C.I.T.

Bombay
V
Bar Council Of Maharashtra.
Case No: CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2115 to 2117 of 1980.
Appeals by special leave from the judgment and order dated the 8 the August, 1978 of the
Bombay High Court in Income Tax Reference No. 142 of 1969.
Bench: V.D. Tulzapurkar, E.S. Venkataramiah
Citation: 1981 Indlaw SC 300, (1981) 3 SCC 308, AIR 1981 SC 1462, 1981 (22) CTR 106,
[1981] 130 ITR 28, 1981(1) SCALE 679, [1981] 3 S.C.R. 542, 1981 TAXLR 889, [1981] 6
TAXMAN 1, 1981 UJ 50.

Issue: Whether on the facts and in the circumstances of the case the assessee-Council
could be taken to be a body intended to advance any object of general public utility
falling within s. 2(15) for purposes of s. 11 of the Income Tax Act, 1961?
Facts: The respondent assesse Bar Council of Maharashtra is a body corporate
established under the Advocate's Act, 1961 (Act 25 of 1961) which came into force on
December 28, 1961. During the accounting periods relevant to the assessment years
1962-63, 1963-64 and 1964-65 the assesse derived income from securities (interest) and
other income by way of enrolment fees details which are as follows:
Assessment year

Interest on securities

Other Income

1962-63

Rs. 3,779

Rs. 28,035

1963-64

Rs. 8,629

Rs. 3,04,103

1964-65

Rs. 9,356

Rs. 96,322

The Income Tax Officer subjected to tax the income from both the sources for all the
three years. In appeals preferred to the Appellate Assistant Commissioner it was
contended by the assessee that its other income by enrolment fees was exempt under s.
10 (23A) and interest on securities was exempt from tax under s. 11 of the Income Tax
Act, 1961. The Appellate Assistant Commissioner did not agree with the exemption
claimed under s. 10(23A) in the absence of the Central Government's notification
according approval to the association and with regard to the claim for exemption in
respect of the interest on securities he held that it was not established that the securities
were held on trust for any charitable purpose. He took the view that the main object of
the assessee-Council was to benefit the legal profession (its Members) and, therefore,
the object was not one of general public utility. Accordingly he confirmed the
assessment orders for the three years.
3. The matter was carried in further appeal to the Income Tax Appellate Tribunal and
since by that time the Central Government had accorded approval to the assessee for the
purpose of s. 10 (23A) by a notification dated August 5, 1966 with effect from
December 28, 1961, the Tribunal held that the assessee-Council was entitled to
exemption under s. 10(23A) in respect of its income by way of enrolment fees. In regard

to the income by way of interest on the securities the Tribunal observed that the
character of the body holding the securities was not by itself decisive, that safeguarding
the rights, privileges and interest of advocates on its roll could not be said to be an object
of general public utility, that the real question to be considered under s. 11 was whether
the securities were held for any charitable purpose or not and the tribunal found that
there was no evidence or material on record touching this aspect. It, therefore, remanded
the case back to the Appellate Assistant Commissioner and directed him to dispose of
the case by examining the question as to the purpose for which the securities were held
by the assessee-Council. It observed that if the said securities were held for educational
purpose or for any other charitable purpose then the exemption under s. 11 would be
admissible to the extent available under the law.
4. At the instance of the assessee Council the question set out at the commencement of
this judgment was referred to the High Court for its decision under s. 256(1) of the Act.
The High Court took the view that having regard to the obligatory functions enjoined
upon a State Bar Council under s.6 of the Advocate's Act the assessee-Council could be
regarded as a body constituted for general public utility and that the entire income of the
body would be exempt from tax under s.11 of the Income Tax Act, 1961. In its view the
advancement of any object beneficial to the public or a section of the public as distinct
from an individual or a group of individuals would be a charitable purpose as defined in
s.2 (15) of the Income Tax Act and in this view of the matter the High Court answered
the question in the affirmative and against the Revenue.
5. It is this view of the High Court that is being challenged by the Revenue before us in
these appeals. In support of the appeals counsel for the Revenue sought to raise two
contentions. First, he urged that the relief claimed under s.11 was ruled out by reason of
relief having been obtained by the assessee-Council in respect of its income from
enrollment fees under s.10 (23A) of the Act. According to him s.10 (23A), while
exempting from tax any income of an association or institution established in India
having as its object the control, supervision, regulation and encouragement of the
profession of law, medicine, accountancy and any other profession as the Central
Government may specify, has expressly excluded from exemption such association's or
institution's income chargeable under the head "interest on securities" or "Income from
house properties" or "any income received in rendering any specific service", etc., and,
therefore, what has been expressly excluded from exemption under this provision could

not be or was not intended to be exempt under s.11 of the Act.

