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TMI Blog1978 (7) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... d from its memorandum of association. The principal objects are : (i) facilitating the transaction of business on the stock exchange and establishing for that purpose a clearing house for the transaction of the members ; (ii) erection and maintenance of a suitable building in Bangalore for transacting there the business of the association and for other purposes as may be determined upon ; (iii) dealing in any manner with the property of the association ; (iv) to associate with other bodies having objects similar to those of the association ; (v) establishing and supporting institutions, trusts, etc., calculated to benefit the present and past members and employees and the dependants of such persons ; and (vi) carrying on business as financiers, promoters, etc. During the assessment years under consideration, the assessee claimed that its incomes during the relevant periods were not taxable under the Act by virtue of s. 11 thereof. Its case was that its objects were of general public utility not involving the carrying on of any activity for profit and the income realised by it had been applied for charitable purposes. The income of the assessee during the relevant peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngalore Turf Club Ltd., (sic), the High Court had come to the conclusion that membership fee of the members is assessable. As the case of the assessee is similar in nature, I hold that the exemption claimed for membership fee cannot succeed. " The AAC, however, allowed the appeals filed by the assessee holding that the object of the assessee did not involve the carrying on of any activity for profit. The appeals filed by the department before the Tribunal were dismissed. At the instance of the department, the above question has been referred to this court. At the outset it should be mentioned that the principal objects of the assessee which are extracted above are of general public utility in view of the decision of the Supreme Court in CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722. After examining the objects of the Andhra Chamber of Commerce, whose objects were more or less similar to the objects of the assessee, the Supreme Court observed : " In the promotion of trade, commerce and industries of India the public is vitally interested and if by the activities of the assessee that object is achieved, it would be within the meaning of s. 4(3)(i) of the Act an advancemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Act the definition of charitable purpose was modified by qualifying the object of general public utility by the addition of the words " not involving the carrying on of any activity for profit ". S. 2(15) of the Act which defines " charitable purpose " reads : " 2. (15) ' Charitable purpose ' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. " The case in Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC) was decided after the Act came into force, in the light of s. 2(15). In that case, the Supreme Court held that although the objects of the Indian Chamber of Commerce were of general public utility, the income derived by it from its activities in the form of (i) arbitration fees, (ii) fees for issuing certificates of origin, and (iii) fees for weighment and measurement for the benefit of traders was the result of activities carried on for profit and hence such income was not exempt under s. 11 of the Act. Even though one of the objects specified in the memorandum of association of the assessee was " carrying on business as financiers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industry : there is also no ground for saying that the object of the company was to start an industry for the purpose of making profit '. " After considering the decision in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC) and the decision in Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC), the Supreme Court proceeded to observe : " The facts of the instant case were not before the court in the case of Indian Chamber of Commerce [1975] 101 ITR 796 (SC) and it is evident from the passage extracted above that the test applied by the Kerala High Court was held to be wrong on the assumption that the case fell under the last clause of s. 2(15) of the Act of 1961, which was the only part of s.2(15) relevant for deciding the case of Indian Chamber of Commerce [1975] 101 ITR 796 (SC). Considering further that the word 'industry' has been italicised in the passage extracted above, it is plain that the court assumed that the assessee was engaged in running an industry. We have endeavoured to point out that, on the facts of the case, it is impossible to hold that the last clause of s. 2(15) has any application and that, in the light of the activities of the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly because service is rendered to traders escapement from tax liability does not follow, every type of service-oriented activity, where some charge is levied from the beneficiary and at the end of the year some surplus is left behind, does not lose the benefit of s. 2(15). For, then, one cannot conceive of any object of general public utility which can be advanced by the chamber of commerce. For every such activity some fee will have to be levied if the chamber is not to turn bankrupt and merely because a fee is levied one cannot castigate the activity as one for profit. Therefore, it is a false dilemma to talk of activity for profit as against activity rendered free. The true demarcating line lies in between." Later on, in the course of the same decision, the Supreme Court observed : " We may wind up with a brief rounding off and indication on the approach. A pragmatic condition, written or unwritten, proved by a proscription of profits or by long years of invariable practice or spelt from strong surrounding circumstances indicative of anti-profit motivation---such a condition will qualify for 'charitable purpose' and legitimately get round the fiscal hook. Short of it, the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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