CHAKRAVARTTI, C.J. - This reference comes to us on case stated by the Appellate Tribunal a Second time in pursuance of directions given by this court under the section 66(4) of the Indian Income-tax Act.
The assessee is limited liability company incorporated on the June7 , 1933, in order the to take over the assets and liabilities of an unincorporated association, called 'The Calcutta Stock Exchange Association' and to conduct the affairs of the stock exchange which that the association had founded. The principal object of the assessee company is to facilitate the transaction of business on the Calcutta Stock Exchange and to make rules and bye-laws, regulating the mode and the conditions in and subject to which the business on the stock exchange shall be transacted. The company is composed of 'members' who may be either individual or firms, but who, except in the case of parties who had been members of the unincorporated association, have to be elected before their admission and upon the such election have to acquire a share of the company and pay an entrance fee. Upon their admission, the members have to be pay monthly subscription, as provided for in the bye laws.
It is not disputed that in regard to its main activity, the assessee company is a mutual association and that it is not the insurance company or a co-operative society. The amounts received by the assessee from its members as entrance fee or subscription in respect of their own membership have not therefore bean sought to be taxed. But in course of the assessment for the year 1945-46, relative to the accounting year ended on the September 30, 1944, a dispute arose between the taxing authorities and the assessee company as regards the taxability of four other items of receipts.
It appears that the under the bye laws of the assessee company, members of a certain standing are allowed to have authorised assistant up of a certain number of who are permitted the use of its room and who may transact business therein the names of the members employing them. Like members, the authorised assistant also the require the to be elected. After the election of an authorised assistant, the members who has proposed to employ him, paying an entrance fee for his admission and, after his admission, goes on the paying a monthly subscription so long as the employment continues. During the accounting year in question, the assessee company received from its members a sum of the Rs. 60,750 as entrance fees of authorised assistants and a sum of the Rs. 15,687 as subscription paid in respect of them.
It appears further that under the other bye-laws of assessee company, no dealing in the shares of any company are permitted on the stock exchange unless the name of such company is included in the official quotation list, except when a special permission is given by the full Committee. Applications for the inclusion of a new company by Full Committee on such application, the members applying for its inclusion has to pay a certain fee for its enlistment. During the accounting year in question, the assessee company received from its members a sum of Rs. 16,000 as fees for enlisting new companies.
It also appears that a members firm may apply for a change in its name and style. Before allowing such change, the assessee company holds an investigation under its bye-laws and, for such investigation, charges a fee. During the accounting year in question, it received from some of it members firm a sum of Rs. 600 as investigation fee in connection with application for recognition of a change in their style.
Before the Income-tax Officer, it was contended on behalf of the assessee company that the four sums of the Rs. 60,750, Rs. 15,687, 16,000 and Rs. 600, were not taxable. With the respect to the first two sums, the argument was that authorised assistant of members were themselves members of the company and therefore monies received on their account as entrance fee or subscription came under the general rule of exemption applicable to mutual association. With respect to the last two sum, the argument appears to have been that they were payment made by the some of the members for services which would ensure to the common behalf of all and, therefore, they too the came under the rule of exemption. The Income-tax Officer repelled those the contentions. He held that the authorised assistants were not members and that although the assessee company was a mutual association, each of the four sums concerned was remuneration definitely related to specific services performed for its members and therefore the profits derived therefrom was chargeable to tax under section 10(6) of the Act. In accordance with that view, the Income-tax Officer included all the four sum in the total income of the assessee. He included other sums of which the assessee company equally objected, but we are not concerned in this reference with those objection.
In its appeals to the Appellate Assistant Commissioner and the Appellate Tribunal, the assessee company repeated the same contention, particularly the contention that the authorised assistant also were members. The bulk of the order passed in the appeals is concerned with that the contention. Both the Appellate Assistant Commissioner and the Appellate Tribunal repelled it and in holding that the amount received on account of authorised assistants as entrance fee and the subscription was remuneration definitely related to specific services performed by the assessee company for its members within the meaning of section 10(6) of Act, both relied on the decision of the Bombay High Court in Native Share and Stock Brokers Association v. Commissioner of Income-tax, Bombay. The other two sums were also held to come under section 10(6) for the same reason.