6. In other words, the assessee-Council's claim for exemption in respect of interest on
securities under s.11 was ruled out by reason of s.10(23A) of the Act. Secondly, counsel
contended that on merits the High Court's view that the assessee-Council was a body
constituted for advancement of an object of general public utility was erroneous
inasmuch as it was a body established principally for the purpose of safeguarding the
rights, privileges and interest of the advocates on its roll and since such objective merely
served to benefit the members of the profession it was no charitable purpose as defined
by s.2 (15) for purposes of s.11 of the Act. In support of this contention counsel placed
reliance on some English decisions.
7. At the outset it may be stated that we were not inclined to permit counsel for the
Revenue to urge his first contention as in our view the Revenue must be deemed to have
given up the same. We may point out that precisely this very contention was raised by
the Revenue before the Tribunal and was negatived by it. The Tribunal on a detailed
analysis of the concerned provisions took the view that the two provisions were not
mutually exclusive but operated under different circumstances, that s.11 was relatively
wider in its scope and ambit, that while s.10 (23A) granted absolute exemption in
respect of particular types of income s.11 imposed certain conditions for the exemption
but such exemption was available for all sources and there was nothing inherently
improbable or inconceivable about the two provisions operating simultaneously and as
such the claim for exemption under s.11 was available to the assessee-Council provided
it satisfied all the requirements of that provision. We may point out that there are other
allied provisions like for instance sub-s. (23C) in s.10 which clearly indicate that the
Legislature did not intend to rule out s.11 when exemption was claimable under such
specific provisions of s.10.
8. It was after negativing the contention in this manner that the Tribunal went on to
consider the claim for exemption made by the assessee-Council under s.11 but on merits
found that there was no material or evidence on record to show whether or not the
securities were held by the assessee-Council for any of charitable purposes and,
therefore, it remanded the case. The remand order was never challenged by the Revenue
by seeking a reference on the ground that a remand was unnecessary because s.11 was
ruled out by reason of exemption having been obtained by the assessee-Council under
s.10 (23A) of the Act nor was any such contention raised when reference was sought by

the assessee-Council nor when the matter was being argued in the High Court. In these
circumstances it is clear to us that the Revenue acquiesced in the view taken by the
Tribunal that the claim for exemption under s.11 of the Act could not be said to be ruled
out by reason of the provisions of s.10 (23A). We, therefore, proceed to deal with the
second contention which was principally argued before us in these appeals.
9. Under s.11 of the Income Tax Act, 1961, subject to the conditions therein specified,
income derived from property held under trust wholly for charitable or religious
purposes to the extent to which such income is applied to such purposes in India is
exempt from the tax liability under the Act and s.2 (15) gives an inclusive definition of
the expression "charitable purpose" thus:
"Charitable purpose" includes relief of the poor, education, medical relief and the
advancement of any other object of general public utility not involving the carrying on
any activity for profit.
10. It may be noticed that whereas any object of general public utility was included in
the definition of "Charitable purpose" in the 1922 Act, the present definition has inserted
the restrictive words "not involving the carrying on of any activity for profit" which
qualify or govern the last head of charitable purpose. In Commissioner of Income Tax,
Madras v. Andhra Chamber of Commerce-a case decided by this Court under the 1922
Act where the restrictive words were absent-this Court laid down that if the primary or
dominant purpose of a trust or institution was charitable, any other object which by itself
might not be charitable but which was merely ancillary or incidental to the primary or
dominant purpose would not prevent the trust or institution from being a valid charity.
After the addition of the restrictive words in the definition in the 1961 Act, this Court in
Additional Commissioner of Income Tax, Gujarat v. Surat Art Silk Cloth Manufacturers
Association affirmed that the aforesaid test of primary of dominant purpose of a trust or
institution still holds good, that the restrictive words qualify "object" and not the
advancement or accomplishment thereof and that the true meaning of the restrictive
words was that when the purpose of a trust or institution was the advancement of an
object of general public utility at was that object of general public utility and not its
accomplishment or carrying out which must not involve the carrying on of any activity
for profit.
11. And applying these tests trading bodies like Andhra chamber of Commerce and Surat
Art Silk Cloth Manufacturers Association have been held to be institutions constituted

