TMI Blog1962 (3) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... in Bengal; (2) to establish or assist home industries-- (a) by the purchase of the raw materials and articles necessary for their manufacture, by advance of money or furnishing of guarantees to encourage such manufacture and the acquisition of craft secrets, rights or methods of work; (b) by promoting the formation of credit societies or other associations having for their object the extension or improvement of the work or the condition of the workers in any home industry or the sale of its products; (3) to promote exhibitions, show-rooms or other public displays of industrial work and the raising of funds from individuals, private or public bodies; (4) to purchase, sell or otherwise acquire or dispose of finished products, to act as agents for the supply of material or appliances or finished products in connection with any home industry; (5) to acquire by purchase, lease or otherwise, and hold land, buildings and property of every description deemed expedient for furthering the objects of the association, and also to build, erect and establish any buildings, factories or other structures deemed suitable for the said purposes, and to sell and dispose of such lands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom any further annual subscription. Clause 12.--If upon the winding up or dissolution of the association there remains after satisfaction of all its debts and liabilities any property whatsoever, the same. shall not be paid or distributed amongst the members of the association, but if and so far as effect can be given to the next provision shall be given or transferred to some other institution or institutions having objects similar to the objects of this association to be determined by the members of the association at or before the time of dissolution, and, in default thereof, by the High Court in Bengal. The association had a set of articles of association to which no particular reference was made except to articles 7 and 16 noted below: Article 7.--No person shall be admitted a member of the association in any class unless he is first approved by the executive committee, and the executive committee shall have full discretion as to the admission of any person to membership in any class. Article 16.--Members shall be entitled to vote at all general meetings, to free admission to all exhibitions, libraries and meetings of the association, and to acquire publications o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Appellate Assistant Commissioner however recorded that from the examination of the object set forth in the memorandum of association as well as from the activities of this body it is clear that the association is meant for promoting the home industries, arts and crafts, in Bengal and helping poor craftsmen and destitute women of Bengal. The association makes advances to the poor craftsmen, weavers, destitute women and others, without interest in order to enable them to purchase raw materials, and takes back decorations and finished hand-made products from them. These are sold to the public and the sale proceeds are utilised for the furtherance of the object of the association...The real underlying object is to benefit the poor craftsmen and destitute women by providing them with easily available advances for purchase of raw materials and giving them remuneration for crafts-works. There is thus a good ground for holding that the purposes of the appellant association also included the advancement of general public utility. This aspect of the activities of the association is not, however, dealt with in the order of the Tribunal. According to the Tribunal though the objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o decisions of the Court of Chancery. In his celebrated judgment in The Commissioners for Special Purposes of the Income Tax v. Pemsel [1891] A.C. 531, Lord Macnaghten came to the conclusion that the expression 'trust for charitable purposes' in the Act of 1842, and the other expressions in the Act in which the word 'charitable' occurs, must be construed in their technical meaning according to English law . His Lordship discussed the foundation of the jurisdiction of the court over a class of trusts known as charitable trusts , the Statute of Elizabeth, the Statute of Mortmain and said charity in its legal sense comprises four principal divisions; trusts for the relief of poverty, trusts for the advancement of education; trusts for the advancement of religion and trusts for other purposes beneficial to the community, not falling under any of the preceding heads . With regard to the last class his Lordship said that they were not the less charitable in the eye of the law, because incidentally they benefit the rich as well as the poor, as indeed, every charity that deserves the name must do either directly or indirectly . The difference between charitable pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was not necessary for any purposes to be of general utility that it should provide something for nothing . According to their Lordships the object of the paper, Tribune, was that of supplying the province with an organ of educated public opinion and as such one of general public utility . The All India Spinners' case [1944] 12 I.T.R. 482; L.R. 71 I.A. 159 has a close resemblance to the facts of the case before us. There the association was started for the purpose of development of village industries of hand-weaving (called Khadi) and the weaving of cotton materials (called Khaddar) by the use of handlooms. The constitution of the association was set out in a document without date or signature contained in a publication called the Khadi Guide published in 1931. The association bought charkas, handlooms and raw cotton out of the funds donated from the public and subscription from the members, supplied them to village people free of charge, gave the said persons a certain wage to enable them to maintain and support their families, taking over yarn spun and supplying them to others for weaving cloth. It then bought hand spun yarn paying persons who had spun them on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. His Lordship went on to add that the-re was no ground for the court to hold that the scheme was not one which may be for the public benefit . In my view, what was said in the above case is true of the facts of the case before us. The cause of the relief of poverty referred to by the Appellate Commissioner is not included in the finding of the Tribunal, but according to the dictum of the judicial Committee, the purpose can still be charitable, if it is otherwise one of general public utility. In terms of the decision of the Judicial Committee, there must be no element of private profit which, in my view, in reference to an institution must mean private profit of the members composing it. It does not and cannot mean that the association itself can make no profit. Indeed, that idea is dispelled by the judgment in The Tribune Press case [1939] 7 I.T.R. 415; 65 I.A. 241. So long, therefore, as there is no element of profit-making so far as the members of an institution are concerned and so long as the institution pursues an object which is beneficial to the general public as distinguished from a particular class or community, it is entitled to exemption under section 4(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust have a local