TMI Blog1956 (1) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... bers of the unincorporated association, have to be elected before their admission and upon the such election have to acquire a share of the company and pay an entrance fee. Upon their admission, the members have to be pay monthly subscription, as provided for in the bye laws. It is not disputed that in regard to its main activity, the assessee company is a mutual association and that it is not the insurance company or a co-operative society. The amounts received by the assessee from its members as entrance fee or subscription in respect of their own membership have not therefore bean sought to be taxed. But in course of the assessment for the year 1945-46, relative to the accounting year ended on the September 30, 1944, a dispute arose between the taxing authorities and the assessee company as regards the taxability of four other items of receipts. It appears that the under the bye laws of the assessee company, members of a certain standing are allowed to have authorised assistant up of a certain number of who are permitted the use of its room and who may transact business therein the names of the members employing them. Like members, the authorised assistant also the require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation, each of the four sums concerned was remuneration definitely related to specific services performed for its members and therefore the profits derived therefrom was chargeable to tax under section 10(6) of the Act. In accordance with that view, the Income Tax Officer included all the four sum in the total income of the assessee. He included other sums of which the assessee company equally objected, but we are not concerned in this reference with those objection. In its appeals to the Appellate Assistant Commissioner and the Appellate Tribunal, the assessee company repeated the same contention, particularly the contention that the authorised assistant also were members. The bulk of the order passed in the appeals is concerned with that the contention. Both the Appellate Assistant Commissioner and the Appellate Tribunal repelled it and in holding that the amount received on account of authorised assistants as entrance fee and the subscription was remuneration definitely related to specific services performed by the assessee company for its members within the meaning of section 10(6) of Act, both relied on the decision of the Bombay High Court in Native Share and Stock Broke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sive question in the following form : Whether, in the facts and circumstances of this case, the income tax appellate tribunal was right in holding that : (a) the amounts of ₹ 15,687 and ₹ 60,750 received from the members of the association as subscription and entrance fees in respects of authorised assistance, and (b) the amounts of ₹ 16,000 and ₹ 600 received from members as fees for the enlisting names of newly floated companies and the for recognition of changes the styles of firm respectively should be included in the assessable income of the assessee. The Tribunal was directed to restate the case on the composite question as formulated by the court and submit the statement in due course. That direction has now been complied with the reference has come up again on a case re-stated. Quite early in the course of his argument before us, Dr. Pal, appearing for the assessee, abandoned his client claim with respect to the sum of ₹ 600 after we had indicated to him and that sum at least appeared to us to be remuneration definitely related to a specific services rendered by the company to such of the members firm as wanted changes in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny trade on business to which the receipts could be related they can be only off they come under section 10(6). Even section 10(6) would not make the whole of the receipts taxable but only deduction have not been allowed. The assessment of the sums of the question was actually made under section 10(6). The only question for consideration, therefore, is whether the three sum of ₹ 15,687, ₹ 60,750 and ₹ 16,000 - the fourth is no longer material - or any one or more of them constituted remuneration definitely related to specific services performed by the assessee company for its members. It will be convenient to set at out this stage actual text of section 10(6). It reads thus : 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. The section seeks to bring amounts contemplated to tax by first enjoying that certain activities of mutual association shall be treated as carrying on business, although ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Tribunal. It is important to remember that the bye-laws now is force were not all in force or in force in the some during the relevant accounting year which ended on the September 30, 1944. The articles of association of the assessee company do not appears to provide directly for the employment of authorised assistant by members who are individuals, except that the respective provisos to the articles 6 and 7 recognise that there may be such assistant. The direct reference in the articles are all to authorised assistants of members which the are firms - see, for example, articles 21. But the clause (20) of articles 90 provided that the committee - by which is meant the Managing committee referred to in articles 73 may make bye-laws for the regulation of the business of the association and the proviso to the articles 6 speaks of an assistant to any members under any bye-laws, for the time being in force One has therefore turn to turn to the bye-laws, but it is not easy to refer the them, because they are unfortunately not numbered and the language in which they are the expressed is often ungrammatical, inappropriate and crude. The bye-laws relating to authorised assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or firms, are entitled to have authorised assistant, it is somewhat curious that the last two clauses should not cover authorised assistant of an individual entering into a contract in the name of the another individual. These are obviously unintended omissions. The right of an authorised assistant to enter the room of the association and transact business and in the stock exchange depends on the substances of his employment as such assistant. If the employment of an authorised assistant under a member is terminated the member concerned is required to give immediate notice of such termination in writing and the authorised assistant becomes and remains disentitled to use the room of the association or to the an as authorised assistant of any other member till he is again