TMI Blog1983 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... re not available. Ultimately, the matters were taken to the Tribunal contending that its objects are charitable and, therefore, its income should be exempt under section 11. It was also contended alternatively that the receipts were casual and non-recurring in nature attracting the provisions of section 10(3). It further contended that neither the provisions of section 28(iii) nor any other provisions of the Act applied to its case so as to render its income taxable. The Tribunal, after going in detail into the objects of the company and after considering the nature of the receipts, held that the provisions of section 28(iii) are not attracted, that the exemption under section 11 was available to the company to the extent to which the income was applied for charitable purposes in India, and since the details of the application of the income were not available, the Tribunal directed the Income-tax Officer to ascertain the extent to which the amount of income has been applied to charitable purposes for each of the assessment years and give the company proper relief. Since the Tribunal held that the company is entitled to claim exemption under section I 1, it did not consider the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case that its objects are clearly for the advancement of the general public utility not involving the carrying on of any activity for profit and, therefore, it should be taken to be an organisation formed for a charitable purpose and, therefore, its income has to be exempted from tax under section II read with section 2(15). Thus we have to see as to whether the objects of the company are for advancement of general public utility not involving the carrying on of any activity for profit. The objects for which the company had been established as per the memorandum of association are, inter alia, (1) To promote commerce, art, science or any other useful objects connected with photographic and allied trades. (2) To promote and protect the interests of photographic and allied traders in every manner possible. (3) To formulate and carry out plans designed to place the trade on a sound and remunerative basis. (4) To make representations to authorities, both Governmental and non-governmental, in India or abroad on behalf of photographers and allied traders. (5) To arrange for equitable distribution at reasonable prices of all goods imported into India and manufactured in India ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, however, held that having regard to the objects of the company which do not contemplate the distribution of profits under any circumstances as between its members, the company cannot be said to be carrying on an activity for profit and, therefore, it should be taken to carry on an object of general public utility. The question is whether the view taken by the Tribunal that the objects of the company are charitable as defined in section 2(15) is correct. In re The Trustees of the Tribune [1939] 7 ITR 415 (PC), the judicial Committee had held that a trust the object of which was described as it supplying the province with an organ of educated public opinion " was entitled to exemption on the ground that it was a trust established for the purpose of general public utility. In Sole Trustee, Loka Shikshana Trust's case [1975] 101 ITR 234, the Supreme Court held (at p. 254): " It seems clear to us that the amended provision, section 2(15) in the Act of 1961, was directed at a change of law as it was declared by the Privy Council in the Tribune case." In that case, the assessee-press carried on publication of a daily newspaper Samyukta Karnatak. The object of the trust was to ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaken, (i) for profit, or (ii) without profit ? Even if (a) and (b) are answered affirmatively, if clause (i) is answered affirmatively, the claim for exemption collapses. The solution to the problem of an activity being one for or irrespective of profit is gathered on a footing of facts. What is the real nature of the activity ? One which is ordinarily carried on by ordinary people for gain ? Is there a built-in prescription in the constitution against making a profit ? Has there been in practice profit from this venture ? although this last is a weak test. The mere fact that a service is rendered is no answer to chargeability because all income is often derived by rendering some service or other. " This court in CIT v. Madras Stock Exchange Ltd. [1976] 105 ITR 546, dealt with the claim for exemption under section 11 of the Andhra Chamber of Commerce, the South Indian Film Chamber of Commerce and the Madras Stock Exchange Association Private Ltd., and held (at p. 555): "In the Loka Shikshana Trust's case[1975] 101 ITR 234 (SC), the object of the trust could not be achieved without carrying on the business of publication of newspapers. If the profit-making activity is thus th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be attracted if the purpose of the trust or institution in fact involves the carrying on of an activity for profit or in other words, if an activity for profit is actually carried on as an integral part of the purpose or " as a matter of advancement of the purpose ". The Supreme Court has laid down the following tests to be applied in such cases. (1) Whether the predominant object of the activity involved in carrying out the object of general public utility is to sub-serve the charitable purpose or to earn profit. (2) Where the profit-making is the predominant object of the activity, then the object of general public utility would cease to be a charitable purpose. (3) Where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. In this case, the decision in Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC) holding that the Chamber will not be entitled to the benefit of section I 1, was specifically overruled. In CIT v. South Indian Film Chamber of Commerce [1981] 129 ITR 22 (Mad), the question arose whether the Sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... develop and protect the brick kiln trade, commerce and industries, (2) to watch and protect the interest of brick kiln owners, contractors, customers and brick dealers, members of the association, and the interest of persons engaged in brick trade commerce or industries, legally, morally and socially, (3) to consider all questions connected with brick trade, commerce and industries and to initiate or support necessary action in connection therewith, and (4) to protect the brick trade, with the co-operation of the Government through legislative representation to get the grievances and difficulties of Brick Kiln Owners' Association redressed. These objects were held to promote the brick kiln trade, that is an object of general public utility. The dominant intention of the association being to promote the brick kiln trade and since that purpose did not involve the carrying on of any activity for profit, the income of the association was entitled to exemption under section 11(1)(a). The Supreme Court in CIT v. Federation of Indian Chambers of Commerce and Industry [1981] 130 ITR 186, dealt with a claim for exemption under section 11 by the Federation of Indian Chambers of Commerce a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shows that the income and the property of the company whencesoever derived, shall be applied solely for the promotion of its objects as set forth in the memorandum of association and it clearly says that no portion of the income or property shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit to persons who at any time are, or have been members of the company. Therefore, the dominant activity of the company is advancement of public utility and carrying on of an activity for profit is not one of its objects. Having regard to the principles laid down in the various decisions of the Supreme Court referred to above as well as the decision of this court, we have to hold that the company is entitled to exemption under section II read with section 2(15) of the Act and that the income of the company is not liable to be taxed under section 28(iii) as has been held by this court in CIT v. South Indian Film Chamber of Commerce [1981] 129 ITR 22. The first question is, therefore, answered in the affirmative and against the Revenue and the second question is also answered in the negative and against the Revenue. The Revenue will pay t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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