with a view to advance an object of general public utility because their primary or
dominant purpose was to promote and protect industry, trade and commerce either
generally or in certain commodities, even though some benefit through some of their
activities did accrue to their members which was regarded as incidental and this Court
held that the income derived from diverse sources by these institutions (rental income
from property in the case of Andhra Chamber of Commerce and income from annual
subscriptions collected from its members and commission of a certain percentage of the
value of licences for import of foreign yarn and quotas for purchase of indigenous yarn
obtained by the assessee from its members in the case of Surat Art Silk Cloth
Manufacturers Association was exempt from tax liability under s.11 of the Act. Reliance
on English decisions would not be of much avail because the definition of charitable
purposes as given in our Act since it embraces 'any other object of general public utility'
goes further than the definition of charity to be derived from the English cases. Under
English law of charity a trust is charitable only if it is within the spirit and intendment of
the Preamble to the Statute of Elizabeth (43 Eliz. ch. 4) and all objects of general public
utility are not necessarily charitable, some may or some may not be, depending upon
whether they fall within the spirit and intendment of the Statute of Elizabeth. Under our
definition every object of general public utility would be charitable subject only to the
condition imposed by the restrictive words inserted in the 1961 Act.
12. It is because of this basic difference between Indian Law and English Law of charity
that Lord Wright in All India Spinners' Assn. v. CIT uttered a warning against blind
adherence to English decisions on the subject thus:
"The Indian Act gives a clear and succinct definition which must be construed according
to its actual language and meaning. English decisions have no binding authority on its
construction and though they may sometimes afford help or guidance, cannot relieve the
Indian Courts from their responsibility of applying the language of the Act to the
particular circumstances that emerge under conditions of Indian life."
13. Having regard to the aforesaid manner in which the definition of "charitable
purpose" given in s.2 (15) has been interpreted by this Court the question that arises for
consideration in these appeals is whether the securities, interest from which is sought to
be exempted from tax liability, were held by the assessee-Council on trust wholly for a
charitable purpose, namely, for the advancement of an object of general public utility?
Admittedly the assessee-Council is not indulging in any activity for profit and hence the

aspect of considering the applicability of the restrictive words does not arise and the
answer to the question must depend upon the nature or character of the functions and
activities which the assessee-Council can undertake under the Advocates Act, 1961 for it
is clear that it cannot go beyond what is prescribed by that Act.
14. The Preamble of the Advocates Act, 1961 shows that it was enacted with a view to
amend and consolidate the law relating to legal practitioners and to provide for the
constitution of Bar Councils and an All India Bar. Under s.3 of the Act Bar Councils are
constituted for various States and the assessee-Council happens to be a State Bar
Council for Maharashtra. S. 4 provides that every Bar Council shall be a body corporate
having perpetual succession and a common seal, with power to acquire and hold
property both movable and immovable and to contract, and may by the name by which it
is known sue or be sued. s. 6 is the material provision which sets out both obligatory as
well as optional functions of every State Bar Council and so far as is material runs thus:
"6.(1)The functions of a State Bar Council shall be(a) to admit persons as advocates on its roll;
(b) to prepare and maintain such roll;
(c) to entertain and determine cases of misconduct against advocates on its roll;
(d) to safeguard the rights, privileges and interests of advocates on its roll;
(e) to promote and support law reform;
(ee) to conduct seminars and organise talks on legal topics by eminent jurists and
publish journals and papers of legal interest;
(eee) to organise legal aid to the poor in the prescribed manner;
(f) to manage and invest the funds of the Bar Council;
(g) to provide for the election of its members;
(h) to perform all other functions conferred on it by or under this Act;
(i) to do all other things necessary for discharging the aforesaid functions.
(2) A State Bar Council may constitute one or more funds in the prescribed manner for
the purpose of(a) giving financial assistance to organise welfare schemes for the indigent, disabled or
other advocates;

