S. Ranganathan, J.
1. All these references raise the question whether the Indian & Eastern Newspaper Society (which is the respondent in all these matters) is eligible for exemption under s. 4(3)(i) of the Indian I.T. Act, 1922, and its successor provision, s. 11 of the I.T. Act, 1961. Since the facts and question of law are common, it will be convenient to dispose of all the references by common order.
2. The references relate to the assessment years 1960-61 to 1971-72, the relevant previous year for each of the assessment years being the preceding calendar year.
3. The respondent-assessed is a society registered under the Companies Act on October 12, 1951. The objects of the society have been set out in para. 3 of its memorandum of association and run as follow :
'3(a) To act as a central organization primarily of the Press of India, and of any other country in Asia which desires to associate itself with the society.
(b) To promote and safeguard the business interests of its members incidental to the production of their publications and to take suitable steps in respect of such business as are affected by the action of legislatures, governments, law courts, municipal and local bodies, and associations or organizations, commercial or formed for any other purpose.
(c) To collect information upon all topics having a practical business interest for its members and to communicate the same to them.
(d) To promote co-operation upon all topics having a practical business interest for its members and to communicate the same to them.
(d) To promote co-operation in all matters affecting the common business interests of its members.
(e) To hold periodical conferences of its members to discuss and determine action on matters of common business interest.
(f) To make rules and regulations and bye-laws to govern the conduct of its members in accordance with the decisions of the society, to provide penalties for the infringement thereof and to provide means of determining whether there has been such ingfringement.
(g) To maintain a permanent secretariat in India to watch over the business interests of its members and to permit a constant interchange of information and views.
(h) To purchase, take on lease or hire or otherwise acquire or build any movable or immovable property for the purpose of the society, and sell, improve, manage, develop, lease, mortgage, charge, dispose of or otherwise deal with all or any such property in the business interests of the society.
(i) To invest and deal with the assets of the society in such manner as may from time to time be determined by the committee of the society and to operate current or fixed deposit accounts with any bank or banks or in government securities as approved by the committee.
(j) To subscribe, become a member of or otherwise co-operate with any other association whose objects are wholly or in part similar to those of the society.
(k) To collect subscriptions and other contributions from its members for the recurring and incidental expenses of the society.
(l) To undertake any arbitration for settlement of general or special disputes arising between members of the society.
(m) To provide for the grant of any pension, gratuity, allowances, bonus or other payment to or for the benefit of the employees of the society as deemed expedient whether they have or have or have not a legal claim upon the society for such grants.
(n) To borrow or raise or secure the payment of money which may be required for the purposes of the society in such manner as the society may think fit.
(o) To undertake and execute any trusts which may lawfully be undertaken by the society and may be conducive to its objects.
(p) To do or concur in doing all such other things as may be considered conducive or incidental to the attainment of the aforesaid objects or to the business interests of newspapers and periodicals in general or the society or any of its members in particular.'
4. By clause 4 of the memorandum of association the society is prohibited from distributing any dividend, bonus or other profits of the society. Under clause 8 it is provided that in the case of winding-up or dissolution all the liabilities of the society should be first satisfied and the balance of the assets left thereafter shall not be paid or distributed amongst the members of the society but should be given or transferred to some other institution or institutions having similar objects or to some charitable object determined by the society at its general meeting in which the dissolution is decided upon.
5. For the assessment year 1960-61, the assessed was originally assessed under s. 23(3) of the Indian I.T. Act, 1922. The assessed-society owned a building on Rafi Marg and the subject-matter of assessment was primarily in respect of the income from this building. It appears that in the original assessment the property income had been assessed under s. 10 of the 1922 Act. The ITO, subsequently, was of opinion that the property income should have been assessed under s. 9 of the said Act and he, thereforee, initiated proceedings under s. 147(b) of the I.T. Act, 1961. He completed the reassessment by computing the income from the said property under s. 9 of the Act. For the assessment year 1961-62, when proceedings for reassessment were initiated on like grounds the assessed took up a contention before the ITO that its income was exempt from tax and relied in support of this contention on the decision of the Supreme Court in the case of CIT v. Andhra Chamber of Commerce : 55ITR722(SC) . But the ITO rejected this contention and completed the reassessment computing the income from property under s. 9, as in respect of the earlier assessment year. The position was the same in relation to the assessment years 1962-63 and 1963-64. For the assessment year 1964-65 onwards, the claim for exemption was put forward by the assessed at the time of the original assessment itself. But the claim was rejected and assessments were made on the same footing as in the earlier years.
