Skip to content


Bar Council of Rajasthan Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Reference No. 37 of 1974
Judge
Reported in(1984)39CTR(Raj)334; [1984]147ITR720(Raj)
ActsIncome Tax Act, 1961 - Sections 2(15), 10(23A) and 11; Advocates Act, 1961
AppellantBar Council of Rajasthan
RespondentCommissioner of Income-tax
Appellant Advocate Rajendra Mehta, Adv.
Respondent Advocate J.P. Joshi, Adv.
Excerpt:
.....may 25, 1973, affirmed the order passed by the aac and held that the object and functions of the assessee-council at best were intended to serve merely the interest of the members on its roll and were not of general public utility. the functions mentioned in clauses (a) and (b) of sub-section (1), namely, to admit persons as advocates on its roll and to prepare and maintain such roll, are clearly regulatory in character intended to ensure that persons with requisite qualifications who are fit and otherwise proper to be advocates are available for being engaged by the litigating public ;the function prescribed in clause (c) has been enjoined upon avowedly with the objective of protecting the litigating public from unscrupulous professionals by taking them to task for any misconduct on..........this court for its opinion : '1. whether, on the facts and in the circumstances of the case, the assessee-council could be taken to be a body intended to advance any object of general public utility ? 2. whether, on the facts and in the circumstances of the case, the tribunal was justified in holding that income from interest was not exempted under section 11 of the income-tax act, 1961?' 2. the assessee, the bar council of rajasthan, is a body corporate constituted under the advocates act, 1961, and it came into existence on november 7, 1962. in respect of the assessment year 1970-71, corresponding to the accounting year ended on march 31, 1970, the assessee derived interest income from securities to the extent of rs. 26,900. the assessee-council claimed that its income was partly.....
Judgment:

Dwarka Prasad, J.

1. This reference has been made by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter called 'the Tribunal'), at the instance of the assessee, the Bar Council of Rajasthan, and the following two questions of law arising out of the order of the Tribunal dated May 25, 1973, have been referred to this court for its opinion :

'1. Whether, on the facts and in the circumstances of the case, the assessee-council could be taken to be a body intended to advance any object of general public utility ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that income from interest was not exempted under Section 11 of the Income-tax Act, 1961?'

2. The assessee, the Bar Council of Rajasthan, is a body corporate constituted under the Advocates Act, 1961, and it came into existence on November 7, 1962. In respect of the assessment year 1970-71, corresponding to the accounting year ended on March 31, 1970, the assessee derived interest income from securities to the extent of Rs. 26,900. The assessee-council claimed that its income was partly exempted from tax under Section 10(23A) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), and the interest income was exempt from tax Section 11 read with Section 2(15) of the Act, on the ground that the Bar Council was a body intended to advance objects of general public utility. The ITO subjected to tax the income of the assessee-council from securities, namely, the interest income on fixed deposits and interest on the savings bank account.

3. The assessee-council preferred an appeal before the AAC and it was contended before him that the Bar Council of Rajasthan was created for charitable purposes within the meaning of Section 2(15) of the Act and was engaged in the advancement of law and legal profession, which are objects of general public utility and as such the interest income received by the assessee-council from its investments was exempt under Section 11 of the Act. The AAC, by his order dated July 2, 1971, held that exemption was not available to the assessee on its income from interest and that the said income was rightly assessed to tax by the ITO. On further appeal, the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, by its order dated May 25, 1973, affirmed the order passed by the AAC and held that the object and functions of the assessee-council at best were intended to serve merely the interest of the members on its roll and were not of general public utility. The Tribunal, therefore, held that the interest income received by the assessee-council was not wholly held under trust for charitable purposes.

4. Thereafter, the assessee-council made an application under Section 256(1) of the Act before the Appellate Tribunal requesting it to draw up a statement of the case and refer the questions of law arising out of the order of the Tribunal dated May 25, 1973, to this court. The Tribunal allowed the application and referred the two questions reproduced above to this court for its opinion, by its order dated June 27, 1974.

