TMI Blog1970 (9) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... arried on for profit within the meaning of section 2(15) of the Income-tax Act, 1961, and, accordingly, the income derived from such activities was exempt from tax under section 11 of the Income-tax Act, 1961 ? " The facts raising this controversy are as follows : The assessee is the Indian Chamber of Commerce. The assessment year is 1964-65 and the corresponding accounting year is the year 1963. The assessee-company was registered under section 26 of the Indian Companies Act, 1913, and was permitted to omit the word " limited " from its name. The income on which the tax is questioned arises in this case from three different sources. The first is the arbitration fees. The second is the fees for certificate of origin. The third source arises from the share of profit of the assessee which arises in the following way. Formerly, the Chamber had a measuring department where it used to undertake all types of weighment and measurements for the benefit of the traders in general for which it charged fees. The Bengal Chamber of Commerce, a sister concern, had also a similar department. By an agreement dated the 20th March, 1962, the two chambers of commerce agreed to carry on the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he main objects of the assessee were objects of general public utility and, according to the decision of the Supreme Court, the assessee was entitled to exemption from tax under section 11 of the Income-tax Act, 1961. The foundation of the assessee's argument on this reference is that the Indian Chamber of Commerce is a company for a charitable purpose within the meaning of section 2(15) of the Income-tax Act, 1961. This charitable purpose, according to the assessee, is " advancement of any other object of general public utility not involving the carrying on of any activity for profit " under section 2(15) of the Income-tax Act, 1961. In support of this contention the memorandum and articles of association were invoked to emphasise that the objects of the Indian Chamber of Commerce, the assessee, are (a) to promote and protect the trade, commerce, and industries of India, and, in particular, the trade, commerce and industries in or with which Indians are engaged or concerned, (b) to aid and stimulate the development of trade, commerce and industries in India with capital principally provided by or under the management of Indians, (c) to watch over and protect the general commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bath Trust. He also relied on a series of stock exchange cases to illustrate his argument on " object of general public utility " by reference to Commissioner of Income-tax v. Calcutta Stock Exchange Association Ltd., Delhi Stock Exchange Association Ltd. v. Commissioner of Income-tax and a decision of the Andhra Pradesh High Court in Hyderabad Stock Exchange Ltd. v. Commissioner of Income tax. We do not consider it necessary to examine in detail these different authorities. They are all to be distinguished on the ground that they did not deal with the new amended law defining " charitable purpose " under section 2(15) of the Income-tax Act, 1961, by the introduction of the expression " not involving the carrying on of any activity for profit ". This is the crucial expression on which the answer to the question depends. It involves a question of interpretation and a construction of that expression in section 2(15) of the Income-tax Act, 1961. The statement of the case and the question raised indicate that the income arising from these three sources in question in this case are described as " activities for profit ". That would indicate that it was common ground between the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olve the carrying on of any activity for profit or else it would not be a charitable purpose within the meaning of section 2(15) of the Income-tax Act, 1961. That, in our view, is the true import, meaning and significance of this new definition with the expression " the advancement of any other object of general public utility not involving the carrying on of any activity for profit ". In other words, the advancement of any other object of general public utility would be a charitable purpose provided that its advancement does not involve the carrying on of any activity for profit. The wisdom behind this limitation is plain. The expression " object of general public utility " is an expression of wide import and it was therefore thought necessary by Parliament in its wisdom to impose certain restrictions on the area of the object of general public utility and the area selected is that its advancement must not involve the carrying on of any activity for profit. An appropriate interpretation of section 2(15) of the Income-tax Act, 1961, is to consider the expression " not involving the carrying on of any activity for profit " as qualifying the expression " the advancement of any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose before this income could be excluded. The question then is whether a business undertaking could be itself such a trust. Hence, section 11(4) of the Act provides, inter alia : " For the purpose of this section, 'property held under trust' includes a business undertaking so held. " These provisions introduce the concept of " property held under trust " wholly for charitable purposes and this property may be the business undertaking itself so that income arising from such business undertaking would, subject to the qualifications of section 11, qualify for the exemption. It needs to be remembered that section 11 of the Income-tax Act, 1961, comes under Chapter III of the statute dealing with incomes which do not form part of the total income. The next section to which reference may be made in considering the interpretation of section 2(15) of the Income-tax Act, 1961, is section 28 which comes under Chapter IV of the Income-tax Act dealing with computation of total income and dealing in particular with profits and gains of business or profession. Significantly, section 28 provides inter alia, that the income chargeable to income-tax shall, among other incomes, include " income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as this where there is really no stock-in-trade for such activities for profit as issuing certificates of origin and charging arbitration fees and also has to a large extent the fees realised from measurements and weighments. Reference was made to a decision recently given on February 12, 1970, by the Mysore High Court in Commissioner of Income-tax v. Sole Trustee, Loka Shikshanat Trust, and reference was made to the " Short Notes of Current Cases " appearing in [1970] 76 I.T.R. (Sh. N.) 17. We do not think it is a desirable practice to rely on such short notes of current cases without the full judgment before the court. But we do not think that the view we are taking is in any way inconsistent with such short notes as have been placed before this court. Dr. Pal for the assessee referred to the English cases to explain and illustrate the concept of " activity for profit ". In the first place, he relied on the decision in Trustees of the National Deposit Friendly Society v. Skegness Urban District Council, and specially the observations of Lord Denning at page 612 explaining the field of legal charities. Lord Denning observes there : " In law 'charitable' is a term of art wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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