6. On appeal, the AAC accepted the claim put forward by the assessed. He passed a consolidated order for the assessment years 1960-61 to 1963-64. He pointed out that in the meantime the assessment for 1964-65 had reached the Tribunal by way of second appeal. The Tribunal by its order dated July 15, 1971, had confirmed the order of the AAC holding that the society was entitled to exemption in respect of its income. On behalf of the department reliance had been placed on sub-cls. (h), (i) and (k) of clause 3 of the memorandum of association. But the Tribunal pointed out that reading all the clauses in the memorandum together it was clear that these sub-clauses did not embody the objects of the assessed but merely set out the acts which the society could do in order to carry out its objects. They were ancillary clauses intended to ensure that the society had the necessary authority to do the acts necessary to implement its objects and manage the society's income, expenditure and properties. They did not imply that the society had to carry out any specific activity for profit without which the advancement of the object could not be achieved. They were meant to enable the assessed to husband its resources in a prudent manner and they did not enjoin on the society to carry out any organized activity in the nature of business without the profits from which the society could not be run. On this line of reasoning the Tribunal had upheld the assessed's claim for exemption. For the assessment year 1965-66, another Bench of the Tribunal had followed the earlier order dated July 15, 1971, and dismissed the department's appeal from the order of the AAC for the assessment year 1965-66. Following the above orders of the Tribunal, the AAC allowed appeals which had been preferred before him for the assessment years 1960-61 to 1963-64 and 1966-67 to 1971-72. Further appeals by the revenue to the Tribunal also failed because the Tribunal decided to follow the earlier decision dated July 15, 1971. It is in these circumstances that the references for all these years have come up before us an certain questions have been referred to us for our opinion.
7. In I.T. Rs. Nos. 35 to 39 of 1976 and 207 & 208 of 1978, the following questions have been referred :
'1. Whether on the facts and in the circumstances of the case, the sole purpose of the society was the advancement of such objects of general public utility as did not at all involve the carrying on of any activity for profit
2. If the answer to question No. 1 is in the affirmative, whether, on the facts and in the circumstances of the case, the income of the society was exempt from tax under section 11(1) of the Income-tax Act, 1961 by reason of it being derived from property held under trust wholly for charitable or religious purposes ?'
8. In I.T. Rs. Nos. 15 & 16 of 1975, 172 & 173 of 1977 and 203 of 1977, the following questions have been referre :
'1. Whether the assessed was liable to pay no tax on its income for the relevant previous year on the ground that the same was derived from property held under trust wholly for charitable purposes within the meaning of section 11(1) of the I.T. Act, 1961
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sole purpose of the society was the advancement of such objects of general public utility as did not at all involve the carrying on of any activity for profit and, thereforee, a charitable purpose within the meaning of section 2(15) of the Income-tax Act, 1961 ?'
9. A perusal of the various orders shows that the question was argued purely on the basis of the various clauses contained in the memorandum of association of the respondent-society and no particular facts were brought on record on the basis of which the exemption claimed by the assessed was rejected. However, when the matter pertaining to the assessment year 1971-72 came up before the Tribunal, while it was conceded that there was no material difference in the facts as compared to the decisions of the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT : 101ITR234(SC) and the case of Indian Chamber of Commerce v. CIT : 101ITR796(SC) . In this context, it was pointed out that the assessed had derived as per its profit & loss account an income from property to the extent of Rs. 1,62,263. It also had other income such as Rs. 8,352 on the sale of the society's hand-books and Rs. 15,791 by way of interest on fixed deposits. It was stressed that such a large income raised a strong presumption that there was an activity for profit. There was no specific condition written into the objects clauses of the association to the effect that the services or goods provided by the society in pursuance of its objects were to be only at cost, or, at the most, a little more than cost but were not to be provided on a profit basis. It was argued that in the absence of any such condition in the objects clauses a clear inference arose that the objects were not covered by s. 2(15) of the Act.
