ADDITIONAL COMMISSIONER OF INCOME-TAX GUJARAT, AHMEDABAD versus SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION, SURAT

Citation: [1980] 2 S.C.R. 77 · Decided: 19-11-1979 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Dismissed

Cited by 4 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

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ADDITIONAL COMMISSIONER OF INCOME-TAX 
GUJARAT, AHMEDABAD 
v. 
77 
SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION, 
SURAT 
November 19, 1979 
[P. N. BHAGWATI, N. L. UNTWALIA, 'V. D. TULZAPURKAR 
R. S. PATHAK AND A. P. SEN, JJ.] 
Income-tax Act 1961-Sections 2 (15), 11 and 13(1)' (bb)-Scope of-
.. Advancement of any other objectr of general public utility not involving the 
-carrying on oj any activity for profit" nzeaning. 
The assessee which was an incorporated company, carried on 
various 
activities for promotion of commerce and trade in art silk yarn, art silk cloth 
and silk cloth. 
Its other objects were to obtain licences for import of raw 
material needed by its members, to obtain licences for export of cloth manu-
factured by its members and to do all other lawful things as are incidental or 
conducive to the attainment of the objects. Its income and property were to 
be applied solely for the promotion of its objects and no portion of the income 
or property was to be paid or transferred directly or indirectly by way of 
dividend, bonus or profits to its meinbers. 
In the event of its winding up or 
<lissolution, surplus of assets over liabilities, if any, could not be distributed 
amongst the members but was liable to be given or transferred to some other 
company having the same objects as the assessee, to be determined 
by the 
n1embers of the assessee or by the fligh Court which has jurisdiction in the 
matter. 
The assessee recieved incon1e by 
way of annual 
subscription fro1n 
its 
men\bers (the revenue conceded that this amount was exempt from tax) and 
commission on the basis of certain percentage of the value of licences for 
import of foreign yarn <ind quotas for the purchase of indigenous yarn. The 
assessee constructed a building out of the. amounts received and the rent re-
ceived from the tenants was an additional source of its income. 
The assessee's claim for exemption 
under section 11(1) of the· 
Jncomc-
Tax Act ~·as rejected by the Income-Tax Officer on the ground that its objects 
'"'ere not charitable within the meaning of section 2(15) of the Act. 
Oil the 
-other hand the Appellate Assistant Commissioner held that the 
~ssessee's 
income was entitled to exemption under section 11 ( 1) because the activities 
carried on by the assessee were in fulfilment of the primary purposes 
\Vhich 
did not involve the carrying on of any activity for profit. This view of the 
Appellate· Assistant Commissioner was affirmed by the Appellate Tribunal in 
appeal by the revenue. 
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In view of the conflicting decisions amongst different High Courts on the 
interpretation of the words "not involving the carrying on of any activity for 
profit" in the definition of charitable purpose in section 2(15) of the 1961 Act 
the Appellate Tribunal referred to this Court, under section 257 of the Act, 
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78 
SUPREME COURT REPORTS 
[ 1980] 2 S.C.R' 
A-
the question v. hether the as..<:essee was entitled to exen1ption under ~ection 11 ( l )' 
of the Act. 
It was contended on behalf of the revenue that if the means to achieve or 
carry out the object of general public utility involve the carrying on of any 
aciivity for profit, the purpose of the trust, though falling within· the description 
"any other object of general public utility"; would not be a charitable purpqse· 
B 
and the income from business would not be exempt from tax. 
Dismissing the appeal, 
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HELD : (Per majority Bhagwati, Untwalia and Tulzapurkar, JJ) 
1. The e-0ntention that the .objects of the assessee did not fall 
\Vithin 
the 
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cate,gory of "advancen1ent of. any other object of general public 
utility" and 
\Vere not charitable 'Within the meaning of section 2(15) in that it£ 
members 
v.·ere merely specified individuals who did not constitute a section of the public 
cannot be allowed to be raised in this reference. 
In a reference under s. 257 
of the Inco1nc Tax; Act 1961 the TribunM is not competent to refer to this 
Court a question in respect of which there is no conflict of decisions among.st 
different High Courts nor can this Court travel beyond the particular questioff 
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of fa\\' referred to it by the Tribunal on account of conflict in the decision_<; of 
the High Court•. 
[92 A-Bl 
2. (a) It is well-settled that where the main or primary objects are distri-
butive, each and every one of the objects must be charitable in order that the 
trust of institution may be upheld as a valid chari

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