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Issues: Interpretation of company's memorandum of association for income tax exemption under section 11 of the Income-tax Act, 1961.
In this case, the High Court of Bombay addressed the question of whether the income of an assessee company is exempt under section 11 of the Income-tax Act, 1961. The company had made amendments to its object clauses, specifically adding clause (e) to its memorandum of association, which detailed the utilization of income solely for charitable purposes. The Income-tax Officer rejected the company's claim for exemption, but the Appellate Assistant Commissioner accepted it, a decision upheld by the Tribunal. The Department argued that the company could utilize its income for any of its objects, not solely for charitable purposes as mentioned in clause (e). On the other hand, the company contended that clause (e) clearly mandated the entire income to be used for charitable objects, with other clauses empowering business activities but not dealing with income utilization. The court agreed with the company, emphasizing that clause (e) created a trust for all assets and income to be utilized for charitable purposes, while other clauses empowered business activities. The court found the Department's argument unconvincing, as the objects in clause (e) were charitable in nature, making the Supreme Court decision applicable. Ultimately, the court held in favor of the assessee company, affirming that the income was exempt under section 11 of the Income-tax Act, 1961. The judgment highlighted the importance of the specific language in the company's memorandum of association, emphasizing the charitable nature of the objects outlined in clause (e).
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