(b) giving legal aid or advice in accordance with the rules made in this behalf."
15. Sections 9, 9A and 10 of the Act provide for the constitution of various committees
for the purposes mentioned therein. S. 15 confers power on the Bar Council to make
rules to carry out the purposes of this Chapter. The rest of the provisions of the Act are
not material for the purpose of the issue under consideration.
16. Counsel for the Revenue contended that the primary object or purpose with which
the Bar Council of a State is constituted is to benefit the members of the legal profession
inasmuch as under s.6 (1) (d) it is an obligatory function of the State Bar Council to
safeguard the rights privileges and interests of the advocates of its roll and that other
functions like promotion of law reform, conducting law seminars etc. are incidental
objects and the benefit to the public is remote or indirect or incidental and, therefore, the
assessee-Council could not be regarded as a body intended to advance the object of
general public utility. It is impossible to accept this contention. It is clear that sub-s. (1)
lays down the obligatory functions while sub-s. (2) indicates what are the optional or
discretionary functions that could be undertaken by the State Bar Council and from
amongst the obligatory functions it will be wrong to pick out one and say it is the
primary or dominant object or purpose. All the clauses of sub-s. (1) will have to be
considered in light of the main objective sought to be achieved as indicated in the
Preamble.
17. The functions mentioned in cls. (a) and (b) of sub-s. (1), namely, to admit persons as
advocates on its roll and to prepare and maintain such roll, are clearly regulatory in
character intended to ensure that persons with requisite qualifications who are fit and
otherwise proper to be advocates are available for being engaged by the litigating public;
the function prescribed in cl. (c) has been enjoined upon avowedly with the objective of
protecting the litigating public from unscrupulous professionals by taking them to task
for any misconduct on their part; it is also one of the obligatory functions of a State Bar
Council to promote and support measures for law reform as also to conduct law
seminars and organise talks on legal topics by eminent jurists, obviously with a view to
educate the general public, the function prescribed by cl. (eee) is obviously charitable in
nature, the same being to organise legal aid to the poor. Amongst these various
obligatory functions one under cl. (d) is to safeguard the rights, privileges and interests
of the advocates on its roll and it is difficult to regard it as a primary or dominant
function or purpose for which the body is constituted, Even this function apart from

securing speedy discharge of obligations by the litigants to the lawyers ensures

maintenance of high professional standards and independence of the Bar which are
necessary in the performance of their duties to the society.
18. In other words, the dominant purpose of a State Bar Council as reflected by the
various obligatory functions is to ensure quality service of competent lawyers to the
litigating public, to spread legal literacy, promote law reforms and provide legal
assistance to the poor while the benefit accruing to the lawyer members is incidental. It
is true that sub-s. (2) provides that a State Bar Council may constitute one or more funds
for the purpose of giving financial assistance to organise welfare schemes for the
indigent, disabled or other advocates; but it is an optional or discretionary function to be
undertaken by the Council. Apart from that, admittedly the assessee-Council has not so
far constituted any such fund for the purpose specified in the instant case. As and when
such a fund is constituted a question may arise for consideration and the Court may have
to decide whether the function so undertaken by a State Bar Council has become the
dominant purpose for which that Council is operating. Having regard to the Preamble of
the Act and the nature of the various obligatory functions including the one under cl. (d)
enjoined upon every State Bar Council Under s.6 (1) of the Act, it is clear that the
primary or dominant purpose of an institution like the assessee-Council is the
advancement of the object of general public utility within the meaning of s.2 (15) of the
Act, and as such the income from securities held by the assessee-Council would be
exempt from any tax liability under s.11 of the Act.
19. Having come to the aforesaid conclusion on applying the language of our Act to the
nature of functions undertaken by a State Bar Council under the Advocates Act 1961 it
is truly unnecessary to deal with the English decisions cited during the course of
arguments. However, we might indicate that in two cases (Royal College of Surgeons
case and the General Medical Council's) case on an analysis of the functions undertaken
by the two concerned institutions under the Statutes and Charters governing them the
Court came to the conclusion that the institutions were not constituted for charitable
purpose but they were more of professional institutions, the approach being to find out
whether the objects satisfied the limited concept of charity within the spirit and
intendment of the Statute of Elizabeth. In the other two cases (The Yorkshire
Agricultural Society's case and The Institute of Civil Engineers' case the Court took the
view that both the institutions were constituted for charitable purposes entitled the

exemptions under s.37 (1) (b) of the Income Tax Act, 1918, and the benefits accruing to
the members were regarded as incidental.
20. In the result we are of the opinion that the High Court was right in answering the
question in the affirmative and in favour of the assessee. The appeals are accordingly
dismissed with no order as to costs.
Appeals dismissed.

CASES CITED IN THE ABOVE CASE

1. State Bank of Patiala v CIT, Retired Officers Associations1:

Assessee submitted application & sought registration u/s. 12 AA (1) of Act. Commissioner
asked for report from Assesse in respect of application. Assesse opined that since objects of
Trust was charitable, case merited grant of registration u/s. 12AA of Act. Commissioner
noted certain shortcoming in return and asked AO to verify issues like examination of
original trust deed, genuineness of activities. CIT considered submissions and referred to
main objects of society as well as provisions of s. 2(15) and decided issue against assessee.
Hence instant appeal.
Held, association was floated by SBOP officers and membership was opened only for officers
form SBOP and cannot be called for general public utility. Expression 'general public utility'
is not restricted to objects beneficial to whole mankind. It is seen if intention is to benefit a
section of public as distinguished from specified individual. Even if this test is applied, it is
very clear that that association is not meant for the benefit of a section of the public but it is
meant for the benefit of the specific individuals i. e for officers of SBOP. Association is not
open for membership for all employees of SBOP but only of retired officers; therefore,
clearly association is for benefit of particular set of specified individuals and cannot be
construed for purpose of general public utility. Association was formed only for benefit of
officers. Assessee's association cannot be said to be formed for any general public utility as
defined in s. 2(15) of Act. If it is going to be run from contribution of Member officers then
assessee can have easily obtained exemption on basis of mutuality. Tribunal finds nothing
wrong with order of CIT and confirmed same. Appeal dismissed
1 2015 Indlaw ITAT 515

2.

