TMI Blog1964 (10) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... e have already observed, to promote and protect trade, commerce and industries, to aid, stimulate and promote the development of trade, commerce and industries and to watch over and protect the general commercial interest of India or any part thereof. It is only for the purpose of securing these primary aims that it was one of the objects mentioned in the memorandum of association that the assessee may take steps to urge or oppose legislative or other measures affecting trade, commerce or manufactures. Such an object must be regarded as purely ancillary or subsidiary and not the primary object. Appeal dismissed. - C.A. 941 OF 1963 - - - Dated:- 1-10-1964 - Judge(s) : K. SUBBA RAO., J. C. SHAH., S. M. SIKRI JUDGMENT The judgment of the court was delivered by SHAH J.----The Andhra Chamber of Commerce-hereinafter called "the assessee"---is a company incorporated under the Indian Companies Act (7 of 1913). The assessee was permitted under section 26 of the Act to omit the word " limited " from its name by order of the Government of Madras. The following are the principal objects of the memorandum of association of the assessee : (a) To promote and protect trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------------------------------------------------------- 1947 1948-49 3,405 7,431 1948 1949-50 6,154 7,139 1949 1950-51 6,928 5,266 1950 1951-52 5,740 10,173 1952 1953-54 8,072 13,672 1953 1954-55 8,072 17,397 --------------------------------------------------------------------------------------------------------------------------------------------------- In proceedings for assessment before the Second Additional Income-tax Officer, City Circle I, Madras I, it was contended that the annual value of the building was not assessable in its hands as the assessee was a charitable institution within the meaning of section 4(3)(i) of the Income-tax Act, 1922. In the alternative, it was contended that the excess of expenditure over income should be set off against such income if the annual value is held assessable. The Income-tax Officer rejected the contentions of the assessee and assessed its income from property on the basis of the net annual value in the six assessment years without debiting the expenditure in excess of income (other than rent) against the net annual value. The assessee appealed to the Appellate Assistant Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raph of sub-section (3) " charitable purpose " was defined as including relief of the poor, education, medical relief, and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ia) or clause (ii) shall operate to exempt from the provisions of the Act that part of the income of a private religious trust which does not enure for the benefit of the public. By the amendment made by section 3 of the Indian Income-tax (Amendment) Act (25 of 1953), clauses (i) and (ia) as they originally stood were amalgamated. It is common ground that by the amendment, no alteration which has a material bearing on the question to be decided in these appeals has been made. Income from property qualifies for exemption under section 4(3)(i) if two conditions co-exist: (i) the property is held under trust or other legal obligation ; and (ii) it is so held wholly or in part for religious or charitable purposes. The building which the assessee owns is by virtue of clause 4 of the memorandum of association held under a legal obligation to apply its income to purposes specified in the memorandum of association. It is not the case of the assessee that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is so much personal benefit, intellectual or professional, to the members of a society or body of persons as to be incapable of being disregarded. " In Institution of Civil Engineers v. Commissioners of Inland Revenue it was held that the Institution of Civil Engineers founded and incorporated by Royal Charter for the general advancement of mechanical science, and more particularly for promoting the acquisition of that species of knowledge which constitutes the profession of a civil engineer, was a body of persons established for charitable purposes only. The Special Commissioners, having regard in particular to the provisions of the supplemental Charter of 1922, by which the corporate members of the institution were authorised to use the title of member, or associate member, as the case might be, found that a substantial part of the objects of the institution was to benefit the members and rejected the claim of the institution for exemption. The Court of King's Bench, disagreeing with the Special Commissioners, held that the benefit of members was purely incidental to the main purpose of the institution which was established for charitable purposes only. The Court of Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the public " and that objects of an association " to benefit works of public utility confined to a section of the public, i.e., those interested in commerce " are not objects of general public utility ", do not correctly interpret the expression "objects of general public utility". 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 is no common quality uniting the potential beneficiaries into a class, it may not be regarded as valid. It is true that in this case there is in fact no trust in respect of the income derived from the building owned by the assessee. But the property and the income therefrom is held under a legal obligation, for, by the terms of the permission granted by the Government to the assessee to exclude from its name the use of the word " limited ", and by the express terms of clause 4 of the memorandum of association, the property and its income are liable to be utilised solely for the purposes set out in the memorandum of association. Counsel for the revenue submitted that the purposes of the assessee are vague and indefin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of charity, and that it is the right and duty of his Attorney-General to intervene and to inform the court if the trustees of a