COMMISSIONER OF INCOME TAX, NEW DELHI versus FEDERATION OF INDIAN CHAMBERS OF COMMERCE & INDUSTRIES, NEW DELHI

Citation: [1981] 3 S.C.R. 489 · Decided: 15-04-1981 · Supreme Court of India · Bench: R.S. PATHAK

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

COMMISSIONER OF INCOME TAX, NEW DELHI 
v. 
FEDERATION OF INDIAN CHAMBERS OF 
COMMERCE & INDUSTRIES, NEW DELHI 
April 15, 1981 
[R.S. PATHAK, A.P. SEN AND E.S. VENKATARAMIAH, JJ.] 
489 
Income Tax Act 1961, S. 52(15) and IJ(J)(a)-'Charitable object'-Object of 
general public utility-' Not involving the carrying on of any activity for profit'-
Meaning of-Primary or dominant purpose of trust or institution to be charitable-
A 
B 
'Purpose' oftrust-'Powers' conferred on trustees for carrying out the purpose-
C 
Distinction between. 
The respondent assessee an existing company under the Companies Act, 
1956 had neither any share capital nor distributed any dividend to its members 
and its entire income was expended for fulfilment of its objects, which were the 
premotion.. protection and development of trade, commerce and industry in 
In~ 
D 
During the assessment year 1962-63, the relevant accounting year for which 
the year ended December 31, 1961 the assessee submitted a return showing its 
total income as 'nil' claiming that all its income was exempt under section 
ll(l)(a) read with Section 2(15) of the Income Tax Act. 
During the assessment 
year, the assessee held the Indian Trade Fair at New Delhi and derived receipts 
from rent for space allotted, temporary stalls and storage and realised deposit 
E 
and advances from the participants for hotel accommodation. In the relevant 
accounting year, the Conference of the Afro-Asian Organisation for Economic Co-
operation, was sponsored by the assessee and for organising the Conference, the 
assessee received from the Government Rs. 3 lakhs as grant-in-aid and after meet· 
ing the expenses, was left with a balance of Rs. 2 lakhs. It also received income 
by sale of books, fee for~arbitration etc. The balance sheet for the accounting 
year indicated that it had an excess of income over expenditure under the head 
F 
'income'. 
The contention of the assessee before the Income Tax Officer was that the 
activities carried on by the Federation were not were not motive of earning 
profits, but that they were carried on with the object of promotion, protection 
and development of trade, commerce and industry in India and abroad, and 
therefore the income derived by the assessee was exempt under S. l l(l)(a). 
G 
The Income Tax Officer, held that the decision of this Court in the Andhra 
Chamber of Commerce's case [1965] 1 S.C.R. 565 was no longer good law due 
to the addition of the words 'not involving the carrying on any activity for profit' 
in the definition of 'cliaritable purpose' in Section 2(15) of the Act which qualify 
the fourth head of charity viz. 'any other object of general public utility' and, 
H 
therefore, must be read subject to the additional statutory requirement that the 
490 
SUPREME COURT REPORTS 
[1981] 3 S.C.R. 
A 
object of general public utility should not involve the carrying on of any activity 
for profit, and accordingly raised a demand. 
B 
c 
n 
E 
F 
G 
H 
On appeal by the assessee, the Appellate Assistant Commissioner disagreed 
with the view of the Income Tax Officer and held that the activities carried on 
by the assessee were not profit-oriented and, therefore, its income was exempt. 
The Department appealed to the Appellate Tribunal, and the Appellate 
Tribunal upheld the view of the Appellate Assisstant Commissioner and held that 
the dominant object with which the Federation was constituted being a charitable 
purpose viz., promotion, protection and development of trade, commerce and 
industry, there being no motive to earn profits, it was not engaged in any activity 
in the nature of business or trade, and, if, any income arose from such activity, 
it was only incidental or ancillary to the dominant object for the welfare and 
common good of the country's trade, commerce and industry. 
The Commissioner of Income-Tax applied to the Appellate Tribunal to 
make a reference to the High Court under sub-section (I) of section 256 of the 
Act, but in view of the conflict in the decisions of the High Courts on the 
construction of the expression 'charitable purpose' as defined in section 2(15) of 
the Act the Tribunal made a reference to this Court under Section 257. 
On the question whether the words 'not involving the carrying on of any 
activity for profit' in the definition of 'charitable purpose' contained in section 
2(15) of the Act, govern the word 'advancement' and not the words 'object of 
general public utility'. 
HELD : [By the Cour

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