TMI Blog1971 (1) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... , according to the statement of the case, is payable by members on the basis of the acreage under tea (rule 21) and any member can secede from the association after giving three calendar months' notice to the secretary (rule 22). The statement of the case says further that this annual subscription has not been taxed. The objects of the association described in rule 3 are as follows : (a) To cultivate and keep up a spirit of fellow-feeling and united action amongst all Indian tea planters wherever working in India ; (b) To take up all matters of common interest connected with the tea industry in which the Indian planters are interested ; (c) To frame model rules and regulations for guidance of its members ; (d) To do all acts and take all measures and steps in connection with the tea industry and in that connection to approach, contact or negotiate with the authorities including the Central Government, the States or any foreign Government ; (e) To raise funds to meet the expenses of the association or for purposes connected with the tea industry ; (f) To borrow money for the purposes of the association and also for purposes connected with the tea industry with or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts members to supply food-grains to their labourers at reasonable prices and also to supply other materials for the running of the tea industries. So far as medical facilities are concerned, the association took over the group medical board in 1948 to render medical assistance to the member gardens. The association had recognised doctors under its employ and the services of those doctors were made available to the members as and when they needed them. The association charged the different members for provision of such medical facilities. In the course of the assessment for the year 1950-51, the Income-tax Officer found that there was a surplus of Rs. 19,140 resulting from the association's activities in connection with the supply of rice and paddy to its constituent members for distribution to their labourers at reasonable rates. The Income-tax Officer also found that there was a surplus of Rs. 3,931 as a result of the association's activities connected with providing medical facilities to its members. The Income-tax Officer held that the assessee was a trade association rendering specific services to its members for remuneration definitely related to such services and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the circumstances of the case, the surplus of the contributions from the members for arranging the supply of rice and paddy and for providing medical facilities over the expenses was rightly assessed to tax under section 10(6) of the Indian Income-tax Act, 1922, for each of the assessment years under appeal ? (4) Whether, on the facts and in the circumstances of the case, the surplus of the contributions referred to in question No. (3) above is exempt under section 4(3)(i) of the Indian Income-tax Act, 1922 ?" At the outset we have to observe that the Tribunal's findings with reference to question No. (4) have not been challenged before us. It was not urged that the association was a charitable institution and the provisions of section 4(3)(i) of the Act would be attracted to any contributions received by the association. The answer to question No. (4), therefore, is obviously in the negative. Mr. Choudhury, learned counsel for the assessee, has argued that the association, it is apparent from its objects, is like a members' club or a kind of mutual concern and the taxing laws applicable to such clubs or concerns should be applied to the assessee. Mr. Choudhury contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves. " In every case, therefore, in which it is claimed that any income or surplus is exempt from taxation on the ground that it is an income or a surplus earned by a mutual concern, the court has to scrutinise the facts and circumstances with a view to ascertain whether the three conditions specified by the Judicial Committee have been satisfied. In other words, the assessee claiming an exemption of this nature must establish (a) the identity of contributors and recipients, (b) the instrumentality of the assessee in the matter of carrying out the mandates of its members and (c) the impossibility of the assessee deriving any profits from contributions made to it. It seems to us, however, that in this reference, it is unnecessary for us to discuss the general principles applicable to a mutual concern. The Supreme Court in Commissioner of Income-tax v. George Henderson Co. Ltd, at page 629, has said : " It is true that the court is bound to proceed normally on the findings of fact which are mentioned in the statement of the case. But if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Co., who conceded a rebate against the quantities of goods supplied to the member bodies through the Indian Tea Planters' Association. This sum of Rs. 4,587 clearly arises out of the business activities of the assessee and as such is treated as profit. Group Medical Board's Subscription : The assessee has got recognised doctors under its employ. The services of the recognised doctors are made available to the members who need them. The assessee charges the members for providing this medical facility. During the accounting year relevant to the present assessment the total receipts amounted to Rs. 21,425 against which Rs. 17,494 has been claimed as expenses. The balance of Rs. 3,931 is therefore the resultant profit." It would be convenient at this stage to set out the provisions of sub-section (6) of section 10 of the Indian Income-tax Act, 1922. These provisions are as follows : " A trade, professional or similar association performing specific services for its members for remuneration definitely related to those services shall be deemed for the purpose of this section to carry on business in respect of those services, and the profits and gains therefrom shall be liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as disagreed with the Income-tax Officer's views specially relying on this court's decision in Calculta Stock Exchange Association Ltd. v. Commissioner of Income-tax. In this judgment Chakravartti C. J., while explaining the provisions of section 10(6), had observed that performing "specific services" was a far stronger expression than "rendering services" ; and, in order that the sub-section might apply, specific task must be performed or function of a specific character must be discharged for payment and such payment should be made to the association concerned as wages for its labour in respect of those tasks and functions. According to the Appellate Assistant Commissioner the materials before him did not, in view of this judgment, bring this case within the purview of section 10(6). But Chakravartti C.J.s decision has subsequently been reversed by the Supreme Court. In Commissioner of Income-tax v. Calcutta Stock Exchange Association Ltd., the Supreme Court has taken a somewhat different view of the expression "specific services". The Supreme Court says : The words 'performing specific services', in our opinion, mean, in the context, 'conferring particular benefits' on the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the Tribunal does not speak of any subscription at all. On the contrary, it specifically states that this additional levy was for "covering the cost of the association's rice and paddy department". The Tribunal, it appears, on these facts, has rightly come to the conclusion that this was a case covered by the provisions of section 10(6) of the Indian Income-tax Act, 1922. The Tribunal also reached similar conclusions regarding the medical benefits. It would be interesting at this stage to refer to the association's own "statement of the case" submitted to the Tribunal for having a reference to this court under section 66(1) of the Act. In this document (at pages 100-101 of the paper book, paragraphs 11, 15 and 17) it states : " 11. The association called for and received contributions, from its members, at the rate of one anna per maund of paddy and rice received by the respective members of the association, in order to cover the cost of handling and/or supervision and of maintaining necessary contacts with the Government officials as well as other parties for the purpose of procurement and delivery of such food-grains. 15. During the same assessment year the associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different from the association's membership subscriptions : vide rule 21. These charges were, therefore, levied for the specific services that the association had rendered and were remunerations within the meaning of sub-section (6) of section 10 definitely related to those services. In these premises for the purpose of sub-section (6) of section 10, the association must be deemed to carry on business in respect of these services and the surplus that remained in the hands of the association after meeting its expenses in connection with these services must be considered to be profits and gains within the meaning of section 10(6) and are, as such, taxable. The charges for medical benefits are also, as we have explained, similarly taxable. In view of the conclusions we have already reached we do not feel inclined to discuss in this judgment the elaborate arguments advanced by counsel for the parties on mutual concerns and the law applicable to them. Our answers to the questions in this reference are as follows : (1) Yes. (2) Yes. (3) Yes. (4) Not pressed. The applicant will pay to the respondents the costs of this reference. A. N. SEN J.-I agree. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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