National Stock Exchange Investor Protection Fund Trust V. ADIT, Mumbai2

Assessee/Trust filed its return of income and declared total income as Nil. Assessee during
assessment noticed that he had received interest of Rs. 26, 48, 15,331 and other contributions
of Rs.21,81,71,167 and capital gain of Rs.30 crores. Further, assessee received Rs.
8,45,25,315 and Rs. 4,25,414 from National Stock Exchange of India Limited(NSEIL) and
NSEIL's members and claimed exemption u/ss.10(23)(E)(A), 11 of the Act for remaining
income of Rs.69,80,35,769 which includes capital gain. AO observed that income of Trust
ensures benefit to NSE and its members directly or indirectly and denied benefit u/s. 11 and
12 of the Act in respect of remaining income of Rs.69,80,35,769 which includes capital gains
and declined to allow expenditure claimed and 15 percent of income claimed as exemption.
Aggrieved assessee filed appeal before CIT was without any success and exemption claimed
u/s.10 of the Act was not allowed. Hence, instant appeal whether income of trading members
and its constituents and denial of exemption by AO was justified.
Held, payment of compensation was directly or indirectly benefited to trading members of
NSEIL. However, nothing was brought on record in support of this allegation and certificate
of auditors gave different colour. Therefore, assessee was directed to file this certificate
before AO and demonstrate its claim by bringing cogent material evidence on record. Further,
assessee received contribution in terms of SEBI guidelines from NSCIL and there was no
prohibition in the Act, denying exemption u/s.10 and 11 of the Act and assessee was notified
trust u/ss.10(23)(c)(iv),10(23)(e)(A) of the Act and for claiming exemption contributions
should be received from recognized stock exchange and members thereof - Hence, AO was
directed to dispose this claim following CIT v. Pruthvi Brokers & Share Holders Pvt. Ltd,
2012 Indlaw Mum 1250 - AO was also directed to levy interest u/s. 234B,234C of the Act
and reassess how capital gain had been considered twice. Appeal partly allowed.

3.

Dy. Director of Income-tax v Vidyananda3 Educational Society

2 [2014] 66 SOT 108

3 2014 Indlaw ITAT 582

Assessee got income from Development fees, special fees and other fees etc. and claimed
exemption u/s. 11 of Act, but AO held that assessee would not be entitled for exemption
either u/s. 11 or u/s. 10(23C) in case it collected any money by whatever name it was called
i.e., donation, building fund, auditorium fund etc., over and above prescribed fees for
admission of students, and further AO noted that the assessee had provided fee concessions to
persons specified u/s. 13(3) in violation of s. 13, it was eligible for exemption u/s. 10(23C)
(vi) and not u/s. 11, and that it had not obtained requisite approval under provision, AO also
disallowed depreciation and assessed total income on appeal before CIT directed AO to allow
exemption u/s. 11 of Act, to assessee. Whether CIT was justified in allowing exemption u/s.
11 of Act to assessee - Held, Tribunal was consistently holding that to avail exemption u/s 11
of Act, only requirement was that assessee should have obtained registration u/s 12A of Act
and there was no necessity to obtain approval u/s 10(23C) of Act. Assessee was duly granted
registration u/s 12A of Act, and claimed exemption u/s 11 of Act, therefore, AO could not
deny exemption on reason that assessee's case was not covered u/s 10(23C) of Act and could
not thrust upon assessee for particular deduction, since assessee was having registration u/s
12A of Act, it was entitled for exemption u/s 11, if conditions required under this section was
complied with - Further, Tribunal was of view that this issue was squarely covered by
decision of coordinate bench of Hyderabad Tribunal in case of DDIT Vs. Exhibition Society
in ITA No. 1195/Hyd/2009 - Since issue under consideration was identical case decided
tribunal remitted file to AO to decide. Appeal partly allowed.
4. Shri Sarafa Association v Commissioner of Income Tax4
Assessee Trust had been created on 17-5-1976. Application for registration of the trust
u/s.12A of 1961 Act was made on 2-7-1998. CIT vide order detained that claim of petitioner
for registration u/s.12A r/w s.2 (15) of 1961 Act was not found acceptable. Application
u/s.12A of 1961 Act has been rejected by order. Petitioner contended that in view of
memorandum of association it was entitled to registration and also covered by term as
defined in s.2 (15) of 1961 Act. Hence instant petition.
Held, words 'not involving carrying on of any activity for profit' were omitted by 1983 Act
with effect from 1-4-1984. Application for registration was to be made before 1-7-1973 or
before expiry of period of one year from date of creation of trust. Association was established
on 17-5-1976 whereas application u/s.12A has been made on 2-7-1998 after enforcement of
4