The assessee then asked for the reference to this court and the Tribunal referred three question. By the first it was asked whether the Tribunal had been right in holding that the authorised assistant were not members and that therefore the sum of Rs. 1,5,687 and Rs. 60,750 'received from them' as subscription and entrance fees should be included in the assessable income of the assessee. The second question which, it was said, would arise only if it was held that the authorised assistant were members of the assessee company and the amounts 'received from them' could not be assessed in its hands on the principle of mutuality, asked whether the aforesaid amounts were received for specific services performed by the company for its members within the meaning of section 10(6) of the Act. The third question was a straight question regarding the sum of Rs. 16,000 and Rs. 600 and asked whether they were remuneration definitely related to specific services performed.
The defects in the frame of the first two question were patent. It was nobody case that the amount of Rs. 15,687 and Rs. 60,750 had been received from the authorised assistant themselves, as the first question assumed; and secondly, once it was held that the amounts could not be assessed in the hands of the assessee company 'on the principles of mutuality', which was the basis on which the second question was posed, no occasion for an enquiry as to whether they were assessable as remuneration received for specific services performed could possibly arise. The Bench before the which the reference came up for hearing, (Harries, C.J. and Banerjee, J.) Therefore found it impossible to deal with the first two question, as framed, because they proceeded on an entirely wrong basis. Before the learned Judges, both the parties agreed that the first two amounts had been received from members and not from authorised assistant; and, on the behalf of the assessee, it was conceded that the authorised assistants were not members of the company. The learned Judges thought that before the matter really in issue between the parties could be dealt with, the question formulated by the Tribunal would have to be recase and they recast them into a single comprehensive question in the following form :
Whether, in the facts and circumstances of this case, the income tax appellate tribunal was right in holding that :
(a) the amounts of Rs. 15,687 and Rs. 60,750 received from the members of the association as subscription and entrance fees in respects of authorised assistance, and
(b) the amounts of Rs. 16,000 and Rs. 600 received from members as fees for the enlisting names of newly floated companies and the for recognition of changes the styles of firm respectively should be included in the assessable income of the assessee.
The Tribunal was directed to restate the case on the composite question as formulated by the court and submit the statement in due course. That direction has now been complied with the reference has come up again on a case re-stated.
Quite early in the course of his argument before us, Dr. Pal, appearing for the assessee, abandoned his client claim with respect to the sum of Rs. 600 after we had indicated to him and that sum at least appeared to us to be remuneration definitely related to a specific services rendered by the company to such of the members firm as wanted changes in their styles to be recognised, inasmuch as it was made up of fees charges for carrying out the necessary investigation. The claim in respect of the sum of Rs. 600 not being pressed, we are not called upon to considered any further.
With regard to the other sum of Rs. 16,000 referred to in clause (b) of the question, it is necessary to make a correction. The amount has been described as 'fees.........for enlisting a names of newly floated companies.' The bye-laws of the assessee speak simply 'enlisting the names of companies,' though one of them, adopted on the December, 16, 1943 add the adjective 'new' in the descriptive heading. But what the bye-laws really contempalte is enlisting the names of companies whichh are not already in the questions list and it is only in that sence that such coompanies aaare 'new'. It was the Income-tax Officer who first committed the mistake of paraphrasing the word 'new' as 'newly floated' and he even found in the circumstances of recent flotation a reason for holding that the enlistment of such companies would be particularly advantageous to the applicant members. Surprisingly enough, not only the Appellate Assistant Commissioner and the Appellate Tribunal but also the assessee itself came subsequently to make the mistake, apparently adopting the description 'newly floated' from the Income-tax Officer order. In the grounds of its appellate Assistant Commissioner and the Appellate Tribunal, as well as in the 'enclosure' attached to its application for a reference where the 'fact admitted or found' are given, the assessee speaks of enlisting the name of 'newly floated' companies. It was however agreed before us that the bye-laws only contemplated fresh additional to the quotation list, whether the companies so added were new or old, and that the sum of Rs. 16,000 represented fee received for the including in the list names of companies which were not previously there.
