Full Judgment Text
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PETITIONER:
COMMISSIONER OF INCOME-TAX, MADRAS
Vs.
RESPONDENT:
ANDHRA CHAMBER OF COMMERCE
DATE OF JUDGMENT:
01/10/1964
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
SUBBARAO, K.
SIKRI, S.M.
CITATION:
1965 AIR 1281 1965 SCR (1) 565
CITATOR INFO :
R 1972 SC 273 (5)
RF 1972 SC 763 (23)
RF 1974 SC1527 (12)
R 1975 SC 506 (3,4,5)
D 1976 SC 10 (26,43)
F 1976 SC 348 (4,8)
R 1976 SC1836 (18)
R 1980 SC 387 (5,6,40,83)
RF 1981 SC1408 (6,7)
R 1981 SC1462 (7)
APL 1981 SC1765 (1)
RF 1986 SC1054 (1,17)
ACT:
Indian Income Tax Act, 1922 (11 of 1922), s. 4(3)
(i)--Charitable purpose, meaning of--Company’s object to
promote trade, commerce and industry, whether charitable-
Urging or opposing legislation affecting trade etc. Object
whether political.
HEADNOTE:
The assessee company--Me Andhra Chamber of Commerce-had as
its main object the promotion, protection, and development
of trade, commerce and industry in India. It owned a
building where it had its offices, and those parts of it not
in the company’s own use were let out to tenants. In
income-tax proceedings the company claimed exemption in
respect of the rental income under- s.4(3) (i) of the Indian
Income-tax Act, 1922. The claim was negatived by the
assessing and appellate authorities. The High Court,
however, held that the company was a charitable institution
and its income from property was exempt under s. 4(3) (i).
The Revenue appealed to the Supreme Court by special leave.
It was contended by the appellant that the property was not
held by the company for a charitable purpose within the
meaning of s. 4(3) (i), that the objects of the company were
vague, that the benefit contemplated by the Memorandum of
Association was not to the public generally but to the
members of the company only, and that the objects of the
company were political it being open to it to appropriate
the entire income for political purposes.
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HELD: (i) The term charitable purpose as defined in the
Act was inclusive and not exclusive. It included objects of
general public utility. The object of the assessee company-
promotion of trade and commerce in the country-was an object
of general public utility, as not only the trading class but
the whole country would benefit by it. It is not necessary
that the benefit must include all mankind. It is sufficient
if the intention be to benefit a section of the public as
distinguished from specified individuals. [571 F-H].
Commissioners of Inland Revenue v. Yorkshire Agricultural
Society, [1928] 1 K.B. 611 and The institution of Civil
Engineers v. Commissioners of Inland Revenue, 16 T.C. 158,
relied on.
Commissioner of Income-tax Bombay Presidency, Sind and
Baluchistan v. The Grain Merchants’ Association of Bombay, 6
I.T.R. 427, disapproved.
(ii) There was nothing vague about the company of general
public utility such as promotion, protection, aiding and
stimulation of trade, commerce need not to be valid, specify
the modus or the steps by which the objects may be achieved
or secured. [573 A-B].
Runchordas Vandrawandas v. Parvati Bai L.R. 26 I.A. 71,
Commissioners of Inland Revenue v. National Anti-Vivisection
Society, 28 T.C. 311 and Baddeley and others (Trustees of
the Newtown Trust) v. Commissioners of Inland Revenue, 35
T.C. 661, distinguished.
(iii) The argument that it was only for the benefit of
the trading classes ,in Andhra Desa that the funds of the
company could be utilised did not stand scrutiny. [574 D-E].
566
(iv) It cannot be said that a purpose would cease to be
charitable even if public welfare is intended to be secured
thereby if it includes the taking of steps to urge or oppose
legislation affecting commerce, trade or manufacture. If
the primary Purpose be advancement of objects of general
public utility, it would remain charitable even if an
incidental entry into the political domain for achieving
that purpose e.g. promotion of or opposition to legislation
concerning that purpose is contemplated. The object
mentioned in the Memorandum of Association was that the
assessee may take steps to urge or oppose legislative or
other measures affecting trade, commerce, or manufacture.
