division Bench of the Gujarat High Court, after analysing the objects for which the Ahmedabad Millowners' Association had been formed, came to the conclusion that the various objects for which the association had been formed were all independent objects, some of which might be considered as of general public utility and some of which may not be so considered. The Division Bench held that some of the objects seek to protect the interests of persons and not the activity which they do. It was open to the association to spend its entire revenue in protecting such personal interests of its members. The Division Bench, therefore, came to the conclusion that the income of the association could not be considered as being held under a legal obligation for the advancement of objects of general public utility. The ratio of that case cannot apply to the present case. From the various objects set out earlier, it cannot be said that the objects of the Western India Cham ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith representation at the International Labour Conference and so on. The present organisation has a number of main objects, and when these objects are read together, it becomes apparent that the objects for which this organisation has been formed are promotion and proper conduct of trade and commerce in the commodities which are referred to in the objects clause. Sub-clause (b) does talk of promoting and protecting interests of merchants. But when this sub-clause is read along with other sub-clauses, it becomes clear that the interests which are sought to be protected and promoted are not private or personal interests of merchants, but those interests which synchronise with the promotion and protection of the trade and commerce in general. A number of High Courts which have dealt with cases involving organisations having similar objects have held that such organisations are formed for the advancement of objects of general public utility, and have held such organisations to be charitable. In fact, in the case of the Andhra Chamber of Commerce [1965] 55 ITR 722 (SC), the Supreme Court, which was dealing with an organisation which had as its object the promotion and protection of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT [1967] 66 ITR 195 (AP) and Addl. CIT v. South India Hire Purchase Association [1979] 116 ITR 793 (Mad)]. The Delhi High Court in the case of Addl. CIT v. Delhi Brick Kiln Owners' Association [1981] 130 ITR 55, also held that the Delhi Brick Kiln Owners' Association, formed with the object of promoting, developing and protecting the brick kiln trade, commerce and industry and to watch and protect the interests of brick kiln owners, contractors, customers and brick dealers, members of the association and the interests of persons engaged in brick trade, commerce or industry, was an Organisation for the advancement of objects of general public utility. Our attention was also drawn to the summary of a case, namely, CIT v. Indian & Eastern Newspaper Society , in which the Delhi High Court held that the assessee society was formed in order to advance objects of general public utility. There is no reason why the present Organisation which is formed with objects comparable to the objects of organisations involved in the above cases should also not be considered as formed for a charitable purpose. Learned counsel for the revenue drew our attention to art. 92 of the articles of asso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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