The question referred to may now be taken up. It asks generally whether the several sums concerned had been rightly included in the assessable income of the assessee, making no particular references to section 10(6) of the Act. But since the assessee is admitted to be a mutual association and it is not either an insurance company or a cooperative society and since the sum were all received from members with whom the assessee was not really carrying on any trade on business to which the receipts could be related they can be only off they come under section 10(6). Even section 10(6) would not make the whole of the receipts taxable but only deduction have not been allowed. The assessment of the sums of the question was actually made under section 10(6). The only question for consideration, therefore, is whether the three sum of Rs. 15,687, Rs. 60,750 and Rs. 16,000 - the fourth is no longer material - or any one or more of them constituted remuneration definitely related to specific services performed by the assessee company for its members.
It will be convenient to set at out this stage actual text of section 10(6). It reads thus :
'A trade, professional or similar association performing specific services for its members for remuneration definitely related to those services shall be deemed for the purpose of this section to carry on business in respect of those services, and the profits and gains therefrom shall be liable to tax accordingly.'
The section seeks to bring amounts contemplated to tax by first enjoying that certain activities of mutual association shall be treated as carrying on business, although they are not really so, them making, consequentlly, the profits derived from such activities profits and gain of business and expressly making them taxable. At the beginning of his argument Dr. Pal stated that he would contended that even the if the sum in question in the present case came under section 10(6), they would not be taxable, because by merely enacting that a mutual association, w performing specific services for its members for remuneration, would be deemed to carry on business in respect oof such services, the section had not succeeded in attaching a liability to tax to the surplus arising from such activities. He was, he said, thinking of the view expressed by the House of Lords in Cornish Mutual Assurance Co. v. Inland Revenue Commissioners that transaction between the mutual society and its members might well amount to carrying on a business and yet the surplus arising therefrom would not be liable to tax unless and some special surplus arising therefrom would not be liable to tax, unless some special provisions of law made it taxable. We pointed out to Dr. Pal that the besides words making the specific services business, there were other words in section 10(6) itself which appeared to make the profits of such business taxable and, after some time, he said that the he would not press the contention.
The only question before the us is therefore the true construction of section 10(6) of the Act, under which the assessment was made, in relation to the facts of this case. The sole contention of Dr. Pal was that the three sums of the Rs. 15,678, Rs. 60,750 and Rs. 16,000 did not come within the words that section. The sole contention of Mr. Meyer Was that they did. He did not contend that even part from section 10(6) the amounts were taxable.
The first and the second sums were both realised by the assessee company in respect of authorised assistants of members and they may conveniently be taken together. It is agreed that they were received from the members and that they were paid respectively as subscriptions for and entrance fees of authorised assistant who, it is now conceded, are not members. The nature the and object of these payments and the purpose served by them have to be ascertained from the bye-laws, of the assessee. They have not been included in the paper-books but printed copies were supplied to us as undertaken before the Tribunal. It is important to remember that the bye-laws now is force were not all in force or in force in the some during the relevant accounting year which ended on the September 30, 1944.
The articles of association of the assessee company do not appears to provide directly for the employment of authorised assistant by members who are individuals, except that the respective provisos to the articles 6 and 7 recognise that there may be such assistant. The direct reference in the articles are all to authorised assistants of members which the are firms - see, for example, articles 21. But the clause (20) of articles 90 provided that the 'committee' - by which is meant the Managing committee referred to in articles 73 may make bye-laws for the regulation of the business of the association and the proviso to the articles 6 speaks of an 'assistant to any members under any bye-laws, for the time being in force' One has therefore turn to turn to the bye-laws, but it is not easy to refer the them, because they are unfortunately not numbered and the language in which they are the expressed is often ungrammatical, inappropriate and crude.