Such an object must be regarded as purely ancillary or
subsidiary and not the primary object. [575 G-H; 580 B-C].
In re the Trustees of the Tribune, 7 I.T.R. 415 and All
India Spinnere Association v. Commissioners of Income-tax,
Bombay, 12 I.T.R. 482, relied on.
Pemsel v. Commissioner for special Purposes of Income Tax,
[1891] A.C. 531 and Bowman v. Secular Society Ltd., [1917]
A.C. 406, referred to.
Rex v. The Special Commissioners of Income-tax (ex-parte The
Incorporated .Association of preparatory schools) 10 T.C 73,
The Commissioners of Inland Revenue v.The temporance council
of the Christian Churches of England and Wales, 10 T.C. 748,
and Laxman Balwant Bhopatkar by Dr. Dhananjaya Ramachndra
Charity commissioner, Bombay, [1963] 2 S.C.R. 625,
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 941. 946 of
1963.
Appeals from the judgment dated February 22, 1961 of the
Madras High Court in Case Referred No. 121 of 1956.
K. N. Rajagopal Sastri, R. H. Dhebar and R. N. Sachthey,
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for the appellant (in all the appeals).
A. V. Viswanatha Sastri, K. Rajendra Chaudhuri and K. R.
Chaudhuri, for the respondent (in all the appeals).
The Judgment of the Court was delivered by -
Shah J. The Andhra Chamber of Commerce-hereinafter called
the assessee’s a Company incorporated under the Indian
Companies Act 7 of 1913. The assessee was permitted under
S. 26 of the Act to omit the word "Limited" from its name by
order of the Government of Madras.
The following are the principal objects of the Memorandum of
Association of the assessee :
(a) To promote and protect trade, commerce and industries
of India, in the Province of Madras and in particular in the
Andhra country.
(b) To aid, stimulate and promote the development of trade,
commerce and industries in India, or
567
any part thereof with capital principally provided by
Indians or under the management of Indians.
(c) To watch over and protect the general commercial
interests of India or any part thereof and the interests of
the Andhras in particular engaged in trade, commerce or
manufacture -in India and in particular the Andhra Desa.
(y) To do all -such other things as may be conducive to the
preservation and extension of trade, commerce, industries
and manufactures or incidental to the attainment of the
above objects or any of them.
Clauses (d) to (x) are incidental to the principal objects.
By cl. 4 of the Memorandum of Association it was provided
that the income and property of the assessee shall be
applied solely towards the promotion of its objects as set
forth therein and no portion thereof shall be paid or
transferred, directly or indirectly, by way of dividends,
bonuses or otherwise howsoever by way of profit to its
members.
On December 2, 1944 the assessee purchased a building and
made substantial alterations, additions and improvements
therein. The assessee then moved its offices into that
building on May 14, 1947 and let out to tenants the portion
not required for its use. The income of the assessee is
obtained from subscriptions and donations collected from its
members and rent received from the building. The following
table sets out in columns 3 & 4 the net annual value of the
property less -the statutory deductions permissible under S.
9 of the Income-tax Act, 1922 and the net excess of
expenditure over the income of the assessee (other than the
rental income) incurred in connection with all its
activities for the assessment years relating to which
dispute arises in this group of appeals
-----------------------------------------------------------
Previous year Assessment Amount Net excess
(calendar year) year Rs. Rs.
-----------------------------------------------------------
(1) (2) (3) (4)
-----------------------------------------------------------
1947 1948-49 3,400 7,431
1948 1949-50 6,154 7,139
1949 1950-51 6,928 5,266
1950 1951-52 5,740 10,173
1952 1953-54 8,072 13,672
1953 1954-55 8,072 17,397
-----------------------------------------------------------
In proceedings for assessment before the Second Additional
Income-tax Officer, City Circle 1, Madras, it was contended
that
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Sup./65-11
568
the annual value of the building was not assessable in its
hands as the assessee was a charitable institution within
the meaning of s. 4(3) (i) of the Income-tax Act, 1922. In
the alternative, it was contended that the excess of
expenditure over income should be set off against such
income if the annual value is held assess,able. The Income-
tax Officer rejected the contentions of the assessee and
assessed its income from property on the basis of net annual
value in the six assessment years without debiting the
-expenditure in excess of income (other than rent) against
the net annual value.