[2007] 163 TAXMAN 228

1983 Act. 'Charitable purpose' includes relief of poor, education, medical relief and
advancement of any other object of general public utility not involving any activity for profit.
Any object of general public utility was included in definition 'charitable purpose' in 1922
Act, definition has inserted the restrictive words 'not involving carrying on of activity for
profit' which qualify or govern the last head of charitable purpose. CIT has denied
registration on ground that claim of petitioner that case falls within ambit of s.2(15) of 1961
Act is not justified. This finding is given for want of any factual material on record. This is
not found to be sustainable without affording the petitioner an opportunity to establish the
same. CIT was required to examine deed as whole and further ought to have considered the
effect of various balance sheets on record. Reference may also be made to section 12A(a) of
1961 Act which obliges the CIT on receipt of application u/s.12A to call for such document
from applicant as he thinks necessary in order to satisfy himself about genuineness of
activities of trust or institution. Since, CIT found claim of petitioner unjustified in absence of
factual material on record, it was obligatory on his part to exercise the power u/s.12A (a) of
1961 Act by calling the requisite information and making the necessary enquiry. Power
having not been exercised the impugned order is not sustainable in law. Respondent No.1 is
directed to re-decide application u/s.12A submitted by petitioner by providing opportunity to
petitioner as well as Department to place the relevant material on record in support of their
respective contentions. Petition disposed of.
5. Mormugao Port Trust v Commissioner of Income Tax, Panaji5
Appellant is a statutory autonomous body of the Government of India. As Major Port
Trusts were not included in the list of specified local authorities eligible for the exemption
under s. 10(20), the assessee made an application to the Commissioner of Income Tax, for
registration under s. 12A as a charitable institution, with a view to fulfilling the
requirement for availing exemption under s. 11. Assessee, prior to insertion of
Explanation in s. 10(20) was treated as a local body and its income was exempt.
Appellant submitted that advancement of an object of General Public Utility has been
held to be a charitable purposes and provisions in the Major Port Trusts Act as regards the
works and services to be provided by the assessee and the manner of utilization of the
funds as laid down in Chapter VIII, highlight inherent charitable nature of activities of the
Port Trusts. Held, if an assessee is an institution, whose object is charitable as defined
under s. 2(15), the institution would be entitled for registration under s. 12A. Assessee
5 2008 (301) ITR(AT) 380

cannot enjoy the status of the local authority but is entitled to apply for the registration
under s. 12A to claim the charitable institution but strictly on merits - No force in the
objection that Major Ports cannot be treated as charitable institutions, because these are
created under a statute - Further, as the assessee-institution is genuinely engaged in the
activities of development and maintenance of Mormugao Port, it fulfils both the
conditions under s. 12AA which are necessary for the registration of the institution under
s. 12A. Impugned order set aside.

6. Calicut Islamic Cultural Society v Assistant Commissioner of Income Tax, Circle

2(1), Kozhikode6:
Assessee was functioning as Charitable Society. Return of income filed by Society/assessee
declared total loss of Rs. 19, 68, 531. Assessee claimed exemption of its entire income u/s.11
of Act. AO examined Memorandum of Association and he found that assessee trust was doing
partly religious and partly charitable activity then they will lose benefit of exemption
u/s.11(1) (a) - AO refused exemption claimed by assessee u/s.11(1)(a) of Act and determined
taxable total income at Rs. 28, 83, 349 - Assessee challenged action of AO before CIT(A) CIT(A) found that appellant was not entitled to exemption u/s.11(1)(a) of Act. Hence instant
appeals.
Held, if clause charitable or religious purposes in s.11(1)(a) is read as charitable and religious
purposes, then purely charitable and purely religious trust will not become eligible for
exemption u/s.11(1)(a) which is not intention of Legislature. Once Registration is granted to
assessee by CIT, AO cannot go into probing objects and purposes of trust or institution and
that is within exclusive domain and jurisdiction of CIT. AO has gone with investigating and
probing basic objects of trust by entering into shoes of CIT and such exercise is not
permissible. Scheme of s.12A of Act, which was applicable prior to introduction of s.12AA, it
cannot be said that it was a mere formality. Getting a registration is one of conditions for
claiming benefits of ss.11, 12 of Act. From language used by Legislature and scheme of
s.12A, it will not be wrong to say that proceedings contemplated under section 12A of Act are
in nature of quasi-judicial proceedings and CIT has to decide whether the applicant trust or
institution are eligible to get the benefits of s.11 or 12 and for deciding eligibility CIT has to
examine byelaws and objects of trust. Even u/s.12A of Act, granting registration was not
6 [2009] 28 SOT 148

