TMI Blog1971 (12) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1922 for the assessment years 1960-61 and 1961-62 and under section 11 of the Income-tax Act of 1961 for the assessment year 1962-63 and their income will be exempt from the tax. On appeal, the Tribunal held that the dominant motive of the assessee was to trade by running the transport service on business lines just as any other owner of a road transport service would do and, therefore, they would not attract the provisions of section 4(3)(i) of the Indian Income-tax Act, 1922, and section 11 of the Income-tax Act, 1961. Hence this reference. The question referred to us for our decision is as follows : " Whether, on the facts and in the circumstances of the case, the assessee's income for the assessment years 1960-61 and 1961-62 was exempt from income-tax under section 4(3)(i) of the Indian Income-tax Act of 1922, and for the assessment year 1962-63, under section 11 of the Income-tax Act, 1961 ? " Though the assessee is the same, the question whether the assessee's income is exempt from tax for the assessment years 1960-61, 1961-62 and for assessment year 1962-63 have to be considered separately, as there has been a change in the law applicable to the assessments. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been created under the provisions of a statute, i.e., the Road Transport Corporations Act, 1950. The objects of the assessee are those contained in the said Act. Under section 3 of the Act, a Road Transport Corporation may be established by the State Government having regard to (a) the advantages offered to the public, trade and industry by the development of road transport ; (b) the desirability of coordinating any form of road transport with any other form of transport ; (c) the desirability of extending and improving the facilities for road transport in any area and of providing an efficient and economical system of road transport service therein. Section 18 again repeats the object by stating that the general duty of the Corporation is to exercise its powers so as to progressively provide or secure or promote the provision of, an efficient, adequate, economical and properly coordinated system of road transport service in the State. Section 19 details, the powers of the Corporation for operating the road transport service. Section, 22 provides that the general principle of the Corporation should be that, in carrying on its undertaking, it shall act on business principles. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d what the State Government is paid is only interest for the monies due, as if it were a debt under section 28(1) of the Act. Whatever balance is left over after meeting the expenses, as provided under section 30, are to be made over to the State Government for purposes of road development, which is again a benefit to the public. Therefore, there can be no doubt in this case that the assessee---Corporation is meant for the advancement of general public utility and as such is meant for a charitable purpose. The decisions in In re Trustees of the Tribune , All India Spinners' Association v. Commissioner of Income-tax, Commissioner of Income-tax v. Breach Candy Swimming Bath Trust, all of the Privy Council, as well as the decisions in Commissioner of Income-tax v. Andhra Chamber of Commerce of the Supreme Court and Hyderabad Stock Exchange Ltd. v. Commissioner, of Income-tax of a Bench of this court, all help us to come to the same conclusion, that the assessee---Corporation caters for providing the general public with an efficient, adequate, economical and properly coordinated system of road transport services, and, as such, it is an enterprise of public utility. It was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of general public utility outside the scope of the definition that object must involve the carrying on of any activity for profit. ' Involve ' means comprise or imply and it, therefore, follows that the object must imply the carrying on of an activity for profit ; it is not sufficient, we think, if there is some activity carried on which results in profit. There must be an activity in the form of business because the activity must be for profit and that activity for profit must be involved in the objects of general public utility ......" On the circumstances of the case, they held : " ......even when an activity is in furtherance of the objects of a trust and even if such activity results in profits, the definition will not be attracted unless the objects involve the carrying on of an activity for profit. The objects of this association (Chamber of Commerce) do not involve the carrying on of any activity for profit. What has been done by the Chamber has not been suggested to be not in furtherance of the objects of the Chamber. If in carrying on such objects there is resulting excess of income over expenditure that cannot be brought in as income liable to tax under the Act by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify the term " public utility ". The scope of cases falling within that omnibus term has been elaborately discussed by the House of Lords in Inland Revenue Commissioners v. Baddeley. Viscount Simonds J. has this to say : " ...while no comprehensive definition of legal charity has been given either by the legislature or in judicial utterance, there is no limit to the number and diversity of the ways in which man will seek to benefit his fellowmen. To determine, whether the privileges, now considerable, which are accorded to charity in its legal sense, are to be granted or refused in a particular case, is often a matter of great nicety, and I think that this house can perform no more useful function in this branch of the law than to discourage a further excess of refinement where already so many fine distinctions have been made." " Object of public utility " is one of the categories of charity, as classified by Lord Macnaghten along with the other categories, relief of poverty advancement of education, etc., in Commissioners for Special Purposes of the Income-tax v. Pemsel , now incorporated in section 4(3) of the Indian Income-tax Act, 1922, and section 2(15) of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his section ", " property held under trust " includes a business undertaking so held ...... for charitable and religious purposes also ...... Section 28 in Chapter IV relating to computation of total income seeks to include income derived by a trade and by professional or similar associations. But, as can be seen from section 14 of the Act, this is subject to the other provisions of the Act, i.e., subject to the exemptions under section 11. Therefore, the interpretation of the clause relating to " general public utility not involving the carrying on of any activity for profit ", as stated by us, is in consonance with the other provisions of the Act. The assessee in this case has no other income except what it gets by running the enterprise. Under section 30 of the Road Transport Corporations Act, after meeting its expenses as detailed in it, whatever is left has to be made over to the State Government for the purpose of road development, which is again an object of general public utility. The object of the assessee, as stated earlier, is to run the transport service by providing an efficient, adequate, economical and properly coordinated system of road transport for the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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