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Commissioner of Income-tax Vs. CochIn Chamber of Commerce and Industry - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference Nos. 9, 10 and 11 of 1970
Judge
Reported in[1973]87ITR83(Ker)
ActsIncome Tax Act, 1961 - Sections 2(15), 11 and 11(1)
AppellantCommissioner of Income-tax
RespondentCochIn Chamber of Commerce and Industry
Appellant Advocate P.A. Francis and; P.K.R. Menon, Advs.
Respondent Advocate M. Pathros Mathai, Adv.
Excerpt:
.....question was that derived from the property held under trust wholly for charitable purposes and therefore is exempt under section 11(1)(a) of the income-tax act, 1961. charitable purpose 'is denned in section 2(15) of that act in these terms :2. (15) 'charitable purpose 'includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. an appropriate interpretation of section 2(15) of the income-tax act, 1961, is to consider the expression not involving the carrying on of any activity for profit' as qualifying the expression 'the advancement of any other object of general public utility' and not the other classes of charitable purpose mentioned in that section like relief of..........is exempt from tax under section 11 of the income-tax act, 1961? '2. the assessee is the cochin chamber of commerce and industry, cochin, and the years of assessments are 1964-65, 1965-66 and 1966-67. the memorandum of association of the chamber contained clauses very similar, if not identical, to those of the indian chamber of commerce whose case we considered in the decision in commissioner of income-tax v. indian chamber of commerce, [1971] 80 i.t.r. 645 (ker.). for activities similar to that carried on by the indian chamber of commerce, namely, the issuance of certificates for survey and weighment, the assessee had received amounts in the accounting periods relating to the three assessment years referred to earlier, of rs. 1,16,167, rs. 1,12,919 and rs. 1,22,785, respectively. the.....
Judgment:

Govindan Nair, J.

1. This is a reference at the instance of the Commissioner of Income-tax and the Income-tax Appellate Tribunal, Cochin Bench, has referred the following question to this court :

'Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the income of the assessee is exempt from tax under Section 11 of the Income-tax Act, 1961? '

2. The assessee is the Cochin Chamber of Commerce and Industry, Cochin, and the years of assessments are 1964-65, 1965-66 and 1966-67. The memorandum of association of the Chamber contained clauses very similar, if not identical, to those of the Indian Chamber of Commerce whose case we considered in the decision in Commissioner of Income-tax v. Indian Chamber of Commerce, [1971] 80 I.T.R. 645 (Ker.). For activities similar to that carried on by the Indian Chamber of Commerce, namely, the issuance of certificates for survey and weighment, the assessee had received amounts in the accounting periods relating to the three assessment years referred to earlier, of Rs. 1,16,167, Rs. 1,12,919 and Rs. 1,22,785, respectively. The net income of the assessee for these three years came to only Rs. 7,893, Rs. 18,177 and Rs. 21,140 respectively.

3. It was proposed to treat the receipts from the issue of certificates for survey and weighment as income for the purpose of assessment. The assessee contended that the income in question was that derived from the property held under trust wholly for charitable purposes and therefore is exempt under Section 11(1)(a) of the Income-tax Act, 1961. 'Charitable purpose ' is denned in Section 2(15) of that Act in these terms :

'2. (15) ' charitable purpose ' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit.'

4. We have had to consider the effect of the words ' not involving the carrying on of any activity for profit' in Commissioner of Income-tax v. Indian Chamber of Commerce and we came to the conclusion that it is not enough that some activity had been carried on which resulted in profit but that the object must involve the carrying on of any activity for profit. Counsel for the department has brought to our notice the decision of the Calcutta High Court in Commissioner of Income-tax v. Indian Chamber of Commerce, [1971] 81 I.T.R. 147, 153 (Cal.). A view different from that we took in the decision in Commissioner of Income-tax v. Indian Chamber of Commerce 1 has been taken by the Calcutta High Court and the reasoning is thus stated in the judgment:

'An appropriate interpretation of Section 2(15) of the Income-tax Act, 1961, is to consider the expression not involving the carrying on of any activity for profit' as qualifying the expression ' the advancement of any other object of general public utility' and not the other classes of charitable purpose mentioned in that section like relief of the poor, education and medical relief. That is the only way by which to avoid a conflict between Section 11 and Section 2(15) of the Income-tax Act, 1961, specially with the provisions of Sections 11(1)(a) and 11(4) of the Income-tax Act, 1961.'

5. With great respect, we are unable to agree with the reasoning. If the object is for general public utility, such as, say, for educating public opinion or for the advancement of trade and commerce and there is no object to carry on any activity for profit, the fact that in carrying out the objects of the trust some income results would not take the charitable purpose outside the scope of the definition. We think that the very object must be for the carrying on of an activity for profit in order that the object may be outside the purview of the definition. This, we think, will be better understood if the section is read in a positive manner as postulating objects' which are outside the purview of the definition. The section has to be read in this manner then:

' Object of general public utility involving the carrying on of any activity for profit; '

6. Such objects alone will be outside the purview of the definition. Here the object is to advance trade and commerce. The issuance of the certificate is for that purpose. It obviates delay and it helps those who are engaged in trade and commerce. This, we conceive, is the main purpose and if, for carrying out this object, it is necessary to incur expenses it is only natural that a fee should be charged and that fee certainly cannot be charged with such arithmetic precision that it always results in receipts which never exceed the expenditure involved. Prudent carrying on of any activity would involve the charging of such fees as would normally cover all expenditure, and income over expenditure in these cases for the three years is not large. We consider that the object of the Chamber is to help its members engaged in trade or commerce and others in the same field and this is an object of general public utility. The income has to be exempted under Section 11(i)(a) of the Income-tax Act, 1961. We, therefore, answer the question referred to us in the affirmative that is, in favour of the assessee and against the department. There will be no order as to costs. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be sent to the Appellate Tribunal as required by Sub-section (1) of Section 260 of the Income-tax Act, 1961.


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