LexDELHI STOCK EXCHANGE ASSOCIATION LTD. versus COMMISSIONER OF INCOME TAX, NEW DELHI
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A DELHI STOCK EXCHANGE ASSOCIATION LTD. v. COMMISSIONER OF INCOME TAX, NEW DELHI MARCH, 20, 1997 B (S.C. AGRAWAL AND G.B. PATTANAIK, JJ.) Income Tax Act, 1961 : S.11 read with s.2( 15)-lncome from properties held under trust or C charitable purpose-Exemption from payment of income ta.>.~Stock Ex- change claiming exemption-Held, p1ior to amendment in A1ticles of Associa- tion in December, 1973, in absence of any obligation prohibiting assessee from distributing the income de1ived by it by way of dividends amongst its shareholders, it was not elltitled to the exemption-17iere is no provision in Securities (Contract Regulation) Act, 1958, imposillg such an obliga- D lion-Securities Contract (Regulation) Act, 195~S.2(j). The assessee-Delhi Stock Exchange Association Ltd., a company limited by shares, claimed exemption from payment of income tax under s. 11 of the Income Tax Act, 1961 on the ground that the income was E derived from property held under trust for charitable purposes. It was claimed that the company was established with the object of conducting a Stock Exchange and to promote and regulate the business in stocks, shares, debentures and other securities. The exemption was claimed with regard to assessment years covering the period prior to December, 1973, as in December, 1973 Articles of Association of the assessee-company were F amended to prohibit the distribution of profits as interest or dividends. The claim of the assessee was rejected by the Income Tax Officer as also by the Appellate Assistant Commissioner. The Income Tax Appellate Tribunal though held that running of the Stock Exchange was with an G object of general public utility and the objects did not cease to be charitable because some surplus was realised by the assessee by reason of receipts from its members or because it derived income from property, it rejected the claim holding that the income of the assessee could not be said to have been derived from property held under trust wholly for religious or charitable purpose; and that there was no trust or legal obligation H compelling the assessee to utilise its income only for such purpose. The 130 DELHISTOCKEXCHANGEASSN.LTD. v. C.I.T. 131 High Court upheld the view of the Tribunal. Aggrieved, the assessee filed A the present appeals. It was contended for the assessee that nature of the activities of the assessee had to be considered as a whole and since the objects of the assessee had been found to be of general public utility and as no dividend had been declared by the assessee, the income derived by it should be held B to be that from properties held for charitable purposes. Dismissing the appeals, this Court HELD : 1.1. The High Court was right in holding that the assessee could not claim exemption under s.11 read with s. 2(15) of the Income Tax C Act, 1961. [135-G] 1.2. There must be an obligation created to spend the money ex- clusively and essentially on charity. In the present case, at the relevant time the assessee was under no obligation prohibiting it from distributing D the income derived by it by way of dividends amongst its share-holders. Such a prohibition was imposed only in December, 1973 by amendment of Article 103(xiv) of the Articles of Association of the assessee. [135-E-F] Additional Commissioner of Income Tax, Gujarat v. Surat Alt Silk Cloth Manufacturers Association, (1980) 121 ITR 1; Sole Trnstee, Loka E Shikshana Trust v. Commissioner of Income Tax, Mysore, (1975) 101 ITR 234, relied on. Commissioner of Income Tax, Andhra Pradesh, Hyderabad v.Andhra Pradesh State Road Transporl Corporation, Hyderabad, [1986] 2 SCC 391, held inapplicable. Delhi Stock Exchange Associ.ation Ltd. v. Commissioner of Income Tax, 41 ITR 495, referred to. F 1.3. The Securities Contracts (Regulation) Act, 1958, though makes G provision for recognition of a "Stock Exchange" as defined in s.2(j) thereof, there is no provision in the said Act which imposes an obligation on a recognised stock exchange not to distribute any part of its profits by way of dividend to its shareholders. [137-A-C] 1.4. As regards the letters dated August 28, 1963 and March 1, 1973 H 132 SUPREME COURT REPORTS [1997] 3 S.C.R. A issued by the Central Government taking object to the presents being given by the assessee to its members on the ground that such presents amounted to distribution of dividends, the High Court has rightly held that the said la
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