The assessee appealed to the Appellate Assistant Commis-
sioner against all the orders of assessments. The Appellate
Assistant Commissioner held that the assessee not being a
charitable institution the income in question was not exempt
under s. 4(3) (i). He also rejected the alternative
contention, for in his view, there was no specific profit-
making activity of the assessee the loss from which could be
set off against its other income.
Appeals were then taken to the Income-tax Appellate Tribu-
nal. The Tribunal held that the assessee was not exempt
within the meaning of s. 4(3) (i) from liability to pay
income-tax, because the activities of the assessee were
intended for the benefit primarily of its members and
"embraced only collective action on behalf of all its
constituent members" which "could not be said to be the
result of any trade or business or vocation carried on by
it".
At the instance of the assessee the Tribunal referred the
following questions to the High Court :
"(1) Whether the aforesaid income from
property owned by the assessee is exempt under
S. 4 (3) (i) for the aforesaid six years of
assessment ?
(2) If the answer to the above question is
in the negative, whether the activities of the
assessee amount to a trade or business, the
profit or loss from which is assessable under
S. 10 ?"
The High Court answered the first question in the
affirmative and did not record a formal answer on the second
question. Against the order of the High Court, these
appeals are preferred by the -Commissioner of Income-tax,
with certificate granted by the High Court under S. 66A (2)
of the Indian Income-tax Act.
We are concerned in this group of appeals with the assess-
ment of income of the assessee in the years 1948-49 to 1954-
55
569
with the omission of the assessment year 1952-53. Between
the years 1948-49 to 1952-53 there has been some change in
s. 4(3) (i) which before it was amended by Act 25 of 1953
with effect from April 1, 1952 read as follows :
"Any income, profits or gains falling within
the following classes shall not be included in
the total income of the person receiving them
:
(i) Any income derived from property held
under trust or other legal obligation wholly
for religious or charitable purposes, and in
the case of property so held in part only for
such purposes, the income applied, or finally
set apart for application thereto."
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By the last paragraph of sub S. (3) "charitable purpose" was
defined as including relief of the poor, education, medical
relief, and the advancement of any other object of general
public utility, but nothing contained in cl. (i) or cl. (i)
or cl.(i.a)or cl. (ii) shall operate to exempt from the
provisions of the Act that part of the income of a private
religious trust which does not enure for the benefit of the
public. By the amendment made by S. 3 of the Indian Income-
tax (Amendment) Act 25 of 1953, cls. (i) and (i-a) as they
originally stood were amalgamated. It is common ground that
by the amendment, no alteration which has a material bearing
on the question to be decided in these appeals has been
made.
Income from property qualifies for exemption under S. 4(3)
(i) if two conditions co-exist (i) the property is held
under trust or other legal obligation; and (ii) it is so
held wholly or in part for religious or charitable
purposes-. The building which the assessee owns is by
virtue of cl. 4 of the Memorandum of Association held under
a legal obligation to apply its income to purposes specified
in the Memorandum of Association. It is not the case of the
assessee that the objects of incorporation are relief of the
poor, education or medical relief, and the only question
canvassed at the Bar is whether the purposes for which the
assessee stands incorporated are objects of general public
utility, within the meaning of the expression "charitable
purpose" in S. 4(3).
The principal objects of the assessee are to promote and
protect trade, commerce and industries and to aid, stimulate
and promote the development of trade, commerce and
industries in India or any part thereof. By the achievement
of these objects, it is not intended to serve merely the
interests of the members of
570
the assessee. Advancement or promotion of trade, commerce
and industry leading to economic prosperity enures for the
benefit of the entire community. That prosperity would be
shared also by those who engage in trade, commerce and
industry but on that account the purpose is not rendered any
the less an object of general public utility. It may be
remembered that promotion and protection of trade, commerce
and industry cannot be equated with promotion and protection
of activities and interests merely of persons engaged in
trade, commerce and industry.