10. On the other hand, on behalf of the assessed, it was pointed out that the building owned by the assessed was let out only to the constituent members of the society and that the rents charged were only the minimum possible. The standard agreement entered into by the society with the licensee occupying the building provided that in consideration of a sum of Rs. 9,200 per annum the licensee was to be permitted to occupy a flat, comprising of one room with attached bath along with sanitary fittings, furniture, telephone and other accessories. The licensee which could be any individual, firm or company or trust owning or carrying on the business of publishing newspapers in India could use the said accommodation only for the persons connected with it. There could not be more than one person in the room at a time and no guest was permitted to stay in or use the premises. Except for the portion of the building occupied by the society's guest-room, record room, printing room and the flat allotted to the society's secretary, members of the society were licensed to occupy the various rooms in the building. The society realised subscriptions amounting to Rs. 3,58,500 whereas the license fee and apartment receipts were only to the extent of Rs. 1,62,362 against which an expenditure of Rs. 82,305 had to be incurred on maintenance, ground rent and tax. The society also published hand-books but the sales were only to the extent of Rs. 8,352. They were exclusively to the members and not to the public. There was actually a loss in this account because the cost of printing itself amounted to Rs. 14,022. Thus, it was contended that the means and the ends of the society fell strictly within the scope of 'charitable purpose' as defined in s. 2(15) and that the advancement of the objects of the society did not involve any activity for profit.
11. After considering the submissions before them the Tribunal saw no reason to differ from the view taken by the Tribunal for the prior years. The Tribunal referred to the decisions of the Supreme Court relied upon for the department but pointed out that in the present case the assessed had provided facilities or services only to its members, and that the charges were nominal having regard to the consideration charged by the assessed for the use of the premises by its members, the size of the accommodation, the extent of facilities provided and the location of the building situated as it was right on the door-step of the news-makers. The only inference possible was that the surrounding circumstance loudly negatived the existence of any activity for profit. The sale of hand-books as an activity for profit was not seriously pressed by the departmental representative. In these circumstances, the Tribunal decided to follow its earlier order and upheld the assessed's claim for exemption.
12. We are of opinion that the questions in these cases are practically concluded by the decision of the Supreme Court in the case of Andhra Chamber of Commerce : 55ITR722(SC) , earlier referred to, and the recent decision of the Supreme Court in the case of Surat Art Silk Cloth Manufacturers' Association : 121ITR1(SC) . Reading the various sub-clauses of clause 3 of the memorandum of association of the society it is clear that the dominant or primary purpose of the assessed was to promote and safeguard the business interest of newspaper proprietors as a whole and its members in particular. The principal objects are those set out in sub-cls. (a) to (g), which make it clear that the primary object of the society was to safeguard and further the business interests of the press in general. The other causes are clearly incidental to the carrying out of the dominant or primary purpose of the society and are only in the nature of powers conferred upon the assessed for the purposes of securing the fulfillment of the dominant or primary purpose. It is no doubt true that these objects or powers would benefit the members of the assessed but this benefit would be incidental in carrying out the main and primary purpose forming the basis of the formation of the assessed-society. It appears to us that the objects and purposes of this society in relation to the press in India are more or less the same as the objects and purposes of a chamber of commerce in relation to business or commerce in general or to a particular type of trade. We are unable to see any difference in principle between the nature of the activities contemplated by the present society and the nature of the activities contemplated in the Andhra Chamber of Commerce Case : 55ITR722(SC) or the Surat Art Silk Cloth Manufacturers' Association case : 121ITR1(SC) except that they have been formed in relation to different types of trades or business. We are clearly of opinion that the Tribunal was right in coming to its conclusion that the principal objects of the society are of general public utility within the meaning of s. 2(15) of the Act. Indeed, apart from the argument addressed on the basis of sub-cls. (h), (i) and (k), it had not been seriously disputed by the I.T. authorities that the purposes of the present society fulfill the requirements of s. 2(15) of the Act. The only argument on behalf of the department was based on sub-cls. (h), (i) and (k) and it was suggested that since these clauses enable the society to let out its property and to collect contributions and subscriptions from the members it should be treated as having non-charitable purposes amongst its objects. As we have already pointed out, these clauses are not independent objects for which the society was established. These clauses only set out the incidental powers that can be exercised by the society for achieving its primary and dominant purpose which appears clearly from sub-cls. (a) to (g) of clause 3.
