# 565. COMMISSIONER OF INCOME-TAX, MADRAS v. ANDHRA CHAMBER OF COMMERCE

- **Citation:** [1965] 1 S.C.R. 565
- **Court:** Supreme Court of India
- **Decided:** 1964-10-01
- **Case number:** Civil Appeals Nos. 941946 of 1963
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/565-commissioner-of-income-tax-madras-v-andhra-chamber-of-commerce-3346
- **Pages:** 16

## Headnote

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565.
COMMISSIONER OF INCOME-TAX, MADRAS
v.
ANDHRA CHAMBER OF COMMERCE
October 1, 1964
(K. SuBBA RAo, J. C. SHAH AND S. M. SIKRI JI.)
Indian Income Tax Act, 1922 (11of1922), s. 4(3)(i)-Charitable purposei meaning of-Conzpany's object to proniote trade, com1nerc:e and
industry, whether charitable-Urging or opposing legislation affecting trade
etc.-Object whether political.
The assesseo c~mpany-The Andhra Chamber of Commerce-had as
its main object the promotion, protection, and development of trade, comM
merce and industry in India. It owned a building where it had ils offices,
and those parts of it not in the company's own use were let out to tenants.
In income-tax proceedings the company claimed exemption in respect of
the rental income under s.4(3)(i) of the Indian Income-tax Act, 1922.
The claim was negatived by the assessing and appellate authorities. The
High Court, however, held that the company was a charitable institution
and its income from property was exempt under s. 4(3)(i).
The Revenue appealed to the Supreme Court by special leave.
It was contended by the appellant that the property was not held by the
company for a charitable purpose within the meaning of s. 4(3) (i), that
the objects of the company were vague, that the benefit contemplated by
the Memorandum of Association was not to the public generally but to
the members of the company only, and that the objects of the company
were political it being open to it to appropriate the entire income for
political purposes.
HELD : (i) The term charitable purpose as defined in the Act was
inclusive and not exclusive.
It included objects of general public utility.
lbe object of the assessee company-promotion of trade and commerce
in the country-was an object of general public utility, as not only the
trading class but the whole country would benefit by it. It is not necessary
that the benefit must include all mankind. It is sufficient if the intention be
to benefit a section of the public as distingUished from specified individuals.
[571 F-H].
Commissioners of Inland Revenue v.
Yorkshire Agricultural Society,
11928] I K.B. 611 and The Institution of Civil Engineers v. Commissioners
of Inland Revenue, 16 T.C. 158, relied on.
Commissioner of Income-tax Bombay Presidency, Sind and Baluchistan
v. The Grabi Merchants' Association of Bombay, 6 I.T.R. 427, disapproved.
(ii) There was nothing vague about the company's objects. An object
of general public utility such as promotion, protection, aiding an_d stimulaw
tion of trade, commerce need not to be valid, specify the modus or the
steps by which the objects may be achieved or secured. [573 A-ll].
Runchordas Vandrawandas v. Parvati Bai L.R. 26 I.A. 71. Commi.<-
sioners of Inland Revenue v. National Anti-Vivisection Society, 28 T.C. 311
and Baddeley and others (Trustees of the Newtown Trust) v. Comn1issioners
of Inland Revenue, 35 T.C. 661, distinguished.
(iii) The argument that it was only for the benefit of the trading classes
itt Andhra Desa that the funds of the company could be utilised did not
stand scrutiny. [574 D-E].
566
SUPREME COURT REPORTS
[1965] I S.C.R.
(iv) It cannot be said that a purpose would cease to be charitable even
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if public welfare is intended to be secured thereby if it includes the taking
of steps to urge or oppose legislation affecting commerce, trade or manufacture.
If the primary purpose be advancement of objects of general
public _utility, it v.·ould remain charitable even if an incidental entry into
the pohiical domain for achieving that purpose e.g. promotion of or opposition to legislation concerning that purpose is contemplated.
The object
mentioned in the ~1cmorandum of Association was that the asses.see may
take steps to urge or oppose legislative or other measures affecting trade,
B
commerce, or manufacture. Such an object must be regarded as purely
ancillary or subsidiary and not the primary object. [575 G-H; 580 B-C].
In re the Trustt!es of the Tribune, 7 l.T.R. 415 and Al