In Commissioners of Inland Revenue v. Yorkshire Agricultural
Society(1) an association called the Yorkshire Agricultural
Society was formed with the object of holding annual
meetings for the exhibition of farming stock, implements
etc., and for the general promotion of agriculture. All
prizes were open to competition in the United Kingdom, but
certain privileges were attached to membership of the
Society. The income of the Society was derived from entry
fees and gate receipts, local subscriptions for prizes,
interest on investments, and subscriptions of members. It
was held by the Court of Appeal that on the facts found by
the Commissioners the Society was established for a
charitable purpose and that purpose continued
notwithstanding the incidental benefits enjoyed by members
of the Society; and that those benefits did not prevent the.
Society from being established for a "charitable purpose
only".
In Halsbury’s Laws of England, 3rd Edn., Vol. 4 at p. 236,
Art 517, it is stated
"An association or institution may benefit its
members in the course of carrying out its main
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charitable purpose and this alone will not
prevent it from being a charity. It is a
question of fact whether there is so much
personal benefit, intellectual or
professional, to the members of a society or
body of persons as to be incapable of being
disregarded."
In The Institution of Civil Engineers v. The Commissioners
of Inland Revenue (2) it was held that the Institution of
Civil Engineers founded and incorporated by Royal Charter
for the general advancement of mechanical science, and more
particularly for promoting the acquisition of that species
of knowledge which constitutes the profession of a civil
engineer was a body of persons established for charitable
purposes only. The Special Commissioners having regard in
particular to the provisions of the supplemental charter of
1922, by which the corporate members
(1) [1928] 1 K.B. 611.
(2) 16 T.C. 158.
571
of the Institution were authorised to use the title of
member, or associate member, as the case might be, found
that a substantial part of the objects of the Institution
was to benefit the member-& and rejected the claim of the
Institution for exemption. The Court of King’s Bench
disagreeing with the Special Commisssioners held that the
benefit of members was purely incidental to the main purpose
of the Institution which was established for charitable
purposes only. The Court of Appeal found that the only
purpose for which the Institution was established was the
promotion of science and that purpose had never been added
to or varied by any of the supplemental charters : it
followed therefore that the Institution was established for
charitable purposes only, notwithstanding that it is of
advantage to a civil engineer in his profession to be a
member of the Institution, this result not being a purpose
for which the Institution was established, but being
incidental to and consequent upon the way in which the
Institution carries out the charitable purpose for which
alone it was established.
In the promotion of trade, commerce and industries of India
the public is vitally interested and if by the activities of
the assessee that object is achieved, it would be within the
meaning of S. 4(3) (1) of the Act an advancement of an
object of general public utility. In enacting the last
paragraph of S. 4(3) the legislature has used language of
great amplitude. "Charitable purpose" includes not only
relief of the poor, education and medical relief alone, but
advancement of other objects of general public utility as
well. The clause is intended to serve as a special
definition of the expression "charitable purpose" for the
Act : it is again inclusive and not exhaustive or exclusive.
Even if the object or purpose may not be regarded as
charitable in its popular signification as not tending to
give relief to the poor or .for advancement of education or
medical relief, it would still be included in the expression
"charitable purpose" if it advances an object of general
public utility. The expression "object of general public
utility" however is not restricted to objects beneficial to
the whole mankind. An object beneficial to a section of the
public is an object of general public utility. To serve a
charitable purpose, it is not necessary that the object
should be to benefit the whole of mankind or even all
persons living in a particular country or Province. It is
sufficient if the intention be to benefit a section of the
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public as distinguished from specified individuals.
Observations to the contrary made by Beaumont C.J., in
Commissioner of Income-tax Bombay Presi-
572
dency, Sind and Baluchistan v. The Grain Merchants’
Association of Bombay(1) that "an object of general public
utility means an object of public utility which is available
to the general public as distinct from any section of the
public" and that objects of an association "to benefit works
of public utility confined to a section of the public, i.e.
those interested in commerce" are not objects of general
public utility, do not correctly interpret the expression
"objects of general public utility". The section of the
community sought to be benefited must undoubtedly be suffi-
ciently defined and identifiable by some common quality of a
public or impersonal nature: where there is no common
quality uniting the potential, beneficiaries into a class,
it may not be regarded as valid.
