9911796707
TMI Blog1982 (3) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified in deleting the net surplus of Rs. 691 as being the surplus out of the receipts from the outsiders." 2. The assessee is a society, registered under the Societies Registration Act, 1860. The assessee's claim for exemption under section 11 of the Income-tax, Act, 1961 ('the Act'), was negatived by the ITO on the ground that it was a society of mutual concern. In the previous year, relevant to the assessment year under consideration, the assessee earned a surplus of Rs. 3,191 from call shows of the Sangit Kala Mandir for programmes of some clubs who were not members of the society and it also earned interest, amounting to Rs. 82,612, from four persons on loans given to them, which was not exempt from tax on the ground of mutuality. The ITO also treated the status of the assessee as an 'AOP'. According to the ITO, the Tribunal, in IT Appeal No. 3988 (Cal.) of 1975-76 for the assessment year 1972-73, held that the assessee was a society and was a mutual concern. 3. The assessee appealed to the AAC and contended that the ITO was wrong in interpreting the findings of the Tribunal for the assessment year 1972-73. It was urged that the objects of the society were wholly charita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad made it clear that during the year under consideration, the assessee did not derive any income from any property held by it. Hence, the provisions of section 11 were not applicable during the year under consideration as it exempted only the income derived from property held under trust which included other legal obligations. The AAC, therefore, came to hold that the aforesaid observations, when viewed from the introductory discussion regarding the objects and organisation of the society and the finding on the grounds regarding applicability and fulfilment of certain procedural and technical requirements such as Explanation to section 11 and section 12(1) of the Act, would decidedly evidence that the Tribunal positively endorsed the claim, which was accepted at the assessment stage, that the society was an institution established wholly for charitable purposes. After going through the various objects of the society, the AAC found that under the memorandum of association the income of property, wheresoever derived, shall be applied solely for the promotion of the objects and no portion of the income or property shall be paid or transferred directly or indirectly to the members. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nant or primary purposes of the assessee-society was charitable and, therefore, the interest earned on advances was evidently held by the society under a legal obligation for promoting the charitable objects. Accordingly, the AAC held that the interest of Rs. 82,612 earned by the assessee was exempt from payment of income-tax under section 11. Similarly, he held that the amount of Rs. 691, being surplus of collection from outsiders for staging dramas, was also exempt from tax as the same could not be said to be a commercial profit in view of the decision of the Calcutta High Court in the case of Cricket Association of Bengal v. CIT [1959] 37 ITR 277. 4. Aggrieved by the above decision of the AAC, the department has filed the present appeal before us ; and the learned departmental representative contended that the AAC was wrong in his observations that the primary objects of the assessee-society were charitable. He urged that the objects of the assessee clearly indicated that they were for the benefit of the members and, therefore, the provisions of section 11 had no application to the facts of the present case. He relied on the decision of the Supreme Court in the case of Sole Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and detailed reasons were given by the AAC for coming to the conclusion that the provisions of section 11 had application to the facts of the case. He urged that the department had not challenged that finding of the AAC. He contended that up to the assessment year 1975-76 the Commissioner himself granted a certificate under section 11 to the assessee-society. He also pointed out that the Tribunal had found as a fact that although the assessee was not a trust, it certainly held property under the trust. Reference was also made to Explanation 1 to section 13 wherein it has been provided that for the purpose of sections 11, 12, 12A and this section, 'trust' includes any other legal obligation. According to him, in order to obtain the benefit of exemption under section 11 the assessee need not be a trust and what is necessary is that certain properties must be held under the trust. Reliance was placed on the decision of the Supreme Court in the case of Surat Art Silk Cotton Mfrs'. Association and it was urged that if the dominant or primary purpose of the assessee is of promotion or development of public utility and not involving carrying on of any activity for profit, the assessee ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts in drawing, painting, drama, dance, music and other fine arts and to arrange debates, lectures, cultural shows, recitations, dramatic performances, etc., of public interest having educational value. Therefore, it can be said that the primary or dominant objects of the assessee-society were to fulfil a charitable purpose, that being development of public interests in fine arts. Such activities, even if limited to a group of individuals, would still serve and promote a public cause as distinguished from private gains of the members of the society. As has been held by the Supreme Court in the case of Surat Art Silk Cotton Mfrs'. Association, if the dominant or primary purpose of the assessee is to promote commerce and trade, as set out in its objects, it can be said to be an object of public utility not involving carrying on of any activity for profit within the meaning of section 2(15) and the assessee is entitled to exemption under section 11. Their Lordships also made it clear that though some objects would benefit the members of the assessee, the benefit would be merely incidental in carrying out the main or primary purposes and if the primary purposes of the assessee are char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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