The bye-laws relating to authorised assistant appears at page 1, 2, 3, 4, 5, 6, 7, 29 and 30 the printed booklet, as also an amendment slip, setting out certain amendment which came into force on the both July 10, 1944. Matters covered by the amendments were therefore governed, during a part of the accounting year, by the old bye-laws, and, during the remaining part, by those by-laws, as amended. It has already been seen that the articles of association contemplate, though indirectly, that bye-laws may provide for the employment of authorised assistants by members. It appears that under the bye-laws, as they stood originally, a members had to complete two years of membership before the became entitled to take authorised assistants, but the period was reduced to one year by the amendments of 1944. Similarly, the number Similarly the number of authorised assistant which a member could take was reduced by the same amendment from eight to six. The advantage have his business in the stock exchange transacted by him, either wholly or in part, and even when he is himself present, he may have the assistance of such assistant in the rooms of the assessee company. Thus, a bye-laws, appearing at page 1 of the booklet provided that no person, other then a member, shall be at liberty to use the rooms of the association, except as otherwise provided by the articles of association and bye laws for the time being in force, and another bye laws at the same page provides in a negative form that the an authorises assistant shall be permitted to enter the room, though not 'until he has been so authorised' by which is obviously means 'not until he has been admitted as an authorised assistant.' An authorised assistant may not enter into contracts his own behalf; all contract made by him must be in the name of the member employing him who shall be responsible for he due fulfilment of such contracts, as also for all the transaction entered into by his authorised assistant on his behalf (p. 3). The practice of allowing assistants of one of the firm to do business in the name of another firm is forbidden (p. 29). A penalty clause attached to the bye-law at page 3 provides that if an authorised assistant enters into a contract in any name other then that of his firm, action may be taken against both the authorised assistant and the firm under articles 21(7) of the articles of association. As all members, whether individuals or firms, are entitled to have authorised assistant, it is somewhat curious that the last two clauses should not cover authorised assistant of an individual entering into a contract in the name of the another individual. These are obviously unintended omissions. The right of an authorised assistant to enter the room of the association and transact business and in the stock exchange depends on the substances of his employment as such assistant. If the employment of an authorised assistant under a member is terminated the member concerned is required to give immediate notice of such termination in writing and the authorised assistant becomes and remains disentitled to use the room of the association or to the an as authorised assistant of any other member till he is again admitted by the committee (p. 4). An Authorised assistant of one firm may get himself transferred to another firm by an application made to the secretary (p. 30) - a provision which the again omits authorised assistants of the members who are individuals.
Such then are the rights and disabilities of authorised assistants and such is their usefulness to the members. Any member wishing to employ an authorised assistant has to apply to the committee for his admission (P. I). Admission is not automatic, but depends upon election by the Committee who have an absolute discretion to decide whether or not a person shall be admitted as an authorised assistant (p. 2). The Committee, it appears, make some investigation, because an investigation fee is provided for (p. 7). A person disqualified for election as a member cannot be admitted as an authorised assistant (p. 2) and, since the amendment of 1944, an years apprenticeship under the applicant member is required (bye-law 3 of the new bye-laws). Upon the election of a person for admission as an authorised assistant, the member seeking his admission has to pay an entrance or admission fee (p. 2). The fee prescribed is on a graduated scale, the lowest amount being payable for the first two assistants and an increasingly higher amount for each assistant, subsequently employed. It appears that by the amendment of 1944, the fees have been increased (p. 2 and bye-law 2 of the new bye-laws). Apparently, on receipt of the admission fee, the authorised assistant is admitted, although no bye-law specifically says so. This entrance or admission fee accounts for the receipt of Rs. 60,750.
Besides the entrance fee, a monthly subscription is to be paid in respect of authorised assistants (pp. 5-6). This monthly subscription accounts for the receipt of Rs. 15,687.
The form of the application which a member has to make for the admission of an authorised assistant has been set out in the assessment order. It shows that the authorised assistant is proposed for membership. Similarly, item (a) of the bye-law providing for an investigation fee speaks of investigation 'for membership....as....authorised assistants' (p. 7). Again, the bye-law regarding payment of a monthly subscription says inter alia that every assistant shall pay a monthly subscription of such amounts as the Committee may from time to time determine (pp. 5-6). Lastly the bye-law about termination of the employment of an authorised assistant and his re-admission say that, on such re-admission, he shall be required to pay a further entrance fee (p. 3).