merely empty formality. Assessees are eligible to claim exemption u/s.11 of Act. Cancel order
of CIT (A) and direct Assessing Officer to give benefits of s.11 to both these assessees by
treating their income as exempt. Appeals allowed.
Ratio - Provision of s. 11(1) (a) of Act, it requires that there should be nexus between
property held under trust wholly for charitable or religious purposes and income under
consideration
7. Jamsetji Tata Trust v Joint Director of Income Tax7
Exemptions denied, Legality Instant appeal by assessee was directed against order dt. 7-112013 of CIT(A) for A/y 2010-2011 with grounds - Whether order of CIT(A), was justified Held, ground no. 1, was regarding denial of exemption and Tribunal, followed by decision of
HC, in case of Director of Income Tax (Exemption) v. Sheth Mafatlal Gagalbhai foundation
Trust, 2000 Indlaw MUM 446, which held that breach of ss. 13(1)(d), 13(2)(h) would lead to
forfeiture of exemption of income derived from such investment and not entire income would
be subjected to maximum marginal rate of tax u/s 164(2) - Thus, exemption u/s 11 was
available to assessee only on income to extent the same was derived in conformity of s. 11
and applied during year for such purpose of charitable trust. Ground no. 2, was regarding
denial of exemption and Tribunal, followed by various decisions holding that dividend
income on shares and mutual funds and long term capital gain on sale of shares exempt u/ss.
10(34), 10(35), 10(38) respectively and could not be brought to tax by applied ss. 11, 13 of
the Act - Ground no. 3, was regarding education grant given to Indian students for studying
abroad and Tribunal, followed by decisions of Tribunal - Tribunal held that education grant
given to Indian students in India for education/higher education abroad fulfills conditions of
application of money for such purpose in India. Ground no. 4, was regarding denial of
deduction of income applied to objects of trust in India and administrative expenses, as it is
clear that AO denied exemption u/s. 11 and computed income in commercial manner .CIT
had recorded that AO had not made any disallowance on account of administrative expenses Thus, Tribunal, note that AO had computed total income by taking income from various
sources and had not allowed any deduction. In view of Tribunal, finding on question of
exemption u/s. 11, said issue was set aside for AO to reconsider claim in light of Tribunal's
finding on other issues. Ground no. 5, was regarding TDS credit, it was evident from finding
of CIT that AO was directed to verify and allow claim of TDS, therefore, no grievance arises
7 [2014] 148 ITD 388

from impugned order of CIT. Thus, AO was directed to consider and decide claim of TDS
credit - Ground no. 6, was regarding maximum marginal rate of tax applied to entire income,
when short term capital gain raised from sale of shares subjected to STT was chargeable to
tax at 15 percent then maximum marginal rate on such income could not exceed maximum
rate of tax provided under the Act - Tribunal, was of view that short term capital gain on sale
of shares already subjected to STT, was chargeable to tax at maximum marginal rate which
could not exceed rate provided u/s. IIIA of the Act, and said issue was decided in favour of
assessee - Appeal partly allowed.
8. U. P. Forest Corporation v Deputy Commissioner of Income Tax8:
Appellant, Forest Corporation whereby assessment proceedings were taken against it wherein
appellant claimed exemption on ground that it was local authority and was liable for
exemption but, its claim was rejected by AO, On appeal, Tribunal held that appellant was not
local authority - Appellant filed writ petition in HC who allowed appeal and held that
appellant was local authority and it was entitled to exemption u/s.11 (1) (a) of the Act.
Respondents filed appeals before SC wherein it was held that appellant was not local
authority and matter was remanded to AO. Thereafter, AO held that predominant object of
appellant was commercial and its income could not be treated as for charitable purpose Hence, instant Appeals - Whether income of appellant is wholly for charitable purpose as
defined u/s.2(15) of the Act.
Held, income derived from exploitation of forest is commercial activity. However, income,
spent on preservation, supervision and development of forest will be treated for general
public utility and shall be exempt u/s.11(1)(a) of the Act provided other conditions provided
under said provision are satisfied. However, view of Tribunal that as income is derived from
exploitation of forest by appellant. Therefore, its income shall not be exempt u/s.11(1)(a) of
the Act is erroneous. As Tribunal has not applied principle, remit matter back to Tribunal to
decide appeals afresh in accordance with observations made. It will examine total income of
appellant for A/y's in question and thereafter it will take into consideration income applied by
appellant specifically for purpose of preservation, supervision and development of forest.
Further, appellant has not shown that it has complied with condition referred to in s.11(2) of
the Act. In case, income is derived from commercial activities and income is accumulated by
such trust it cannot be held that income was accumulated only for charitable purpose. Hence,
8 2002 Indlaw ALL 369