It is true that in this case there is in fact no trust in
respect of the income derived from the building owned by the
assessee. But the property and the income therefrom is held
under a legal obligation, for by the terms of the permission
granted by the Government to the assessee to exclude from
its name the use of the word "limited", and by the express
term,% of cl. 4 of the Memorandum of Association the
property and its income are not liable to be utilised only
for the purposes set out in the Memorandum of Association.
Counsel for the revenue submitted that the purposes of the
assessee are vague and indefinite. He submitted that if a
competent Court were called upon, as it may be called upon
to administer the obligation imposed by the Memorandum of
Association, the Court would on account of vagueness of the
objects decline to do so, and therefore the purposes cannot
be regarded as charitable. In the alternative, counsel
contended that the benefit which is contemplated by the
Memorandum of Association was not the benefit to the public
generally, but the benefit to its members to carry on their
business more profitably. In the further alternative,
relying upon cl. 3(g) of the Memorandum of Association,
counsel contended that the objects of the assessee were
political, it being open to the assessee to appropriate the
entire income for political purposes.
But the primary objects of the assessee are to promote and
protect trade, commerce and industries and to aid, stimulate
and promote the development of trade, commerce and
industries and to watch over and protect the general
commercial interests of India or any part thereof. These
objects are not vague or inde-
(1) 6 I.T.R. 427.
573
finite as objects of general public utility. An object of
general public utility, such as promotion, protection,
aiding and stimulation of trade, commerce and industries
need not, to be valid specify the modus or the steps by
which the objects may be achieved or secured. It cannot be
said that if called upon to administer an institution of
which the objects are of the nature set out, the Court would
decline to do so merely on the ground that the method by
which trade, commerce or industry is to be promoted or
protected, aided or stimulated or the general commercial
interests of India are to be watched over or protected are
not specified. Analogy of cases like Runchordas Vandra-
wandas v. Parvati Bhai(1) in which the Privy Council
declared a devise under a will in favour of "dharam" void,
is misleading. In that case the devise was declared void,
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because the expression "dharam" in the view of the Judicial
Committee being law, virtue, legal or moral duty was too
general and too indefinite for the courts to enforce.
Observations by Lord Simonds in Commissioners of Inland
Revenue v. National Anti-Vivisection Society(2) that "One of
the tests, and a crucial test, whether a trust is charitable
lies in the competence of the Court to control and reform
it........... that it is the King as parens patriae who is
the guardian of charity, and that it is the right and duty
of his Attorney-General to intervenue and to inform "the
Court if the trustees of a charitable trust fall short of
their duty. So too it is his duty to assist the Court, if
need be, in the formulation of a scheme for the execution of
a charitable trust. But......... is it for a moment to be
supposed that it is the function of the Attorney-General on
behalf of the Crown to intervene and demand that a trust
shall be established and administered by the Court, the
object of which is to alter the law in a manner highly
prejudicial, as he and His Majesty’s Government may think,
to the welfare of -the State ?" do not assist the case of
the revenue. In the view of Lord Simonds the object of the
trust was political and, therefore, void, and not because it
was vague or indefinite.
In Baddeley and others (Trustees of the Newtown Trust) v.
Commissioners of Inland Revenue(") certain properties were
conveyed to trustees by two conveyances, in one case on
trust, inter alia, for the promotion of the religious,
social and physical well-being of persons resident in the
County Boroughs of West Ham and Leyton by the provision of
facilities for religious
(1) L.R. 26 I.A. 71. (2) 28 T.C. 311, 367.
(3) 35 T.C. 661.
574
services and instruction and for the social and physical
training and recreation of such aforementioned persons who
were members or likely to become members of the Methodist
Church and of insufficient means otherwise to enjoy the
advantages provided and by promoting and encouraging all
forms of such activities, as were calculated to contribute
to the health and well-being of such persons, and in the
other case on similar trusts omitting reference to religious
services and instruction and otherwise substituting "moral"
for "religious". These trusts were, it was held, not for
charitable purposes only. The case arose under the Stamp
Act of 1891, and it was contended that the trusts being
charitable stamp duty at a lower rate was chargeable. The
House of Lords held that the trust was not charitable. It
was observed by Lord Simonds that "the moral, social, and
physical well-being of the community or any part of it is a
laudable object of benevolence and philanthropy, but its
ambit is far too wide to include purposes which the law
regards as charitable".