All these are mistakes, however strange it may be that such mistakes should occur in the by-law of an influential and well-established association of businessmen, formed for commercial purposes. As a matter of fact, authorised assistants are not, as is now conceded, members and their entrance fees and subscriptions are paid, not by themselves but by the members employing them.
The assessee is undoubtedly a trade association. But can it be said, in the circumstances stated above, that in admitting authorised assistants and continuing to recognise them as such, the assessee performs specific services for its members for remuneration and that the entrance fee and the subscription it realised as, and constitute, remuneration definitely related to such services I find it impossible to answer either branch of the question in the affirmative. In the case of Native Share and Stock-brokers Association v. Commissioner of Income tax, Bombay, the Bombay High Court found it possible to do so in circumstances, more or less though not wholly, similar, but with great respect to the eminent Judges who decided that case, I am unable to adopt the view taken by them in the case before us. The bye-laws of the Bombay Association contain a specific provision for the maintenance of a separate register for authorised clerks who, unlike the authorised assistants of Calcutta, seem to be treated differently from members and they contain another specific provision for the exercise of a disciplinary jurisdiction over authorised clerks with the right to suspend or expel them without giving any reason. The bye-laws of the assessee company do not contain any provision for the maintenance of a separate register for authorised assistants, nor for any action to be taken against them except when an authorised assistant of a firm enters into a contract in a name other than that of his own firm. Article 21 of the articles of association is, as I have already pointed out, limited to authorised assistants of firms. These differences, however, are perhaps not vital, though they are not immaterial. In the Bombay case, Stone, C.J., thought that the rules of the association before him laid down a definite scheme and organised arrangement for the control and supervision of the authorised clerks for the benefit of the members and that the carrying the scheme into effect amounted to performance of service for the members. Since the scheme was identifiable, the service was also specific; and the subscriptions realised from members in respect of their authorised clerks were remuneration definitely related to the service performed. Kania, J., as he then was, thought that the scheme, taken as a whole, was based on 'the institution of the authorised clerks' and that the service performed consisted in the registration, recognition and supervision of the work and behaviour of the clerks for the benefit of the members who employed them and paid the fees. He did not think that it was a case of merely offering some facilities to the members, because, under the rules, the association undertook certain obligations is respect of the authorised clerks. With great respect, I am unable to agree and take the same view of the facts of the case before us. I do not feel pressed by the decision in Commissioner of Income-tax v. Chamber of Commerce, Alleppey, which was also cited, because the maintenance of a separate produce section for such of the members as might join it, carrying with it the duty of performing certain additional duties of a definite character, might well be said to be performance of a specific service.
The difficulty I feel arises from the language used by the Legislature in section 10(6). That language appears to have been adopted verbatim from the Income-tax Enquiry Report, 1936, but what we must pay regard to is the language and not its source. 'Performing specific services for' is a strong expression, far stronger and more definite than 'rendering service to' and it connotes the actual doing of definite acts in the nature of services. One may confer a benefit on another by some act or omission or even by merely maintaining a particular attitude and in such circumstances it may well be said that he has rendered a service to the latter. But in order that a person may be correctly described as performing specific services for another, it is required that he should execute certain definite tasks in the interest and for the benefit of the latter under an arrangement of a direct character. The section says further that the specific services must be performed 'for remuneration' and that such remuneration must be 'definitely related to those services.' What that language means and contemplates is that certain specific tasks must be performed or functions of a specific character must be discharged for payment and such payment is to be made to the association as wages for its labour in respect of those tasks or functions. It appears to me that if an association undertook to type out the outgoing letters of its members for payment and were paid for the typing work for such of the members as might avail themselves of the facility, the case would be one within the words of the section. Or, to recall an illustration I gave in the course of the argument, if the Automobile Association of Bengal, which makes arrangements, as a matter of courtesy, for paying the road tax of its members and collecting the tax tokens for them, were to charge a fee for that services, the words of the section would be satisfied. But I am unable to see how, by merely admitting authorised assistants, granting them certain privileges and taking action against them if they should enter into contracts in any name other than that of their employers, the assessee company can