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1971 (1) TMI 31

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....n 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 without securities ; (g) To start provident fund for its employees and frame rules therefor ; (h) To acquire, purchase, take on hire or lease instruments and machinery or obtain settlement of lands, buildings to construct and erect buildings or any structure or structures for the association or in connection with its activities ; (i) To grant affilia....

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.... 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, therefore, the aforesaid, surpluses came within the purview, of section 10(6) of the Indian Income-tax Act, 1922. He was of opinion that these surpluses were assessable as business profits of the association. The association urged that section 10(6) was not applicable to these surpluses as it was not a profit-making concern and did not carry on any business. The Income-ta....

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....e 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 further that all the activities of the association including supply of paddy and rice and providing for medical benefits were directed towards conferring of benefits on its members or were for the mutual benefit of the members only. The general principle applicable to mutual concerns is that the surplus accruing to it cannot be regarded as income, profits or gains for the....

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....h 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 statement of the case does not correctly summarise or interpret the finding recorded in the order of the Appellate Tribunal which has been made part of the case, the court is entitled to look at the order itself in order to satisfy itself as to what was actually the finding of the Appellate Tribunal." In the instant reference, it seems to us, we cannot confine ourselves to the sta....

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....ors 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 to tax accordingly." It appears that every trade, professional or similar association which renders specific services to its own members for remuneration related to those services would come within the purport of this subsection. It may be that such an association is a kind of members' club or a mutual concern. But if it performs specific services for remuneration relatable to those servi....

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....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 members. The word 'services' is a term of a very wide import, but in the context of section 10 of the Act, its use excludes its theological or artistic usage. With reference to a trade, professional or similar association, the performing of specific services must mean conferring on its members some tangible benefit which otherwise would not be available to them as such, except for payment receive....

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....eached 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 association received subscriptions from its members for rendering medical services, by running or maintaining a "group medical board". In the assessment year 1949-50 the total subscription collected from its members by the association for the aforesaid purpose amounted to Rs. 21,069. The association incurred expenses for rendering the said medical services amounting to Rs. 9,512 thereby leaving a balance sum o....