LexINDIAN CHAMBERS OF COMMERCE versus C.I.T., WEST BENGAL-II, CALCUTTA
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8 30 INDIAN CHAMBERS OF COMMERCE v. C.I.T., WEST BENGAL-II, CALCUTTA September 17,. 1975 [V. R. KRISHNA !YEI<, A. C. GUPTA AND S. MURTAZA FAZAL Au, JJ.] l!1come Tax Act (43 of 1961), s.2 (xv)-Charitable purpose, scope of- Burae11 of proof~Activitv for vrofit ~\!hat is. . Under the Income-tax Act_ 1961 one of the items not includ"ed.in the total income of an assessee for purposes of tax is, under s.11 incon1e derived from . .property h~.ld under trust wholly for charitable purpose. Charitable purpose is defined 1n s.2 (xv). Chambers of commerce, promoting the trade interest of the c~m1?ercial con:imunity, have been regarded as pursuing charitable purposes w1th1n the n1ean1ng of s.2 (xv). But. under cover of charitable purposes they have been indulging in various activitie'S and deriving tax free profit. Therefore, s. 2 (xv) was amended by adding a clause at the end. Under the an1ended definition, unless the context: otherwise 1-equires, charitable purpose includes the advancement of any object df general publi'c utility not i111·0/ving the carrying on of any acth·ity for profit. HELD : The ·incon1e of the assessees, which are chambers of commerce. frorn three sources, namely, (a) arbitration fees levied by them; (b) fees collected for issuing certificates of origin; and (c) share of profit in another CGmpany for issue of certificates of weighmient and measurement, which ser- vices are extended to members and non-n1embers. that is, to be trade generally, is. not entitled to the exemption, and is liable to tax. [845E-G] ( 1) The teSt is to ask for answers to the following questions :-(a) Is the object of the assessee one of general public utility; (b) Does the advance- ment of the object involve activties bringing in money? (c) If so, arc· such activities undertaken (i) for profit or (ii) with.out profit. Even if (a) and (b) A B c D are answered affirmativ'elY, if (c) (i) is also answered affirmatively the claim for E exemption collapses. [844B-Cl (2) Section 2 (xv) n1ust be intoerpreted in such a manner that every word is given a meaning and not to treat any expression as redundant or miss the accent of the amendatory phrase. So viewed, an institution which carries out charitable purposes out of income 'derived from property held under trust \Vholly for charitable· purposes' may still· forfeit the claim to exemption in respect of such takings or incomes as n1ay come to it from pursuing any activity for profil By the new definition the benefit of exclusion from total income iSi taken away where~ in accomplishing a charitable purpose, the institution engages itself in activities for profit. If' it wants immunity from taxation the moeans of fulfilling charitable purposes must be unsuUied by profit-mking ventures. The advancement of the object of general public utility must not involve the carrying on of any activity for profit. Otherwise. it will Jead to the absurd conclusion that a Chamber of Cbmmerce may run a printing press. advertisement bu~iness. market exploration activity or even exJ?Qrt pro- motion business and Jevy huge sums from itSi custimers. whether they are niembers of the organisation or not. and still c1ain1 a blanket exemption from tax on the score that the objects of general public utility which it had set forth for itself implied these activi"t.~es even though profits or surpluses m>iy arise therefrom. If it runs special types of services for the benefit of manufacturers and charges remuneration from them. it i<> undontedlv an activity which. if carried on bv private agencies, would be- taxable. and there is no reason why a Chamber Of Commerce should be exempt. The policy of the statute is to give tax relief for charitable purposes. An undertakin~ hv a busine~s or~anisa tion is ordinarily assumed to be for profit unless c-xpressly or bv necessarv implication. or by eloquent surrounding circumstances. the making of pro.fit o;;tands dearlv negatived. For example. if' there is a restrictive provision in the hve-laws which insists that the charges levied for services of public utilit" re"ndered are to be on a 'no profit' basis, that is, that it shall not charge more F G H -+ ' • ) - A B c D E F G INDIAN CHAMBERS OF COMMERCE V. C.J.T. 831 than is actually needed for the rendering of the services, then it earns the benefit of •.2(xv). It may not be an exact equivalent--£uch mathematical precision bein
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