Indian Kanoon - Search engine for Indian Law

The Indian Chamber of Commerce is a company registered under s. 26 of the Indian Companies Act, 1913. Its memorandum and articles of association spell out the broad objects and there is no doubt that they fall within the sweep of the expression 'the advancement of any . . . Object of general public utility' as set down in s. 2 (15) of the Act. Briefly put, they are primarily promotional and protective of Indian trade interests and other allied service operations. A general concluding clause authorizes it 'to do all other things as may be Conducive to the development o trade, commerce and industries or incidental to attainment of the above objects or any of them'. It is clear from clauses 4 and 8 of the Memorandum of Association that the Members of the Chamber do not and cannot stand to gain personally since no portion of 'income and property of the association' shall be paid . . . directly or indirectly, by way of dividend or bonus or otherwise howsoever by way of profit to the persons who at any time are . . . Members of the Association . . . '. Even on the dissolution of the Association the Members cannot claim any share in the assets. These highlight the fundamental fact that the Chamber, by and large, strives to advance the general trade interests of India and Indians without [916] 1 S.C.R. 471 seeking to make profits for its Members. In the light of this Court's decision in C.I.T v., Andhra Chamber of Commerce(1) one may readily state that the Chambers advance objects of general public utility and, prima facie more into the exclusionary area of charitable purpose. However, the bone of contention in this case is as to whether the three source of income, viz., (a) arbitration fees levied by the Chamber; (b) fees collected for the certificates of origin; and (c) share of profit in M/s. Calcutta Licensed Measures for issue of certificates of weighment and Measurement fall within the exclusion. It may be mentioned that all these three services were extended to Members and non-Members or, rather, to the trade generally. Had the law bearing on 'charitable purpose' been what it was prior to 1961, the Chamber would have won hands down may be. But then there is a significant change in the definition of 'charitable purpose' by the addition of nine new words which cut back on the amplitude of the expression in the prior Act. The straight question to be answered here is whether in plan English the there activities which have yielded profits to the chamber involve 'the carrying on of any activity for profit', uncomplicated by casuistic, nicetics, semantic nuances and case-law conflicts. Unfortunately, legislative simplicity has not been accomplished by the draftsman in the amended definition and, consequently, interpretative complexity persists. The Judges of the Andhra Pradesh High Court in A. P. State Road Transport Corporation v. C.I.T.(2) observed, while considering the import of s. 2(15) of the 1961 Act:

charitable purpose' on the view that these activities were for profit the Appellate Tribunal took a contrary view reversing the concurrent findings of the Income-tax officer and the Appellate Assistant Commissioner. The conclusion of the Tribunal was that s. 2(15) applied but the High Court on a reference under s. 256(1) of the Act, answered the question in favour of the Revenue.

We have indicated earlier that the various High Courts have taken contrary views. Kerala has consistently held on facts substantially identical that s. 2(15) is attracted. Andhra Pradesh has concurred, while Calcutta and Mysore have ranged themselves on the opposite side. A recent decision of this Court earlier mentioned has given some telling guidelines although the precise facet pressed before us may not be said to have been wholly covered by it.

The true test is to ask for answers to the following question (a), Is the object of the assessee one of general public utility? (b) Does the advancement of the object involve activities bringing in moneys ? (c) If so, are such activities undertaken (i) for profit or (ii) without profit ? Even if (a) and (b) are answered affirmatively, if (c) (i) is answered affirmatively, the claim for exemption collapses. The solution to the problem of an activity being one for or irrespective of profit is gathered on a footing or facts. What is the real nature of the activity? one which is ordinarily carried on by ordinary people for gain'? Is there a built in prescription in the constitution against making a profit? Has there been in practice, profit from this venture ? Although this last is a weak test. The mere fact that a service is rendered is no answer to chargeability because all income is often derived by rendering some service or other.