The Income-tax Appellate Tribunal (Delhi Bench 'C') has referred the following question of law to this court for opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to the benefit of exemption provided in section 4(3) (i) of the Act of 1922 and in excluding the property income for the assessment of the assessee ?
The assessment year is 1960-61 for which the previous year ended on June 30, 1959. The assessee, M/s. Textile Manufacturers Association, Amritsar, is a company limited by guarantee and registered under the Indian Companies Act, 1913. It was incorporated in 1936. The assessee owns a building at Amritsar from which it derives rental income. That income was being assessed to tax in the previous years which was not objected to by the assessee but during the course of the proceedings for the assessment year 1960-61, the assessee contended that the rental income of Rs. 6,600 was exempt under section 4(3) (i) of the Income-tax Act 1922 (hereinafter called 'the Act'). The Income-tax Officer rejected the contention of the assessee and included the rental income in its total income for the purpose of assessment. The assessee filed an appeal before the appellate Assistant Commissioner which was dismissed on March 12, 1964. The assessee then filed an appeal before the Income-tax appellate Tribunal which was accepted on the basis of the judgment of their Lordships of the Supreme Court in Commissioner of Income-tax v. Andhra Chamber of Commerce. The Commissioner of Income-tax then applied for a reference to this court which was allowed.
The learned counsel for the petitioner has vehemently argued that the judgment of their lordships relied upon by the Tribunal is distinguishable which is apparent from the following observations of their Lordships on page 727 of the report :
'The principal objects of the assessee are to promote and protect trade, commerce and industries and to aid, stimulate and promote the development of trade, commerce and industries in India or any part thereof. By the achievement of these objects, it is not intended to serve merely the interests of the entire community. That prosperity would be shared also by those who engage in trade, commerce and industry but on the account the purpose is not rendered any the less an object of general public utility. It may be remembered that promotion and protection of trade, commerce and industry cannot be equated with promotion and protection of activities and interests merely of persons engaged in trade, commerce and industry.'
In that case also, the question for determination was whether the rental income from building which the Chamber of Commerce had purchased was exempt from income-tax under section 4(3) (i) of the Act. At page 728, their Lordships observed as under :
'In the promotion of trade, commerce and industries of India the public is vitally interested and if by the activities of the assessee that object is achieved, it would be within the meaning of section 4(3) (i) of the Act an advancement of an object of general public utility. In enacting the last paragraph of section 4(3) the legislature has used language of great amplitude. `Charitable purpose includes not only relief of the poor, education and medical relief alone, but advancement of other objects of general public utility as well. The clause is intended to serve as a special definition of the expression charitable purpose for the Act; it is again inclusive and not exhaustive or exclusive. Even if the object or purpose may not be regarded as charitable in its popular signification as not tending to give relief to the poor or for advancement of education or medical relief, it would still be included in the expression charitable purpose if it advances an object of general public utility. The expression object of general public utility, however, is not restricted to objects beneficial to the whole of mankind. An object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or province. It is sufficient if the intention is to benefit a section of the public as distinguished from specified individuals. Observations to the contrary made by Beaumont C. N. in Commissioner of Income-tax v. Grain Merchants association of Bombay, that an object of general public utility means an object of public utility which is available to the general public as distinct from any section of the public, and that objects of an association 'to benefit works of public utility confined to a section of the public, that is, 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.'
The judgment of their Lordships fully covers the case of the assessee in view of the following clauses stated in its memorandum of association :
'4. The income and property of the association whensoever derived shall be applied solely towards the promotion of the objects of the association as set forth in this memorandum of association and no promotion thereof shall be paid or transferred directly or indirectly by way of dividend or bonus or otherwise howsoever by way of profit to the persons who at any time are or have been members of the association or to any of them or to any person claiming through them. Provided that nothing herein contained shall prevent the payment in good faith of remuneration to any officer or servants of the association or to any member thereof or other person in return for any services actually rendered to the association or the payment of interest on money borrowed from any member of the association...
7. If upon the winding up or dissolution of the association there remains after satisfaction of all its debts and liabilities any property whatsoever, the same shall not be paid or distributed among the members of the association but shall be given or transferred to some other institution or institution having objects similar to the objects of the association to be determined by members of the association at or before the time of dissolution and in default thereof by such judge of the High Court of Judicature of Punjab as may have or acquire jurisdiction in the matter.'
From these clauses, it is absolutely clear the neither the income nor the property of the assessee could be utilised by the members and the objects for which the assessee had been incorporated were for the general public utility, that is, of the textile manufacturers and particularly those who were members of the association. According to the observations made by their Lordships, the general public utility does not mean the mankind at large but also includes a section of the community sought to be benefited if it is sufficiently defined and identifiable by some common quality of a public or impersonal nature. In the present case, the section of the community is sufficiently defined and identifiable as the textile manufacturers of the Province of Punjab, which in 1936, extended from Delhi to Peshawar. The judgment of their Lordships fully applies to the facts of the present case.
The learned counsel for the petitioner has, however, relied on the judgment in Rex v. Special Commissioners of Income-tax (Ex parte Head masters Conference) and Rex v. Special Commissioners of Income-tax (Ex parte Incorporated association of Preparatory Schools). This case was considered by their Lordships of the Supreme Court in the case of Andhra Chamber of Commerce, at page 735 of the report, and it was opined that it had no applicability to the facts of the case. For the same reasons, we hold that the learned counsel for the petitioner can derive no assistance from this case. The judgment of their Lordships referred to above is conclusive on the point. Respectfully following that judgment, we return the answer to the question referred to us in the affirmative. The assessee will have his costs which we assess at Rs. 200.