13. The argument that has been advanced in relation to the assessment year 1971-72 is that since the society is owning a building and is making profits by letting out flats or rooms in the building to various persons it should be held that the objects of the society involve the carrying on of an activity for profit and, thereforee, the exemption under s. 2(15) will not be available to the society. So far as this objection of the Department is concerned it can be considered in two parts. The first is the question whether the objects of the society are such that they involve the carrying on of an activity for profit. This has to be clearly answered in the negative because the primary or dominant purpose of the society is only to benefit the press in India in general and, as explained earlier, none of the objects clauses contemplate the carrying of any activity for profit by the society. The second aspect to be examined in this connection arises because, as pointed out by the Supreme Court, the inhibition of the exclusionary clause contained in the last ten words of s. 2(15), namely, 'not involving the carrying on of any activity for profit' 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'. In the present case if it is assumed that an activity for profit is indulged in by the society by renting out the various portions of its premises to the members then it is no doubt true that such activity is carried on as a matter of advancement of its primary purpose of subserving the interest of the press in India and of the various members of the society. But the expression 'activity for profit' has a restricted meaning as explained by the Supreme Court and the preposition 'for' used in it has a very great significance. It is implicit in these words that the activity in question must be carried on with the object of earning profit. It is not enough merely that some activity is being carried on and it results in a profit. In other words, the predominant object of the activity in question should be the making of profit before the inhibition of the last ten words could be attracted. Where an activity is not pervaded by a profit motive but is carried on primarily for serving a charitable purpose it would not be correct to describe it as an activity for profit. But, on the other hand, if the activity is carried on with the predominant object of earning profit then it would be an activity for profit though it may be carried on in advancement of the charitable purposes of the trust or institution. Where an activity is carried on a matter of advancement of the charitable purpose or for the purposes of carrying out the charitable object, while it would be correct to say that the charitable purpose involves the carrying on of such an activity, the predominant object of such activity would be to subserve the charitable purpose and not to earn profit. Differing from the observations in the Loka Shikshana Trust's case : 101ITR234(SC) and the Indian Chamber of Commerce's case : 101ITR796(SC) referred to earlier, the Supreme Court has pointed out in the recent decision that merely because there is an activity which results in a profit, an inference cannot be drawn that the activity is for profit. It is also not necessary that there must be a provision in the constitution of the trust that the activities shall be carried on a no-profit no-loss basis or that profits shall be proscribed. Even if there is no such express provision the court will have to consider the nature of the charitable purpose, the manner in which the activity for advancement of charitable purpose is carried on and other surrounding circumstances and decide whether the activity is propelled by a dominant profit motive or whether the dominant object of the activity is merely to carry out a charitable purpose.
14. Applying the above principles we, have no doubt in our minds that, in the present case, the activity which resulted in a profit for the society was not an activity for profit carried on by the society. It was an activity the dominant object of which was only to subserve the primary or dominant purpose of the society which, as already pointed out, is clearly charitable in nature. It was not the intention of the society to make a profit by letting out parts of the building : such activity was only incidental to the carrying out of the primary purpose of the society. The Tribunal, after considering all the surrounding circumstances, has arrived at this conclusion and we see no grounds for interfering with this factual conclusion.
15. We are, thereforee, of opinion that both under the 1922 Act as well as the 1961 Act, the assessed-society was rightly held to be entitled to exemption. We, thereforee, answer the questions referred to us in all the years in favor of the assessed. The assessed will be entitled to its costs in one of the references. Counsel's fee Rs. 500.