be said to perform a specific service for its members or how the entrance fees and subscriptions realised in respect of authorised assistants can be said to be remuneration definitely related to such services. The Bombay High Court found specific service in the carrying out of a scheme for the registration, recognition and supervision of the work of the authorised clerks. Apart from the fact that there appears to be no provision in the Calcutta bye-laws for a separate registration of authorised assistants as such, nor any provision for a general supervision of their work, I do not think that even if the functions of the association in regard to authorised assistants be taken collectively, as appears to have been done by the Bombay High Court in the case of authorised clerks, it can be correctly said that what the assessee does amounts to performing specific services for its members. If, for example, the assessee maintained an institution for the training of apprentices and took in apprentices sent by members and trained them for a fee paid by them, it could be said to be performing a specific service for its members. But the mere admission of certain person as authorised assistants to transact business in the rooms of the association on behalf of their employers and on their behalf alone, may amount to conferring a benefit or extending a privilege to the members but cannot, in my view, amount to performing a specific service for them. Nor am I able to hold that the entrance fees and subscription are remuneration definitely related to any specific services performed. They are undoubtedly related to authorised assistants and related definitely, but can it be said that they are charged and realised as the wages for or the money value of any specific act done by way of performing a service for members I think not. It is true that when an application for the admission of an authorised assistant is made, the assessee makes some kind of an investigation, but the fee for that work is separately charged and forms no part of the entrance fee or the monthly subscription which we are considering. When an association or a club charges an admission fee for membership or quasi-membership and also realises a monthly subscription for the continuance of such status, the amounts so charged and realised do not bear any relationship to any specific service performed as the money value thereof and cannot be said to be remuneration for any such service, although the association or the club may have the duty of enforcing its rules against the members or quasi-members and may perform that duty. The entrance fee and the subscriptions are arbitrary sums, charged as the price of the privilege of membership or quasi-membership and not as remuneration definitely related to any specific service performed. I am unable to see in the present case to what specific service performed for the members, the entrance fee and subscriptions realised in respect of authorised assistants can be said to be definitely related as the remuneration therefor.
Indeed, if the entrance fees and monthly subscriptions received from members in respect of their authorised assistants be taxable under section 10(6) as remuneration definitely related to specific services performed, entrance fees and subscriptions paid by members in respect of themselves must equally be taxable under the same section on the same basis. The functions performed by the assessee in respect of its members are precisely the same or at least they are precisely of the same nature. As in the case of authorised assistants, so in the case of members, the assessee admits them, recognises them as holders off the status conferred, affords them certain facilities and penalises them for breaches of the rules. If that amounts, in the case of authorised assistants, to the performance of specific services for members and if the entrance fees and the monthly subscriptions be, in their case, remuneration definitely related to such services, the position must be exactly the same in the case of the members. Mr. Meyer at first submitted that in the case of members, the principle of mutuality and the rule of exemption applicable to the surplus arising from mutual dealings which is not profit, would apply, but obviously no distinction on any such ground is tenable. Section 10(6) constitutes an exception to the general principle applicable to mutual associations and, consequently, even when payments are made to a mutual association by its members on their own account, the profit derived from such payments will be taxable under section 10(6), if they come within the ambit of that section. Mr. Meyer then submitted that the omission to assess the entrance fees and subscriptions paid by the members in respect of themselves had been a mistake and it would be made good in future. I realise that simply because the Department had not assessed certain other receipts to which the principle sought to be applied by them to the present receipts would seem equally to apply, it cannot be held that the latter are exempt from taxation. But I am not prepared to accept a construction of section 10(6) which would make even the admission fee received from the members of a trade, professional or similar association of a mutual character, as also the monthly subscriptions received from them, taxable as remuneration definitely related to specific services performed. In my view, having regard to the bye-laws of the assessee company aaas respects members and authorised assistants, entrance fees and monthy subcriptions paid by the members in respect of themselves and in respect of their authorised assistants stand on the same footing and the language in which section 10(6) is expressed does not cover either of them.
