1970 (10) TMI 20 - HC - Income Tax

Trade association - objects of general public utility - charitable purpose - Whether the Tribunal was right in holding that the assessee was entitled to the benefit of exemption provided in section 4(3)(i) of the Act of 1922 and in excluding the property income from the assessment of the assessee

Summary

Issues:
- Interpretation of exemption under section 4(3)(i) of the Income-tax Act, 1922 for property income.

Analysis:
The case involved the interpretation of whether the assessee, a company limited by guarantee, was entitled to exemption under section 4(3)(i) of the Income-tax Act, 1922 for its rental income derived from a building it owned in Amritsar. The assessee contended that its income was exempt under this provision, while the Income-tax Officer included the rental income in the total income for assessment. The Appellate Assistant Commissioner dismissed the appeal, but the Income-tax Appellate Tribunal accepted it based on the judgment in Commissioner of Income-tax v. Andhra Chamber of Commerce. The Tribunal referred the question of law to the High Court for opinion.

The High Court analyzed the objects and memorandum of association of the assessee to determine if the income and property were applied solely towards the promotion of objects for general public utility. The court referred to the judgment in Andhra Chamber of Commerce, emphasizing that the advancement of trade, commerce, and industry benefits the entire community, not just the members of the association. The court highlighted that the term 'general public utility' includes benefiting a section of the public with identifiable common qualities. In this case, the section of the community identified was the textile manufacturers of the Province of Punjab, indicating a valid purpose for general public utility.

The petitioner's counsel relied on judgments in Rex v. Special Commissioners of Income-tax, but the court found them inapplicable to the present case based on the Supreme Court's decision in Andhra Chamber of Commerce. The High Court concluded that the judgment in Andhra Chamber of Commerce was conclusive on the matter, and the assessee was entitled to the exemption under section 4(3)(i) of the Act. The court answered the referred question in the affirmative, allowing the assessee's claim for exemption and awarding costs to the assessee.