admitted by the committee (p. 4). An Authorised assistant of one firm may get himself transferred to another firm by an application made to the secretary (p. 30) - a provision which the again omits authorised assistants of the members who are individuals. Such then are the rights and disabilities of authorised assistants and such is their usefulness to the members. Any member wishing to employ an authorised assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , authorised assistants are not, as is now conceded, members and their entrance fees and subscriptions are paid, not by themselves but by the members employing them. The assessee is undoubtedly a trade association. But can it be said, in the circumstances stated above, that in admitting authorised assistants and continuing to recognise them as such, the assessee performs specific services for its members for remuneration and that the entrance fee and the subscription it realised as, and constitute, remuneration definitely related to such services ? I find it impossible to answer either branch of the question in the affirmative. In the case of Native Share and Stock-brokers Association v. Commissioner of Income tax, Bombay, the Bombay High Court found it possible to do so in circumstances, more or less though not wholly, similar, but with great respect to the eminent Judges who decided that case, I am unable to adopt the view taken by them in the case before us. The bye-laws of the Bombay Association contain a specific provision for the maintenance of a separate register for authorised clerks who, unlike the authorised assistants of Calcutta, seem to be treated differently from m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what we must pay regard to is the language and not its source. Performing specific services for is a strong expression, far stronger and more definite than rendering service to and it connotes the actual doing of definite acts in the nature of services. One may confer a benefit on another by some act or omission or even by merely maintaining a particular attitude and in such circumstances it may well be said that he has rendered a service to the latter. But in order that a person may be correctly described as performing specific services for another, it is required that he should execute certain definite tasks in the interest and for the benefit of the latter under an arrangement of a direct character. The section says further that the specific services must be performed for remuneration and that such remuneration must be definitely related to those services. What that language means and contemplates is that certain specific tasks must be performed or functions of a specific character must be discharged for payment and such payment is to be made to the association as wages for its labour in respect of those tasks or functions. It appears to me that if an association undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y related to authorised assistants and related definitely, but can it be said that they are charged and realised as the wages for or the money value of any specific act done by way of performing a service for members ? I think not. It is true that when an application for the admission of an authorised assistant is made, the assessee makes some kind of an investigation, but the fee for that work is separately charged and forms no part of the entrance fee or the monthly subscription which we are considering. When an association or a club charges an admission fee for membership or quasi-membership and also realises a monthly subscription for the continuance of such status, the amounts so charged and realised do not bear any relationship to any specific service performed as the money value thereof and cannot be said to be remuneration for any such service, although the association or the club may have the duty of enforcing its rules against the members or quasi-members and may perform that duty. The entrance fee and the subscriptions are arbitrary sums, charged as the price of the privilege of membership or quasi-membership and not as remuneration definitely related to any specific ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on fee received from the members of a trade, professional or similar association of a mutual character, as also the monthly subscriptions received from them, taxable as remuneration definitely related to specific services performed. In my view, having regard to the bye-laws of the assessee company as respects members and authorised assistants, entrance fees and monthly subscriptions paid by the members in respect of themselves and in respect of their authorised assistants stand on the same footing and the language in which section 10(6) is expressed does not cover either of them. The third sum of ₹ 16,000 was received by the assessee as fees for enlisting names of new companies. I have already pointed out that new companies do not mean newly floated companies , as wrongly stated in all the orders, but companies not already borne on the quotations list and, as such, fresh or additional companies. The bye-laws relating to the enlistment of new companies are contained in an amendment slip inserted against page 34 of the booklet but bearing no date and certain other amendment slips, dated the April 22, 1943, the May 6, 1943, the December 16, 1943, and the February 10, 1944, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for its members and the fee it received in that connection was remuneration definitely related to such service. I do not, however, think that such is the true view of the matter. When section 10(6) speaks of a trade, professional or other similar association performing specific services for its members for remuneration, it contemplates, I think, services in regard to matters outside the mutual dealings for which the association was formed and for the transaction of which it exists as a mutual association. If performance of functions even in regard to matters within the objects of the association as a mutual association be performance of specific service within the meaning of the sub-section, discharge of no function can be outside it and everything done would be specific service performed. That, I do not think, is what the sub-section means and intends. It contemplates, in my view, the performance of additional and special functions, outside the ambit of the dealings which give the association the character of a mutual association and the performance of which is the very object of its formation and the essence of its constitution as an undertaking. The principal object of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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