These cases have, in our judgment, no bearing on the inter-
pretation of the language used in the Memorandum of Associa-
tion of the assessee.
The argument that it is only for the benefit of the members
or the trading classes in Andhra Desa that the funds of the
assessee could be utilised does not stand scrutiny. It is
clear from the diverse clauses in paragraph 3 of the
Memorandum of Association that the objects were not merely
to benefit the members of the assessee or even the trading
community of Andhra Desa. Reliance was placed upon the
membership clause in the Articles of Association and it was
submitted that only persons speaking Telugu language and
residing in Andhra Desa [as defined in cl. 1 (s) of the
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Articles of Association] could be members. But that
argument is wholly unfounded. By sub-cl. (iii) of cl. 5 a
Chamber of Commerce or Trade Association protecting and
promoting Indian trade, commerce and industry is eligible
for election as a member of the Chamber and the
representative of such a Chamber of Commerce or Trade Asso-
ciation need not necessarily be able to speak and write
Telugu. Similarly by sub-cl. (iv) a Company or Corporation
having its principal office or registered office in Andhra
Desa or a branch in Andhra Desa is eligible to become a
member in its conventional or corporate name and the
representative of such a Company or Corporation need not
necessarily be able to speak or write Telugu. Again under
sub-cl. (v) a Partner of a Firm of a "Private Partnership
Concern" or a Joint Family Business
575
concern, or a Sole Proprietory concern having its principal
office or registered office in Andhra Desa or a branch in
Andhra Desa is eligible for membership of the Chamber and
the representative of such a member need not necessarily be
able to speak or write Telugu. Finally, by sub-cl. (vi) an
individual residing anywhere in India and connected in any
manner with trade, industry and commerce is eligible for
membership of the Chamber provided his mother tongue is
Telugu or he can both speak and write Telugu. There is no
geographical limitation upon the membership qualification,
nor is there limitation about the capacity to speak or write
Telugu. We should not be taken as holding that if there
were such restrictions, the character of the assessee as an
institution for promotion of charitable objects would
thereby be necessarily effected.
Clause 3(g) of the Memorandum of Association on which
strong reliance was placed reads as follows :
"To urge or oppose legislative and other
measures affecting trade, commerce or
manufactures and to procure change of law and
practice affecting trade, commerce and
manufactures and in particular those affecting
trade, commerce and industries in which
Andhras are concerned and obtain by all
acknowledged means the removal, as far as
possible, of all grievances affecting
merchants as a body and mercantile interests
in general."
But cl. 3(g) is not the primary object of the assessee : it
is merely incidental to the primary objects of promotion or
protection of trade, commerce and industries, or to aid,
stimulate and promote the development of trade, commerce and
industries or to watch over and protect the general
commercial interests.
The expression "object of general public utility" in s. 4(3)
would prima facie include all objects which promote the
welfare of the general public. It cannot be said that
merely a purpose would cease to be charitable even if public
welfare is intended to be served thereby if it includes the
taking of steps to urge or oppose legislation affecting
trade, commerce or manufacture. If the primary purpose be
advancement of objects of general public utility, it would
remain charitable even if an incidental entry into the
political domain for achieving that purpose e.g. promotion
of or opposition to legislation concerning that purpose, is
contemplated. In In re The Trustees of the Tribune(1) the
(1) 7 I.T.R. 415.
576
Judicial Committee of the Privy Council was called upon to
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consider whether a trust created under a will to maintain a
printing press and newspaper in an efficient condition, and
to keep up the liberal policy of the newspaper, devoting the
surplus income of the press and newspaper after defraying
all current expenses in improving the newspaper and placing
it on a footing of permanency and further providing that in
case the paper ceased to function or for any other reason
the surplus of the income could not be applied to the object
mentioned above, the same should be applied for the
maintenance of a college which had been established out of
the funds of another trust created by the same testator, was
a charitable purpose within the meaning of S. 4(3). The
Judicial Committee expressed the view that the object of the
settler was to supply the province with an organ of educated
public opinion and this was prima facie an object of general
public utility, and observed
"These English decisions-are in point in so
far only as they illustrate the manner in
which political objects, in the wide sense
which includes projects for legislation in the
interests of particular causes, affect the
question whether the Court can regard a trust
as being one of general public utility. In
the original letter of reference it was not
suggested by the Commissioner that the
newspaper was intended by its founder to be a
mere vehicle of political propaganda, and in
the case of Sardar Dyal Singh it seems unrea-
sonable to doubt that his object was to
benefit the people of Upper India by providing
them with an English newspaper-the
dissemination of news and the ventilation of
opinion upon all matters of public interest.
