TMI Blog1967 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... he exemption is found in the objects and purposes for which the Council was established. Its principal general object, as stated in its memorandum of association, is to promote, support, protect, maintain and increase the export of cloth and yarn, but, inter alia, it was a body which undertook many other activities with the idea, as its name implies, of promoting the export of cotton textiles from this country. With that end in view, among its several objects were the objects of undertaking market studies, sending out trade missions, collecting statistics and other information regarding the manufacture or trade in cloth and yarn in various countries, propagating information useful to that trade, laying down standards of quality and packing in respect of cloth and yarn, and so on. Under the licence granted to the council under section 26 it was provided that the conditions and provisions contained in its memorandum of association shall, in all respects, govern the Council. As regards its income and property, it was provided in clause (2) of the licence that " the income and property ............ whensoever derived shall be applied solely towards the promotion of the objects of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no income as such left with the assessee which was taxable. But the Appellate Assistant Commissioner held that the assessee being a company the grant which was being received was in the nature of a revenue receipt in its hands and that justified treating the surplus in the hands of the Council as the income of the assessee from " other sources ". When the matter went before the Tribunal, the Tribunal reversed the decision of the tax authorities on the short ground that the Council was not an association for profit and the income of the assessee was thus entitled to exemption under section 4(3)(i) of the Act. The Tribunal held : " Examining even the several objects of the company, there is no doubt in our minds that they are of general public utility and relate to things clone within the taxable territories. This is an association not for profit. All that the Government does is to recoup the actual deficit and whatever is unexpended at the end of the year has to be paid over to the Government in accordance with the Treasury Rules. Promoting trade, commerce and industry is certainly an object of general public utility within the meaning of section 4(3)(i) of the Act and the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the following terms : " 4. (3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them : (i) Subject to the provisions of clause (c) of sub-section (1) of section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto." There is an explanatory clause at the end of the section including in the expression " charitable purpose " several matters. The clause runs as follows : " In this sub-section ' charitable purpose ' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act that part of the income from property held under a trust or other legal obligation for pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial Purposes of the Income-Tax. But so far as that definition was concerned, the Supreme Court ruled it out. They said : " The Indian legislature has evolved a definition of the expression ' charitable purpose ' which departs in its material clause from the definition judicially supplied in Pemsel's case and decisions of English courts, which proceed upon the interpretation of language different from the Indian statute, have little value ". The Supreme Court also pointed out that the legislature had used language of great amplitude in defining " charitable purpose " in the Indian Income-tax Act and the definition was inclusive and not exhaustive or exclusive. We hold, therefore, that the Tribunal was right in holding that the property held by the assessee-company was for an object of general public utility, and was wholly for charitable purposes. The further question that has been raised is upon the words used in sub-section (3) of section 4 " any income derived from property held under trust ". It is contended on behalf of the Commissioner that it is not the requirement of the sub-section that the income of the assessee should be held under trust but that the income shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which this company receives from its members was not income for a charitable purpose. In this respect, reference was made on behalf of the department to two decisions in Commissioner of Income-tax v. Bar Council, Madras and Bar Council, Patna High Court v. Commissioner of Income-tax. Both these cases were cases concerning the income of the Bar Councils of Madras and Patna, respectively, and in both of them the same view was taken that the income received by the Bar Council by way of fees paid by the advocates for enrolling themselves to practice in the High Court or registration fee for apprentices of law is not income derived from property held under trust or other legal obligation and is not, therefore, exempt from tax under section 4(3)(i) of the Income-tax Act. Even accepting the principles laid down in these authorities, we may point out that the position here is different. In this case there has been advanced the contention that the property held under trust in the present case from which the income of this company is being derived is the business of the company itself. The word " property " includes the business of the company. In the present case all the income which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The question was whether these amounts of commission earned by the trustees as managing agents for managing the Raymond Woollen Mills were earned by them as managing agents for services rendered or was income from property held under trust, which was exempt under the provisions of section 4(3)(i) of the Income-tax Act. The Supreme Court pointed out (see J. K. Trust, Bombay v. Commissioner of Income-tax at page 541.) that the managing agency was a business and the business itself was the property of the trust. It was argued before the Supreme Court that the only property of the trust was the sum of Rs. 1 lakh given to them by the Singhania brothers and that had never been utilised. The Supreme Court did not accept this contention and pointed out that the J. K. Trust had given a guarantee of Rs. 1 lakh with the aid of that amount and they held that, when trustees carry on business with the aid of trust funds, the position in law is the same as if they actually employed it in the business, though, in fact, it be not actually invested there in. They held that the word " property " in section 4(3)(i) of the Act is of sufficient amplitude to comprehend " business ". In that connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trust property, it would partake of the nature of the trust property. The property held under trust was in that case Rs. 1 lakh in respect of which the trust was declared and by the terms of that very trust deed they were empowered to acquire the managing agency or selling agency of any company. In the present case, as in the All India Spinners' Association case, the Council got donations from the Government and subscriptions from its members and commenced its business. That business further gave rise to income. There can, therefore, be no distinction drawn between the business and the income. The latter was derived from the former. It cannot be accepted, therefore, that there is any distinction between the facts of that case and the present case. We have already shown that the entire business in this case or the organisation of the assessee was commenced with the object of promoting the export trade of the country. That object, we have already held, would fall within the words " charitable purposes " as defined in the Act. The income which the company received from the two admitted sources, namely, grants from Government and subscriptions from its members, was income which it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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