TMI Blog1996 (9) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleting the assessment, the assessing authority observed that the assessee-association was merely an arrangement for the benefit of the society's own members. The members and the beneficiaries were found to be one and the same and the members could claim the benefits of the society, as a right and also that there was no perceivable benefit to outsiders. They were found to be not entitled to the benefit of section 11 of the Act as it was found that their income was not an income from property held for charitable or religious purposes. The Assessing Officer brought to tax the bank interest of Rs. 3,64,060 derived by the assessee and held that as in the past the provisions of section 13(1)(c) were attracted, the respondent-assessee was not entitled to exemption under sections 11 and 12 of the Act. In an appeal filed by the assessee, the order passed by the Assessing Officer was confirmed and it was held that assessee-association was not a charitable trust. The appellate authority concluded that the bank interest income had accrued not on account of any lending by the association to its members but on account of the fixed deposits kept with the bank which was not covered by the mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause-ways, churches, seabanks and highways ; education and preferment of orphans ; the relief, stock or maintenance of houses of correction ; marriages of poor maids ; supportation, aid and help of young tradesmen, handicraftsman and persons decayed ; relief or redemption of prisoners or captives ; and aid or ease of any poor inhabitants, concerning payments of fifteenths, setting out of soldiers and other taxes. " It has been held by the English courts that a trust is not charitable unless it is attracted to the public benefit. It should benefit the community or a section of the community. A trust would not be charitable if it only conferred private benefits. To support and oppose the reference learned counsel for the parties have referred to a number of judgments of the English courts and the Indian High Courts such as the judgment of the House of Lords in Commissioners of Inland Revenue v. City of Glasgow Police Athletic Association [1952] S.L.T. 136 ; [1953] 34 TC 76, Oppenheim v. Tobacco Securities Trust Co. Ltd. [1951] AC 297 (HL), in Hobourn Aero Components Limited's Air Raid Distress Fund, In re and Ryan v. Forrest [1946] 1 Ch 86 ; Addl. CIT v. Ahmedabad Millowners' A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominant object of the Association. The court further held : " We now proceed to consider whether an object which serves personal interest would fall within the scope of section 2(15) of the Act. There is no dispute that the charitable purposes of relief to poor and educational and medical relief have no relevance to the facts of the present case. It is, therefore, the fourth category of the charitable purpose, namely, the object of general public utility, with which we are concerned in this case. The expression 'object of general public utility' appearing in section 2(15) would include only those objects which promote the welfare of general public and not the personal and individual interests of some persons. It is not uncommon to find the objects of general public utility being in conflict with the objects of personal welfare of some specified individuals. It is true, as held by the Supreme Court in the case of Andhra Chamber of Commerce [19651 55 ITR 722 (SC), that personal welfare of specified individual would be incidental or consequential to the main purpose of general public utility, but a converse of this proposition is not always true. Now, if we examine the objects cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole of mankind or persons living in a particular country or province. But, while making these observations, the Supreme Court has been careful in pointing out the distinction between 'a section of the public' and specified individuals. Even so far as 'a section of the public' is concerned, the Supreme Court has been particular in identifying it in the following terms : 'The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature : where there was no common quality uniting the potential beneficiaries into a class, it might not be regarded as valid.' These observations are repeated by the Supreme Court in the subsequent decision in Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC). These observations supply a complete answer to the contention of the learned Advocate-General that the category of persons covered by the expression 'millowners and users of motive power' constitutes a section of the public, which can legitimately form the object of a charitable purpose. The observations make it clear that the section of the public which is to be benefited to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the common quality which unites the potential beneficiaries into a class is essentially an impersonal one. It is definable by reference to what each has in common with the others, and that is something into which their status as individuals does not enter.' Our Supreme Court has approved of this principle, in Ahmedabad Rana Caste Association's case [1971] 82 ITR 704 (SC) and has held that members of the Rana caste had a relationship which was an impersonal one dependent upon their status as members of that caste. No such relationship of impersonal nature can be found amongst the millowners and users of motive power, and, hence, none of the objects mentioned in clauses (a), (b) and (c) can be treated as objects of a public utility. " After referring to the judgment in Oppenheim v. Tobacco Securities Trust Co. Ltd., [1951] AC 297 (HL), to which reference is made by the Supreme Court in Ahmedabad Rana Caste Association's case [1971] 82 ITR 704, 710 (SC), of the report, it was concluded by the court that (at page 741 of 106 ITR) : " If we closely scrutinise the objects contained in rule 3, we find that a substantial part of these objects benefit the association's own members, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively for such purposes, then the income of the whole of the property is assessable to income-tax. This principle is approved by the Supreme Court in East India Industries (Madras) Pvt. Ltd. v. CIT [1967] 65 ITR 611 (SC). Considering all these facts we conclude that the respondent-association is not entitled to the benefit contemplated by section 11 in view of the mixed purposes for which the respondent-association is expected to function. " We find ourselves in agreement with this view of the Division Bench of the Gujarat High Court. The reliance of the learned counsel for the respondents on Andhra Pradesh Police Welfare Society's case [1984] 148 ITR 287 (AP) is of no assistance to him, inasmuch as the High Court of Andhra Pradesh did not consider the question of the association being for a charitable purpose in the light of the test laid down by various courts upon analysis of section 2(15) of the Act. The court was persuaded to hold the society to have been constituted for a charitable purpose because, "hierarchy of the authorities of the Income-tax Department itself observed that they are of charitable nature. Therefore, we unhesitatingly hold that the objects are of char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en years, in the event of his termination from the services of BEL, either on grounds of superannuation or medical disability. (iii) To render some financial assistance to a member who has been regular in subscribing to the Fund for a continuous period of seven years, in the event of his termination from the services of BEL on grounds other than superannuation/medical disability. Under rule 4 of the Rules of the Association, membership is confined only to subscribed members who are ultimately to be the beneficiaries. Rule 15 pertaining to disbursement of service benefits provides : "Disbursement of service benefit (vide rule No. 14C(3)) to the eligible persons will be regulated as under :-- (a) The amount will be paid to the member himself unless he is incapable of receiving the same due to any legal disability (e.g., insanity). (b) If the member is under any legal disability to receive the payment, the amount shall be paid to his nominee(s). (c) If the nominee is a minor, to the guardian of the minor nominee, on production of guardianship certificate issued by the competent court. (d) If the member expires after going out of the service of the company but before the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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