The third sum of Rs. 16,000 was received by the assessee as fees for enlisting names of new companies. I have already pointed out that 'new companies' do not mean 'newly floated companies', as wrongly stated in all the orders, but companies not already borne on the quotations list and, as such, fresh or additional companies. The bye-laws relating to the enlistment of new companies are contained in an amendment slip inserted against page 34 of the booklet but bearing no date and certain other amendment slips, dated the April 22, 1943, the May 6, 1943, the December 16, 1943, and the February 10, 1944, respectively which, for the sake of convenience, were numbered before us as 8, 9, 13 and 16. It is provided in bye-laws inserted against page 34, that the Full committee of the Association may admit shares and securities for dealings by members in the stock exchange, may suspend dealings thereof or may remove them altogether from the official quotations list. Bye-law 2 provides that except when a special permission is given, no dealings in respect of shares and securities, not included in the daily official report and quotations list, can take place in the stock exchange. In view of this bye-law and another appearing at page 26 which provides that no member may have dealings in stocks and shares with any brokers, buyers or sellers who do not use the medium of the Calcutta Stock Exchange, it would appear that no member can at all transact business in stocks and shares which are not included in the quotations list. Applications for the enlistment of shares and securities are to be made by members (bye-law 4 at p. 2 of the amendment slip inserted against p. 34) and can be made by members alone (amendment of the April 22, 1943). The Full Committee have an absolute discretion to grant or reject any application (bye-law 3 of the amendment slip against p. 34). Names of companies cannot be included in the list, unless all the shares have been issued (amendment of the December 16, 1943), nor names of companies which have issued or authorised the issue of deferred shares with disproportionate voting rights, as compared with ordinary shares (amendment of the February 10, 1944). A member applying for the enlistment of the name of a new company has to pay a fee of Rs. 1,000 on his application being granted (bye-law 4 at p. 2 of the amendment slip inserted against p. 34 and also the amendment of the April 22, 1943). The third sum of Rs. 16,000 with which we are concerned is made up of fees received under this head.
It is clear that the enlistment of the name of a new company results in an advantage and such advantage ensures to the benefit of not merely the member at whose instance the name is enlisted but all members. After its enlistment, all members can transact business in shares of the company which they were previously debarred from doing. Prima facie, it might seem that when the assessee enlisted the name of a new company, it performed a specific service for its members and the fee it received in that connection was remuneration definitely related to such service. I do not, however, think that such is the true view of the matter. When section 10(6) speaks of a trade, professional or other similar association performing specific services for its members for remuneration, it contemplates, I think, services in regard to matters outside the mutual dealings for which the association was formed and for the transaction of which it exists as a mutual association. If performance of functions even in regard to matters within the objects of the association as a mutual association be performance of specific service within the meaning of the sub-section, discharge of no function can be outside it and everything done would be specific service performed. That, I do not think, is what the sub-section means and intends. It contemplates, in my view, the performance of additional and special functions, outside the ambit of the dealings which give the association the character of a mutual association and the performance of which is the very object of its formation and the essence of its constitution as an undertaking. The principal object of the assessee company is to facilitate the transaction of business on the stock exchange by its members and to that end it maintains a list of approved companies, transactions in the shares of which is permitted on the stock exchange and to which the business of the members is limited, the list being added to or subtracted from time to time. One of the constituent elements of the activities of the assessee company as a mutual association is thus the maintenance of a list of approvable and approved companies for the facilitation of the business of share-dealing, carried on by its members on the stock exchange. In view of such objects and functions of the assessee, I do not think that simply because an application for the inclusion of a new company in the list is to be made by a member or because on the name of a new company being included, the members get the benefit of being able to deal in its shares, it can be said that when the assessee enlists the name of a new company, it performs a specific service for its members as contemplated by section 10(6). Less can it be said of the fee received that it is remuneration definitely related to the specific service, because although it is definitely related to the enlistment, it cannot properly be said to be remuneration therefor, as the wages or monetary reparation charged particularly for the labour undergone or the trouble taken.
For the reasons given above the answer to the question referred should, in my opinion, be as follows :
Clause (a) :
As to the sum of Rs. 15,687... No.
As to the sum of Rs. 60,750... No.
Clause (b) :
As to the sum of Rs. 16,000... No.
As to the sum of Rs. 600... Not pressed.
The assessee will have the costs of this reference. Certified for two counsel.
SARKAR, J. - I agree.
Reference answered accordingly.