5. The answer to the aforesaid two questions is no longer in dispute as similar questions arising out of a reference in the case of the Bar Council of Maharashtra have been decided by their Lordships of the Supreme Court in CIT v. Bar Council of Maharashtra : [1981]130ITR28(SC) . Identical questions were referred in the case of the Bar Council of Maharashtra of the Bombay High Court, which were answered in favour of the assessee by the High Court by its decision in Bar Council of Maharashtra v. CIT : [1980]126ITR27(Bom) . The decision of the Bombay High Court was affirmed on appeal by their Lordships of the Supreme Court in the aforesaid Bar Council of Maharashtra's case : [1981]130ITR28(SC) . The Bar Council of Maharashtra is a body established under the Advocates Act for the area comprised in the State of Maharashtra, with the same objects and purposes and performed the same duties and functions as the Bar Council of Rajas-than in the area comprised in the State of Rajasthan. In the Bar Council of Maharashtra's case : [1981]130ITR28(SC) after discussing the objects and functions of the Bar Councils, their Lordships of the Supreme Court observed as under (p. 36):

'It is clear that Sub-section (1) lays down the obligatory functions while Sub-section (2) indicates what are the optional or discretionary functions that could be undertaken by the State Bar Council and from amongst the obligatory functions it will be wrong to pick out one and say it is the primary or dominant object or purpose. All the clauses of Sub-section (1) will have to be considered in the light of the main objective sought to be achieved as indicated in the preamble. The functions mentioned in Clauses (a) and (b) of Sub-section (1), namely, to admit persons as advocates on its roll and to prepare and maintain such roll, are clearly regulatory in character intended to ensure that persons with requisite qualifications who are fit and otherwise proper to be advocates are available for being engaged by the litigating public ; the function prescribed in Clause (c) has been enjoined upon avowedly with the objective of protecting the litigating public from unscrupulous professionals by taking them to task for any misconduct on their part; it is also one of the obligatory functions of a State Bar Council to promote and support measures for law reform as also to conduct law seminars and organise talks on legal topics by eminent jurists, obviously with a view to educate the general public ; the function prescribed by Clause (eee) is obviously charitable in nature, the same being to organise legal aid to the poor. Amongst these various obligatory functions, one under Clause (d) is to safeguard the rights, privileges and interests of the advocates on its roll and it is difficult to regard it as a primary or dominant function or purpose for which the body is constituted. Even this function, apart from securing speedy discharge of obligations by the litigants to the lawyers, ensures maintenance of high professional standards and independence of the Bar, which are necessary in the performance of their duties to the society. In other words, the dominant purpose of a State Bar Council, as reflected by the various obligatory functions, is to ensure quality service of competent lawyers to the litigating public, to spread legal literacy, promote law reforms and provide legal assistance to the poor, while the benefit accruing to the lawyer-members is incidental... Having regard to the preamble of the Act and the nature of the various obligatory functions, including the one under Clause (d) enjoined upon every State Bar Council under Section 6(1) of the Act, it is clear that the primary or dominant purpose of an institution like the assessee-council is the advancement of the object of general public utility within the meaning of Section 2(15) of the Act, and as such the income from securities held by the assessee-council would be exempt from any tax liability under Section 11 of the Act.' (emphasis* added)

6. Thus, their Lordships of the Supreme Court have clearly held in the aforesaid case that the primary or dominant purpose of the assessee-council is the advancement of the object of general public utility, within the meaning of Section 2(15) of the Act and further that the income from securities held by such assessee would be exempt from any tax liability under Section 11 of the Act.

7. Following the aforesaid decision of their Lordships of the Supreme Court, we answer question No. 1 in the affirmative and in favour of the assessee-Bar Council. The second question is answered in the negative and also in favour of the assessee-Bar Council, as has been held by their Lordships of the Supreme Court in Bar Council of Maharashtra's case : [1981]130ITR28(SC) .


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //