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Southern India Mill Owners' Association Vs. Commissioner of Income-tax (16.04.1975 - MADHC) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 172 of 1969 (Reference No. 60 of 1969)
Judge
Reported in[1977]110ITR871(Mad)
ActsIndian Income Tax Act, 1922 - Sections 4(3); Companies Act, 1913
AppellantSouthern India Mill Owners' Association
RespondentCommissioner of Income-tax
Appellant AdvocateS. Padmanabhan, Adv.
Respondent AdvocateJ. Jayaraman, Adv.
Cases ReferredAssociation v. Commissioner of Income
Excerpt:
.....and dominant purpose of association was to promote and protect textile industry - objects of assessee-association satisfy test of general public utility - question answered in affirmative. - - the objects for which the assessee-association came' into existence are as follows :(1) to create and encourage friendly feeling and unanimity amongst the textile mill owners on all subjects connected with their common good. (2) to secure good relations between members of the association and between themselves and their employees. the settlement of a dispute in a healthy manner is such as to subserve public good. having these objects in view, we are satisfied that the tribunal rightly upheld the assessee's claim for exemption on the ground that it came within the last part of the..........and other accommodation for the comfort of the members who are engaged in questions connected with trade, commerce and manufactures and promote the diffusion of knowledge among its members. (6) to collect, supply, distribute and circulate literature, statistics, tables and such other data and to circulate and supply such information as useful for the trade, commerce and manufactures of its members and their employees. (7) to take all steps which may be necessary for promoting, protecting, supporting, encouraging or opposing legislative and other measures affecting the interests of its members. (8) to make representations to municipal, state, central or other authorities on any matters connected with trade, commerce and manufactures of its members and their interests. (9) to act as.....
Judgment:

Sethuraman, J.

1. This is a reference under the Indian Income-tax Act, 1922, in which the point raised relates to the claim of the assessee for exemption under Section 4(3)(i) of that Act. The assessee, originally a company known as ' South Indian Mill Owners' Association ', was registered under 'the Indian Companies Act, 1913. The present assessee is an association of persons registered under the Societies Registration Act on 14th December, 1959, and it took over all the assets and liabilities of the previous Association registered under the Indian Companies Act. The objects for which the assessee-Association came' into existence are as follows :

' (1) To create and encourage friendly feeling and unanimity amongst the textile mill owners on all subjects connected with their common good.

(2) To secure good relations between members of the Association and between themselves and their employees.

(3) To advance, encourage and promote commercial and other technical education and also to establish and maintain such institutions for instructing and training persons connected with manufacture, trade and commerce of its members,

(4) To promote and protect the interest of textile industries and other trades, commerce and manufactures of South India in general and of the cotton trade in particular.

(5) To provide an exchange or mart with library and reading rooms and other accommodation for the comfort of the members who are engaged in questions connected with trade, commerce and manufactures and promote the diffusion of knowledge among its members.

(6) To collect, supply, distribute and circulate literature, statistics, tables and such other data and to circulate and supply such information as useful for the trade, commerce and manufactures of its members and their employees.

(7) To take all steps which may be necessary for promoting, protecting, supporting, encouraging or opposing legislative and other measures affecting the interests of its members.

(8) To make representations to Municipal, State, Central or other authorities on any matters connected with trade, commerce and manufactures of its members and their interests.

(9) To act as arbitrators or umpires in the settlement of disputes arising out of the transactions in all products of the textile mills and also raw materials for the manufacture of the textile goods between parties willing or agreeing to submit to arbitration in accordance with the Arbitration Act and Rules of the Association.

(10) To undertake special enquiries and initiate or support any action for securing the redress of legitimate grievances connected with manufacture, trade or commerce of its members.

(11) To take any action which may be conducive to the extension of manufacture, trade and commerce of its members or incidental to the attainment of this object.

(12) To take such steps by personal or written appeals, non-political public meetings or otherwise as may from time to time be deemed expedient for the purposes of procuring contributions to the funds of the Association in the shape of donations, annual subscriptions or otherwise.

(13) To print and publish any newspapers, periodicals or leaflets that the Association may think desirable for the promotion of its objects and dissemination of knowledge and information.

(14) To apply for and acquire such concessions and Acts of legislature in any country, State in India or foreign country as may be advantageous for carrying out the objects of the Association.

(15) From time to time to subscribe to local or other charities and to grant donations for any public purpose, and to provide or establish or aid in the establishment of superannuation or such other funds for employees and servants of the Association, or otherwise to assist any such servants, their widows and children.

(16) To establish and support and to aid in the establishment andsupport of any other association formed for all or any of the objects ofthis Association and also to subscribe to become member or affiliate, amalgamate and co-operate with any other associations, institutions, societies orcompanies incorporated or not whose objects are altogether or in partsimilar to those of the Association, to procure from or communicate to anysuch association such information as may be likely to promote the objectsof this Association.

(17) To purchase or otherwise acquire and undertake all or any part of the property, assets, liabilities and engagements of any one or more of the Associations, institutions, societies or companies with which this Association is authorised to amalgamate.Association v. Commissioner of Income-tax [1944] 12 ITR 482 . In that case the question related to the claim for exemption of the All India Spinners' Association, which was a body brought into existence for the development of hand-spinning and hand-weaving. There was an attempt on the part of that assessee to rely on the practice to use the surplus income for the purpose of the Association. It was also sought to be shown by the assessee that the business was carried on in pursuance of the primary purpose in addition mainly by the beneficiaries of the Association. The Privy Council pointed out at page 487 that the practice, however, was not enough and that the purpose was to be ascertained from the constitution. We agree that external aid is not to be availed of for ascertaining the purpose or the object for which the assessee-Association has come into existence. The Tribunal has sought to use these external data only to show how the assessee has actually functioned. In other words, we do not understand the order of the Tribunal, as relying on the practice for the purpose of ascertaining the intention of the objects of the Association. However, those materials themselves have not been included in the annexures. We say no more about those materials. We have already, independently of those materials, come to the conclusion that the objects of the assessee-Association satisfy the test of general public utility.

11. During the course of the arguments our attention was drawn to the decision of the Supreme Court in Commissioner of Income-tax v. Indian Sugar Mills Association : [1974]97ITR486(SC) , wherein also a similar claim for exemption was agitated. In that case Rule 64 permitted' distribution of profits among the members on a resolution being passed for this purpose. This was construed as introducing an element of private gain, which was inconsistent with the object of general public utility. There is no such rule in the present case, so that the assessee's claim cannot fail because of any element of private gain.

12. For all these reasons, we answer the first question in the affirmativeand in favour of the assessee. The second question does not arise for consideration in view of this answer. The assessee will have its costs. Counsel's fee Rs. 250.


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