While not perhaps impossible it is difficult
for a newspaper to avoid having or acquiring a
particular political complexion unless indeed
it avoids all reference to the activities of
Governments or legislatures or treats of them
in an eclectic or inconsistent manner. The
circumstances of Upper India in the last
decade of the nineteenth century would
doubtless make any paper published for Indian
readers sympathetic to various movements for
social and political reform. But their
Lordships having before them material which
shows the character of the newspaper as it was
in fact conducted in the testator’s lifetime,
have arrived at the conclusion that questions
of politics and legislation
577
were discussed only as many other matters were
in this paper discussed and that it is not
made out that a political purpose was the
dominant purpose of the trust."
In All India Spinners’ Association v. Commissioner of
Incometax, Bombay(1) the assessee was formed as an
unregistered association by a resolution of the All India
Congress Committee for the development of village industry
of hand-spinning and hand-weaving. The Association was
established as an integral part of the Congress
Organisation, but it had independent existence and powers
unaffected and uncontrolled by politics. The objects of the
Association, amongst others, were to give financial
assistance to khaddar organisations by way of loans, gifts
or bounties, to help or establish schools or institutions
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where handspinning is taught, to help and open khaddar
stores, to establish a khaddar service, to act as agency on
behalf of the Congress to receive self-spun yarn as
subscription to the Congress and to issue certificates and
to do all the things that may be considered necessary for
the furtherance of its objects, with power to make
regulations for the conduct of affairs of the Association of
the Council and to make such amendments in the present
constitution, as may be considered from time to time. The
funds of the Association consisted mostly of donations and
subscriptions, and out of the funds charkas and handlooms
were purchased and supplied to the inhabitants free of
charge. Raw cotton was supplied to the poor people to be
spun into yarn and the yam so spun along with the yam
acquired by the Association were supplied to other poor
people for hand-weaving. The income of the Association was
treated by the Commissioner of Incometax as not exempt under
s. 4(3) (i) of the Indian Income-tax Act inasmuch as (i) the
dominant purpose of the Association was political, (ii) even
assuming it was not political, the dominant purpose was not
in any event a valid charitable purpose in law, and (iii)
some of the objects were not clearly charitable objects.
The Judicial Committee held that the income of the
Association was derived from property held under trust or
other legal obligation wholly for charitable purposes and
the English decisions on the law of charities not based upon
any definite and precise statutory provisions were not
helpful in construing the provisions of S. 4(3) (i) of the
Indian Income-tax Act. The words of S. 4(3) were largely
influenced by Lord Macnaghten’s definition of charity in
Pemsel v. Commissioners for Special Purposes of Income-Tax
(2) , but that definition had no statutory
(1) 12 I.T.R. 482. (2) [1891] A.C. 53
578
authority and was not precisely followed in the most
material particulars; the words of the section being "for
the advancement of any other object of general public
utility" and not as Lord Macnaghten said "other purposes
beneficial to the community". The Judicial Committee
observed that the primary object of the Association was
relief of the poor and apart from that ground there was good
ground for holding that the purposes of the Association
included advancement of other purposes of general public
utility. The Judicial Committee then held :
"These words, their Lordships think, would
exclude the object of private gain, such as an
undertaking for commercial profit though all
the same it would sub-, serve general public
utility. But private profit was eliminated in
this case. Though the connexion in one sense
of the Association with Congress was relied on
as not consistent with ’general public
utility’ because it might be for the
advancement primarily of a particular party,
it is sufficiently clear in this case that the
Association’s purposes were independent of and
were not affected by the purposes or
propaganda of Congress."
