Income Tax Appellate Tribunal - Hyderabad
S.R.M.T. Staff Association vs Income-Tax Officer on 11 February, 1986
Equivalent citations: [1986]16ITD448(HYD)
ORDER
T. Venkatappa, Judicial Member
1. Since common points are involved these appeals are being disposed of together.
2. The assessee is a registered society which came into existence on 21-8-1963. Every employee of S.R.M.T. who is a major and literate can be a member of this association. It was contended before the ITO that the assessee is a charitable institution and its income is exempt under Sections 11 and 12 of the Income-tax Act, 1961. The ITO held that this is a mutual society and its benefits are limited to members only who are employees in the organisation. The objects of the society includes sports, recreation, cultural activities and representation of bona fide grievances to the management besides other objectives like financial aid to members, development of co-operatives for the welfare of the members and scholarships for the children of the members. The ITO held that these objectives cannot be considered to be charitable. Further the benefits arc to private individuals or a fluctuating body of private individuals. The relationship between the members is personal in nature and is attributable to the office in which they work. Further the objectives of the assessee cannot be within the purview of the definition of charitable purpose. The nature of the expenditure incurred for providing sports, games, garden parties, etc., to the members indicates that it is not for charitable purpose. It is neither for relief to poor, education, and medical relief and it cannot even come under the residuary object of general public utility. It is only a service association established to look after the welfare of its members to provide recreation for them and to get their grievances redressed by discussion with the managements. The ITO noticed that the assessee has received amounts by way of advertisements, which the assessee claimed as voluntary contributions. The ITO held that the advertisement charges collected from outsiders cannot be termed as voluntary contributions and the amount is taxable as the assessee's income from trading activity. Thus, he rejected the assessee's claim for all the three years.
3. On appeal, the Commissioner (Appeals) agreed with the ITO in the assessment year 1980-81 that the assessee is not an organisation devoted to any charitable objects. With regard to the collections from advertisements in the souvenir, he held that they cannot be considered as donations. The subscriber has not offered the amount as donation. The assessee prescribed rates for the space of advertisement and appeals were issued by the assessee for advertisements. These collections of amount by way of advertisements in an organised and concerted manner would clearly show that the amount was received as advertisement charges but not as voluntary donations. The above order was followed in the assessment years 1981-82 and 1982-83 by the AAC. Against the said orders the assessee has preferred these appeals.
4. The learned counsel for the assessee strongly urged that the society is a charitable one. Not only employees of S.R.M.T. but even a few others are also its members. The objects are charitable in nature. So its income is exempt under Sections 11 and 12. Alternatively it is urged that the amounts received by way of advertisements for the construction of the office building of the association being voluntary donations are not taxable. The learned departmental representative supported the order of the lower authorities.
5. We have considered the rival submissions. The members of the assessee-society are the employees of S.R.M.T. or its allied concerns. The objects of the society include, sports, recreation, cultural activities and representation of bona fide grievances to the management, besides other objectives like financial aid to members, development of co-operatives for the welfare of the members and scholarships to the children of the members. It is clear from the objects that the benefits of the society are confined to private individuals who are employees of S.R.M.T. or its allied concerns. In CIT v. Andhra Pradesh Police Welfare Society [1984] 148 ITR 287, the Andhra Pradesh High Court held as under :
...Here we propose to confine ourselves to the question as to whether the members of the assessee-society, who doubtless are the employees of the police department under the aegis of the State Government, are entitled to the benefit. So, the immediate question is whether the nexus between the Government, which is said to be the employer and the police personnel, the membership of the society is of personal or impersonal nature. That poses, indeed, an interesting question, which the learned counsel for the assessee, Shri Y.V. Anjaneyulu very rightly submitted, i.e., there cannot be any analogy between public employment and private employment. Surely, in the case of private employment, such nexus being personal, is conspicuous. But insofar as public employment is concerned and in particular the Governments formed by, for and of the people is the employer, even if it is to be taken in a restrictive sense, and the employer is the representative of the public or the people. In the ultimate analysis, it is the public that is the employer; qui fadt per alium facit per se and so, to the services rendered by the employees in the public employment, the beneficiaries are the public. Testing, therefore, from that angle, the nexus which exists in case of private employment and which is of personal nature, cannot be said to be so in case of public employment. If that be so, in our judgmemt, the nexus in the case of public employment is its impersonal nature. In fact, we derive considerable assistance in this conclusion from the fact that the armed personnel, who form part of the Government, have been given the benefit under Section 10(23C) of the Act. If, in cases where a fund has been constituted for the benefit of either such armed personnel or their children or their wives, the Central Government has chosen to give expansive definition to Section 10(23C), we see no reason to adopt a restrictive interpretation of the words 'charitable trust' vis-a-vis the personnel in the police department. (p. 295) In the above decision a distinction was made between public employment and private employment. It was held that in the case of private employment such nexus being personal is conspicuous. But insofar as public employment is concerned and in particular the Government formed by, for and of the people is the employer, even if it is to be taken in a restrictive sense and the employer is the representative of the people. Thus, the nexus which exists in the case of private employment which is of personal nature cannot be said to be so in the case of public employment. In view of the ratio laid down in the above decision the contention of the assessee cannot be accepted. The members of the assessee-society are employees of a private employment. They cannot constitute a section of the public. The benefits of the society are confined to private individuals. Thus, the objects of the society are not charitable in nature, and it cannot be treated as a charitable trust.
6. The next contention that has to be considered is whether the amounts received by way of advertisement charges in its souvenir for the construction of the building could be considered as voluntary donations. In CIT v. Trustees of Visha Nima Chanty Trust [1982] 138 ITR 564 (Bom.) the assessee received contributions by way of issue of advertisement space in the souvenir which advertisements were priced from Rs. 100 to Rs. 1,000. A general appeal was also issued to the public for the sale of tickets and advertisements. The assessee received Rs. 83,644 by way of advertisements. The amount collected was used for the purchase of ownership flats to have a permanent home for providing shelter to those who come to Bombay for short duration. On those facts, the Bombay High Court held that the contributions received by way of tickets and for advertisements should be regarded as merely voluntary contributions. In the above decision also the advertisement charges were at prescribed rates and there was also an appeal for advertisements. Even then the Bombay High Court held that the amount received by way of advertisements should be regarded as voluntary contributions. The above decision squarely applies to the instant case. In our view the amounts received by the assessee by way of advertisements in its souvenir should be regarded as voluntary contributions or donations. They cannot be treated as trading receipts.
7. In the result, the appeals are partly allowed.