habitation as well as a name and must be allowed to hold property from where to carry on its activities. The inclusion of the word factories is rather unfortunate but one must not emphasise too strongly on this. Clause 4 of memorandum goes to show that the association was not to support any endeavour on the part of its members to make it a trading concern. This clause as well as clauses 5 and 12 in my opinion go to show that the idea of profit accruing to the members of the association was altogether eliminated. The profit, if any, could only be utilised in furtherance of the objects of the association as in All India Spinners' case [1944] 12 I.T.R. 482; 71 I.A. 159. Clause 6 goes to show that the members were not to receive any remuneration. They were to be of different grades depending on the amount of their contribution but whether they were ordinary members or life-members or patrons they were not to derive any profit from the working of the association. Following the decision in All India Spinners' Association case(1) the Madras High Court held that a Chamber of Commerce registered under section 26 of the Companies Act, 1913, its main object be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the promotion of trade and industry could be said to have a charitable purpose. Yet if an object of general public utility be a charitable purpose I can see no reason why a body which has for its object the advancement of commerce and industry can be said to be outside the pale of charitable institutions. Neither from the statement of case nor from the judgment does it appear who were the members of the chamber of commerce. If the members themselves were actively engaged in trade it would be difficult to describe their association as a charitable one for then the element of private gain which the judicial Committee found lacking in All India Spinners' case [1944] 12 I.T.R. 482; 71 I.A. 159 would loom large in the picture. Nor would the analogy of the decision in The Tribune case [1939] 7 I.T.R. 415; 66 I.A. 241 apply, for, there the profit, if any, to be made by the publication of the newspaper was to be applied for improving it. The English decisions which Mr. Meyer referred to may now be considered to find out whether the ratio decidendi of these cases can be applied to the facts of the instant case. Mr. Meyer relied very strongly on the decision of MacDermott J. in Pigs M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g made this assumption the question remains whether the purposes of the Board are charitable only. I do not think they are. The benefits conferred upon pig producers cannot, in my opinion, be left out of account as being merely incidental. I think there can be little doubt that one of the purposes for which the Board was established was to rescue pig producers from the plight into which their particular industry had fallen. The purpose of the scheme, as expressed in the statute under which it was framed, was to regulate the marketing of pigs in order to obtain more efficient production and marketing. I do not see how this purpose can be isolated from the direct effect which its implementation was bound to have on those most vitally concerned--the producers of the regulated product...This view brings me to the series of decisions establishing that a professional body whose purposes benefit the community in a manner which is charitable and also advance, not incidentally but directly, the interests of the profession concerned, is not established for charitable purposes only...In my opinion no distinction in principle can be drawn between the promotion of the interests of a particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering of dramatic art subject to the guidance of the Council and the production of plays of great artistic merit. Having regard to the wide terms of the memorandum of association the Special Commissioners held that the objects of the company were not confined to charitable purposes. This was upheld both by Macnaghten J. and the Court of Appeal. It was argued before the Court of Appeal al that Macnaghten J. had failed to give due weight to the introductory words and that to decide the question whether a company was established for charitable purpose only its main or dominant purpose was alone to be considered. The Court of Appeal found itself unable to accept this argument and referring to the objects clause whereby plays of all kinds whether educational, partly educational or scientific or partly scientific or otherwise or for philanthropic or charitable purposes were mentioned, Cohen L.J. observed that it was not possible to rule out plays which were not purely educational or for other non-charitable purposes as an independent object. Looking at clauses (a), (b) and (c) of the objects clause his Lordship said that objects which were not charitable had also been included. I do n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, its activities and its relation to the police force and the public? And what the respondents must show in the circumstances of this case is that, so viewed objectively, the association is established for a public purpose, and that the private benefits to members are the unsought consequences of the pursuit of the public purpose, and can, therefore, be disregarded as incidental. That is a view which I cannot take. The private benefits to members are essential. The recreation of the members is an end in itself, and without its attainment the public purpose would never come into view......The private advantage of members is a purpose for which the association is established, and it therefore cannot be said 'that this is an association established for a public charitable purpose only.....If an association has two purposes, one charitable and the other not, and if the two purposes are such and so related that the non-charitable purpose cannot be regarded as incidental to the other, the association is not a body established for charitable purposes only. Lord Cohen laid down certain principles deducible from the cases: (1) If the main purpose of the body of personas is cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Force [1953] 34 Tax Cas. 76, moreover, the private benefits to the members (or their widows) in the present case are not the unsought consequences of the pursuance of a public purpose but are an object without which the association would not have been formed and could not survive. It is indeed, I think, as has been argued substantially, a mutual benefit society and not an altruistic charitable body. The benefit of the members being wholly eliminated on the facts of the case before us the association cannot be said to be established for a non-charitable purpose and the decisions either in Glasgow Police Force case [1953] 34 Tax Cas. 76 or Royal Naval and Royal Marine Officers' Assocition case [1954] 36 Tax Cas. 187 do not apply to the facts before us. Mr. Meyer referred also to the case of Pharmaceutical Society of Ireland v. Special Commissioners of Income Tax [1938] I.R. 202. I do not think it is necessary to examine the case in detail. After examining the various authorities cited at the Bar, Hanna J., who delivered the judgment of the court, said that these cases give us two contrasted tests: (1) where the institution or society is mainly for a purpose that falls w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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