appellant is not entitled to exemption of any amount accumulated by it. Thus, view taken by
Tribunal in remanding matter of interest is erroneous. Appeal allowed.
Ratio - Where there is no activities of carrying on of any activity for profit then it cannot be
termed as commercial activity.
9. Commissioner of Income Tax v Jodhpur Chartered Accountants Society9
Assessee was society and filed application u/s.12A of the Act. Commissioner of Income Tax
rejected application holding that object of society did not fall within category denoted by
words 'advancement of any other object of general public utility' appearing in s.2(15) of the
Act and as such was not charitable society. Tribunal held that objects of applicant embraced,
within its fold, group of individuals of particular class of society still they formed section of
public distinguished from specified individuals and directed to grant registration to assessee
u/s.12A of the Act. Hence, instant Appeal, Whether assessee fall within purview of s.2(15) of
the Act so as to entitle assessee to registration u/s.12A of the Act.
Held, predominant object of the society is dissemination of knowledge and education of
commercial laws, tax laws for the benefit of general public to inculcate a sense of
responsibility towards the nation and foster law abiding citizens. The object clause of
constitution emphasizes to propagate and disseminate knowledge about the auditing,
accounting, direct and indirect taxes by holding seminars, conferences and workshops, etc.
The fruits of such seminars, conferences, etc. would be available to public at large, thus, it
appears that society is not for the benefit of a small group of individuals and it is not only for
the benefit of members but to promote awareness and education of the commercial and tax
laws for the general public without any profit motive. In the situation of explosion in
population, the vast changes brought by the scientific technology and other developments,
more particularly, the universal concept of globalisation, new trends in the world order to
meet the ever growing challenges to organising seminars, conferences and workshops to
educate the people of commercial laws, tax laws, auditing, accounting, direct and indirect
taxes are of great general public utility, at least to a section of people falling in the category
of charitable institution. Therefore, the Tribunal has rightly directed the CIT to grant
registration to the applicant-society u/s.12A of the Act. Appeal dismissed.

9 [2002] 258 ITR 548

Ratio - To serve a charitable purpose, it is not necessary that object should be to benefit
whole of mankind, even if section of public is given benefit, it cannot be said that it is not
trust for charitable purpose in the interest of the public.
10. Jodhpur Chartered Accountants Society v Commissioner of Income Tax10:
Assessee was a Chartered Accountants Society - Assessee filed its application for registration
u/s. 12A of 1961 Act - CIT observed that in view of its objects the applicant-society does not
fall within the category denoted by the words advancement of any other object of general
public utility contained in s. 2(15) of 1961 Act. CIT rejected application that main objects of
the society were for benefit of its members only. Hence, instant appeal.
Held, applicant-society has all its objects expressly and in unequivocal terms to be for the
benefit of its members as also for profession of the members and to undertake various
activities required for the achievement of its said objects. Members of the assessee being
chartered accountants and residing in State may not be termed as specified individuals and
should, more appropriately, be termed as specified class of individuals or specified category
of individuals. Membership of the applicant-society as prescribed in the constitution of the
applicant does not mention as being obtainable by some specified person or persons but by
specified class or category of individuals identifiable on definite ba-sis/qualification, and are
determinable. Assessee-society does qualify for grant of registration u/s. 12A of 1961 Act
inasmuch as its objects as elaborated/detailed in object clause of its constitution do declare
the same to be speaking for the benefit of chartered accountants/members of this society and
residing within the area of operation of the applicant and also for the profession of chartered
accountants and as such falling within the purport of s. 2(15) of 1961 Act. Order of CIT is not
tenable and not justified. CIT directed to grant registration to the assessee society. Appeal
allowed

10 2000 (69) TTJ 217