The Indian legislature has evolved a definition of the ex-
pression "charitable purpose" which departs in its material
clause from the definition judicially supplied in Pemsel’s
case(1), and decisions of English Courts, which proceed upon
interpretation of language different from the Indian statute
have little value. We, therefore, do not propose to deal
with the large number of English cases cited at the Bar,
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except to mention three, which declared trusts for political
purposes invalid.
In Rex v. The Special Commissioners of Income-tax (ex-parte
The Headmasters’ Conference) and Rex v. The Special Com-
missioners of Income Tax (ex-parte) The Incorporated
Association of Preparatory School(1) it was held that a
conference of Headmasters incorporated under the Companies
Act as an Association limited by guarantee, of which under
the Memorandum of Association income was to be applied
towards the promotion of its expressed objects, one of which
was the promotion of or opposition to, legislative or
administrative educational measures, the holding of
examinations, etc. was not a body of persons established for
charitable purposes only within the meaning of the Income
Tax Acts. Similarly an incorporated Association of
Preparatory Schools incorporated under the Companies Act as
an Association limited by guarantee, income
(1) [1891] A.C. 531.
(2) 10 T.C. 73
579
whereof was to be applied solely towards the promotion of
its expressed objects which included the advancement and
promotion of, or opposition to, legislative or
administrative educational measures etc. was not an
association whose income was applicable to charitable
purposes only. The Court of King’s Bench held in the case
of each of the two trusts that because the income could be
utilised for promotion of, or opposition to, legislative or
administrative educational measures, and those being the
primary objects, the income was not liable to be applied
solely to charitable purposes.
In The Commissioners of Inland Revenue v. The Temperance
Council of the Christian Churches of England and Wales (1) a
Council constituted by resolution at a meeting of
representatives of the temperance Organisation of the
Christian Churches of England and Wales, the purpose of
which being united action to secure legislative and other
temperance reform was held not to be a council established
for charitable purposes only, nor was its income applicable
to charitable purposes only, and that it was therefore not
entitled to the exemption sought.
In Bowman v. Secular Society Ltd.(2) Lord Parker observed:
"A trust for the attainment of political
objects has always been held invalid, not
because it is illegal but because the Court
has no means of judging whether a proposed
change -in the law will or will not be for the
public benefit."
This Court in a recent judgment, Laxman Balwant Bhopatkar by
Dr. Dhananjaya Ramchandra Gadgil v. Charity Commissioner,
Bombay (3) considered whether for the purposes of the Bombay
Public Trust Act 29 of 1950 a trust to educate public
opinion and to make people conscious of political rights was
a trust for a charitable purpose. The Court held (Subba Rao
J., dissenting) that the object for which the trust was
founded was political, and political purpose being not a
charitable purpose did not come within the meaning of the
expression "for the advancement of any other object of
general public utility" in S. 9(4) of the Bombay Public
Trusts Act, 1950. The definition of "Charitable purpose" in
s. 9 of the Bombay Public Trusts Act closely follows the
language used in the definition given under the Income-tax
Act s. 4(3). But in Laxman Balwant Bhopatkar’s case(1), as
in the cases of the Courts in England which we
(1) 10 T.C. 748. (2) [1917] A.C. 406, 442.
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(3) [1963] 2 S.C.R. 625.
580
have referred to, it was held that the primary or the
principal object was political and therefore the trust was
not charitable. In the present case the primary purpose of
the assessee was not to urge or oppose legislative and other
measures affecting trade, commerce or manufactures. The
primary purpose of the assessee is, as we have already
observed, to promote and protect trade, ,commerce and
industries to aid, stimulate and promote the development of
trade, commerce and industries and to watch over and protect
the general commercial interests of India or any Part
thereof. It is only for the purpose of securing these
primary aims that it was one of the objects mentioned in the
Memorandum of Association that the assessee may take steps
to urge or oppose legislative or other measures affecting
trade, commerce or manufactures. Such an object must be
regarded as purely ancillary or subsidiary and not the
primary object. -
The appeals therefore fail and are dismissed with costs.
One hearing fee.
Appeals dismissed.
581