charitable trust fall short of their duty. So too it is his duty to assist the court, if need be, in the formulation of a scheme for the execution of a charitable trust. But... is it for a moment to be supposed that it is the function of the Attorney-General on behalf of the Crown to intervene and demand that a trust shall be established and administered by the court, the object of which is to alter the law in a manner highly prejudicial, as he and His Majesty's Government may think, to the welfare of the State ? " do not assist the case of the revenue. In the view of Lord Simonds the object of the trust was political and, therefore, void, and not because it was vague or indefinite. In Baddeley v. Commissioners of Inland Revenue certain properties were conveyed to trustees by two conveyances, in one case on trust, inter alia, for the promotion of the religious, social and physical well-being of persons resident in the County Boroughs of West Ham and Leyton by the provision of facilities for religious services and instruction and for the social and phy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny or corporation need not necessarily be able to speak or write Telugu. Again under sub-clause (v) a partner of a firm of a " private partnership concern" or a joint family business concern, or a sole proprietary concern having its principal office or registered office in Andhra Desa or a branch in Andhra Desa is eligible for membership of the Chamber and the representative of such a member need not necessarily be able to speak or write Telugu. Finally, by sub-clause (vi) an individual residing anywhere in India and connected in any manner with trade, industry and commerce is eligible for membership of the Chamber provided his mother tongue is Telugu or he can both speak and write Telugu. There is no geographical limitation upon the membership qualification, nor is there limitation about the capacity to speak or write Telugu. We should not be taken as holding that if there were such restrictions, the character of the assessee as an institution for promotion of charitable objects would thereby necessarily affected. Clause 3(g) of the memorandum of association on which strong reliance was placed reads as follows: " To urge or oppose legislative and other measures affecting tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int in so far only as they illustrate the manner in which political objects, in the wide sense which includes projects for legislation in the interests of particulars causes, affect the question whether the court can regard a trust as being one of general public utility. In the original letter of reference it was not suggested by the Commissioner that the newspaper was intended by its founder to be a mere vehicle of political propaganda, and in the case of Sardar Dyal Singh it seems unreasonable to doubt that his object was to benefit the people of Upper India by providing them with an English newspaper---the dissemination of news and the ventilation of opinion upon all matters of public interest. While not perhaps impossible, it is difficult for a newspaper to avoid having or acquiring a particular political complexion unless indeed it avoids all reference to the activities of governments or legislatures or treats of them in an eclectic or inconsistent manner. The circumstances of Upper India in the last decade of the nineteenth century would doubtless make any paper published for Indian readers sympathetic to various movements for social and political reform. But their Lordships ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes and the English decisions on the law of charities not based upon any definite and precise statutory provisions were not helpful in construing the provisions of section 4(3)(i) of the Indian Income-tax Act. The words of section 4(3) were largely influenced by Lord Macnaghten's definition of charity in Pemsel v. Commissioners for Special Purposes of the Income Tax, but that definition had no statutory authority and was not precisely followed in the most material particulars; the words of the section being " for the advancement of any other object of general public utility" and not as Lord Macnaghten said " other purposes beneficial to the community ". The Judicial Committee observed that the primary object of the association was relief of the poor and apart from that ground there was good ground for holding that the purposes of the association included advancement of other purposes of general public utility. The Judicial Committee then held: " These words, their Lordships think, would exclude the object of private gain, such as an undertaking for commercial profit though all the same it would subserve general public utility. But private profit was eliminated in this case. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted by resolution at a meeting of representatives of the temperance Organisation of the Christian Churches of England and Wales, the purpose of which being united action to secure legislative and other temperance reform was held not to be a council established for charitable purposes only, nor was its income applicable to charitable purposes only, and that it was therefore not entitled to the exemption sought. In Bowman v. Secular Society Ltd. Lord Parker observed: " A trust for the attainment of political objects has always been held invalid, not because it is ... illegal but because the court has no means of judging whether a proposed change in the law will or will not be for the public benefit ......" This court, in a recent judgment, Laxman Balwant Bhopatkar by Dr. Dhananjaya Ramchandra Gadgil v. Charity Commissioner, Bombay, considered whether for the purposes of the Bombay Public Trusts Act (29 of 1950) a trust to educate public opinion and to make people conscious of political rights was a trust for a charitable purpose. The court held (Subba Rao J. dissenting) that the object for which the trust was founded, was political, and political purpose being not a charita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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