9911796707
TMI Blog1983 (8) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... d expenditure account for the assessment year 1975-76 showed an excess of income over expenditure to the tune of Rs. 11,176 after deducting income-tax paid at Rs. 8,002. The excess of income over expenditure was, therefore, Rs. 19,178. For the assessment year 1976-77 the excess of income over expenditure as per income and expenditure account was Rs. 19,552 (Rs. 19,000 having been set apart for application to charitable and religious purposes in India). For the assessment years 1972-73 and 1973-74, the assessee had filed returns showing nil income and the receipts were claimed by the assessee to be exempt on the principle of mutuality. However, this contention was not accepted up to the stage of the Tribunal. The receipts from weighbridge were held to be not exempt. The interest income on fixed deposit was also taxed. For the assessment years in question, the assessee had claimed exemption on the ground that till then the decision of the Hon'ble Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 had not come. Therefore, it was claimed that the decision for the assessment years 1972-73 and 1973-74 could not operate as res judicata agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be given by the assessee within the time allowed. The ITO, therefore, held that the case of the assessee for claim of exemption fell under section 11(1) as well under section 11(2)(a). He relied upon the order dated 15-10-1975 of the Tribunal for the assessment years 1972-73 and 1973-74 and assessed the assessee in respect of the amounts of Rs. 19,178 and Rs. 19,552 for the assessment years in question as aforesaid. 3. The assessee being aggrieved, came up in appeals, before the Commissioner (Appeals). The stand taken up on its behalf was: (i) That the assessee-company had been constituted to promote and protect trade, commerce and industry in India and to act and stimulate development and trade and other allied services connected with the main objects, which were of general public utility and, therefore, the assessee's income was exempt, and (ii) That the mere fact that the assessee operated a weighbridge could not be considered to be an activity for profit disentitling it from getting the benefit of exemption under section 11(1). The learned Commissioner (Appeals), on a perusal of the memorandum of association of the assessee-company, took the view that none of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating on his submission, he pointed out that the assessee, in the course of carrying out its charitable purposes of promoting and protecting trade and commerce, had arranged a facility for traders for their being able to obtain authentic and recognised weighment and measurement certificates. He pointed out that for providing this facility, for the smooth flow, promotion and protection of commerce and in the interests of the mercantile community within the area of the assessee's operations in this behalf, the assessee-company was organising and arranging the necessary outfit for issuance of the authentic and recognised weighment and measurement certificates. He pointed out that this required the installation of weighbridge and the appointment of staff, etc., and expenditure had to be incurred by the assessee for being able to provide the above facility. He also pointed out that in order to work out the aforesaid and other purposes, it was necessary to adopt some mode or method of finding finance such as may be open to the assessee within the frame work of its constitution. He, therefore, submitted that the assessee was entitled to exemption under section 11(1). Reference was made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incidental to the carrying out of the purpose of the trust and that such payments could not be excluded from exemption and were, thus, to be excluded from the income of the assessee. 5. On the other hand, Shri K.K. Rai, the learned departmental representative placed strong reliance on the orders of the income-tax authorities. He pointed out that the income from weighbridge did not come from the members of the assessee but also from non-members. According to him, it was the dominant purpose and the dominant activity which was being carried on for profit. Reliance was placed by him on the decision of the Hon'ble Supreme Court in the case of Dharmaposhanam Co. v. CIT [1978] 114 ITR 463 for the proposition that the question whether a trust was for charitable purposes has to be determined with reference to all the objects for which the trust had been brought into existence and not merely with reference to the activity actually conducted by the assessee. So far as the assessee's claim under section 11(2)(a) is concerned, he submitted that the question did not arise as the assessee was not entitled to the exemption under section 11(1). Referring to the decisions relied upon on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contrary that the activity is for profit or that the charitable purpose involves the carrying on of any activity for profit. It was also held that if the primary and the dominant purpose of the trust is of charitable nature which by itself may not be charitable but merely ancillary or incidental to the primary object it would not prevent the trust from being a valid charity. The decision of the Kerala High Court in the case of Cochin Chamber of Commerce Industry was also referred to and approved by the Supreme Court in the aforesaid case. In the present case, the income-tax authorities have not disputed that the nature and the functions of the assessee were charitable. Some of the clauses from the memorandum of association can be reproduced below, namely : "(2) To promote and protect the trade, commerce, industries, agriculture and manufacture of India in which Indians are engaged or interested, directly or indirectly, and to represent and express on these and connected questions the opinion of Indians and Indian mercantile community of the United Provinces. (3) To stimulate the development of trade, commerce, industry, manufactures and agriculture in India with Capital r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly from the members of the assessee but also from outsiders, there is no material on the record to show that the said income was derived with a profit motive. In order to carry out the charitable purposes of the assessee, it had to have some funds at its disposal and also some source from which those funds could be derived. The weighbridge is such a source. Therefore, the weighbridge apart from its not being prohibited under the objects of the assessee-company is directly relevant to and connected with the charitable objects of the assessee. In the case of Dharmaposhanam Co., the assessee was engaged in Chitties and money-lending business with the main object 'to do the needful for the promotion of charity, education, medical relief and other matters of public good' and the question arose whether those objects fell under section 2(15) and its income from Chitties and money-lending business was exempt under section 11. It was held that since it was open to the assessee to apply its income from business to any of the objects and no definite part of the assessee's income was related to charitable purposes, its income was held not to be exempt under section 11. However, in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X
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