LexDELHI STOCK EXCHANGE ASSOCIATION LTD. versus COMMISSIONER OF INCOME TAX, DELHI
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798 SUPREME COURT REPORTS (1961] In our opinion the High Court was in error and the question referred should have been decided in favour Ch . Mahar~jsa of the appellant. We therefore allow the appeal, set inta111a•U aran . . . Nath Sah Deo aside the judgment and order of the High Court and v. answer the question in favour of the appellant who The Commissio"'' will have his costs in this Courc and the High Court. of lncome-taK. Bihar 6- Orissa T<apur ]. .. Vovetnber 30. Appeal allowed. DELHI STOCK EXCHANGE ASSOCIATJON LTD. v . COMMISSIONER OF INCOME TAX, DELHI (J. L. KAPUR, M. HIDAYATULLAH and J.C. SHAH, JJ.) Income-tax-Assessment-Company running a Stock Exchange and dealing in shares-Admissionfees of Members and Authorised Assistants-If taxable income. The object with which the appellant company was formed was to promote ~nd regulate the business in shares, stocks and securities etc., and to establish and conduct a Stock Exchange in order to facilitate the transaction of such business. Its capi- tal was divided into shares on which dividend could be earned. It provided a building wherein business was to be transacted under its supervision and control. It made rules for the con- duct of business of sale and purchase of shares in the Exchange premises. During the assessment year in question the com- pany's receipts consisted of certain amounts received as admis- sion fee from Members and Authorised Assistants and the ques- tion stated to the High Court for its opinion was whether these fees in the hands of the appellant were taxable income. The High Court answered the question in the affirmative. It held that the appellant was not a mutual society, that dividends could be earned on its share capital, that any person could be- come a share-holder but every share-holder was not a member unless he paid the admission fee and the real object of the com- pany was to carry on business of exchange of stocks and earn profits. The case of the appellant, inter alia, was that as the amount received as membership fee was shown as capital in the books of the company and there was no periodicity, it should be treated as capital receipt exempt from assessment. - 2 S.C.R. SUPREME COURT REPORTS 799 Held, that the High Court was right in its decision and the appeals must be dismissed. It was wholly immaterial how the appellant treated the amounts in question. It is the nature of the receipt and not how the assessee treated it that must determine its taxability. Since the fee received on account of Authorised Assisstants fall within the decision of this Court in Commissioner of Income- tax v. Calcutta Stock Exchange Association Ltd., (1959) 36 I.T.R. 222, it must be held to be taxable income. , The question as to whether the Members' admission fee was taxable income was to be determined by the nature of the business of the company, its profits and the distribution thereof as disclosed by· its Memorandum and Articles of Association and the rules made for the conduct of business. They showed that the income of the company was distributable amongst its share- holders as in any other joint stock company, and the body of trading members who paid the entrance fees and share-holders were not identical. The element of mutuality was, therefore, lacking. Liverpool Corn Trade Associatian v. Monks, (1926) 2 K. B. uo,. applied. Commissioner of Income-tax, Bombay City v. Royal Western India Turf Club Ltd., [19541 S.C.R. 289 and Styles v. New York Life Insurance Co., (1889) 2 T.C. 460, referred to. ClvIL APPELLATE JURISDICTION: Civil Appeals Nos. 187 and 190 of 1960. Appeals from the judgment dated 22nd January, 1957, of the Punjab High Court (Circuit Bench), Delhi, in Civil Reference No. 6 of 1953. Veda Vyasa, S. K. Kapur and K. K. Jain, for the appellant. R. Ganapathi Iyer and• D. Gupta, for the respon- dent. 1960. November 30. The Judgment of the Court was delivered by KAPUR, J.-These appeals are brought by the asses- see company against a common judgment and order of the Punjab High Court by which four appeals were decided in Civil Reference No. 6of1953. The appeals relate to four assessment years, 1947-48, 1948-49, 1949-50 and 1950-51. Two of these assessments, i.e., for the years 1947-48 and 1948-49 were made on the z960 Delhi Stock E:rchang1 Association Ltd. v. Commissioner of r .. com•-ta:r, Dellli Kapur ]. I960 Delhi Stach Exchange Association Ltd.
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