## Text

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565.
COMMISSIONER OF INCOME-TAX, MADRAS
v.
ANDHRA CHAMBER OF COMMERCE
October 1, 1964
(K. SuBBA RAo, J. C. SHAH AND S. M. SIKRI JI.)
Indian Income Tax Act, 1922 (11of1922), s. 4(3)(i)-Charitable purposei meaning of-Conzpany's object to proniote trade, com1nerc:e and
industry, whether charitable-Urging or opposing legislation affecting trade
etc.-Object whether political.
The assesseo c~mpany-The Andhra Chamber of Commerce-had as
its main object the promotion, protection, and development of trade, comM
merce and industry in India. It owned a building where it had ils offices,
and those parts of it not in the company's own use were let out to tenants.
In income-tax proceedings the company claimed exemption in respect of
the rental income under s.4(3)(i) of the Indian Income-tax Act, 1922.
The claim was negatived by the assessing and appellate authorities. The
High Court, however, held that the company was a charitable institution
and its income from property was exempt under s. 4(3)(i).
The Revenue appealed to the Supreme Court by special leave.
It was contended by the appellant that the property was not held by the
company for a charitable purpose within the meaning of s. 4(3) (i), that
the objects of the company were vague, that the benefit contemplated by
the Memorandum of Association was not to the public generally but to
the members of the company only, and that the objects of the company
were political it being open to it to appropriate the entire income for
political purposes.
HELD : (i) The term charitable purpose as defined in the Act was
inclusive and not exclusive.
It included objects of general public utility.
lbe object of the assessee company-promotion of trade and commerce
in the country-was an object of general public utility, as not only the
trading class but the whole country would benefit by it. It is not necessary
that the benefit must include all mankind. It is sufficient if the intention be
to benefit a section of the public as distingUished from specified individuals.
[571 F-H].
Commissioners of Inland Revenue v.
Yorkshire Agricultural Society,
11928] I K.B. 611 and The Institution of Civil Engineers v. Commissioners
of Inland Revenue, 16 T.C. 158, relied on.
Commissioner of Income-tax Bombay Presidency, Sind and Baluchistan
v. The Grabi Merchants' Association of Bombay, 6 I.T.R. 427, disapproved.
(ii) There was nothing vague about the company's objects. An object
of general public utility such as promotion, protection, aiding an_d stimulaw
tion of trade, commerce need not to be valid, specify the modus or the
steps by which the objects may be achieved or secured. [573 A-ll].
Runchordas Vandrawandas v. Parvati Bai L.R. 26 I.A. 71. Commi.<-
sioners of Inland Revenue v. National Anti-Vivisection Society, 28 T.C. 311
and Baddeley and others (Trustees of the Newtown Trust) v. Comn1issioners
of Inland Revenue, 35 T.C. 661, distinguished.
(iii) The argument that it was only for the benefit of the trading classes
itt Andhra Desa that the funds of the company could be utilised did not
stand scrutiny. [574 D-E].
566
SUPREME COURT REPORTS
[1965] I S.C.R.
(iv) It cannot be said that a purpose would cease to be charitable even
A
if public welfare is intended to be secured thereby if it includes the taking
of steps to urge or oppose legislation affecting commerce, trade or manufacture.
If the primary purpose be advancement of objects of general
public _utility, it v.·ould remain charitable even if an incidental entry into
the pohiical domain for achieving that purpose e.g. promotion of or opposition to legislation concerning that purpose is contemplated.
The object
mentioned in the ~1cmorandum of Association was that the asses.see may
take steps to urge or oppose legislative or other measures affecting trade,
B
commerce, or manufacture. Such an object must be regarded as purely
ancillary or subsidiary and not the primary object. [575 G-H; 580 B-C].
In re the Trustt!es of the Tribune, 7 l.T.R. 415 and All India Spinners
Association v. Conzmissioners of lnconie-uu, Bombay, 12 J.T.R. 482, relied
OD,
Pemse/ v. Con1missioner for special Purposes of Jnco1ne Tax, [I 891]
A.C. 531 and Bowman v. Secular Society Ltd., (1917] A.C. 406, referred
to.
Rex v. The Special Commissioners of lncome-'ax (ex-parte Tht lncor·
porated Association of Preparatory Schools) 10 T.C. 73, 1·ne Commissioners
of Inland Revenue v. Tire Temperance Council of the Christian Churches
of England and Wales, JO T.C. 748, and Laxman Ba/want Bhopatkar by
Dr. Dhananjaya Ramchandra Gadgil v. CharUy Commissioner, Bombay,
(1963] 2 S.C.R. 625, distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 941946 of 1963.
Appeals from the judgment dated February 22, 1961 of the
Madras High Court in Case Referred No. 121 of 1956.
K. N. Rajagopa/ Sastrl, R. H. Dhebar and R. N. Sachthey,
for the appellant (in all the appeals).
A. V. Viswanarha Sastri, K. Rajendra Chaudhuri and K. R.
Chaudhuri, for the respondent (in all the appeals).
The Judgment of the Court was delivered by ·
Shah J.
The Andhra Chamber of Commerce-hereinafter
called 'the assessee'-is a Company incorporated under the Indian
Companies Act 7 of 1913.
The assessee was permitted under
s. 26 of the Act to omit the word "limited" from its name by
order of the Government of Madras.
The following are the principal objects of the Memorandum
of Association of the assessec :
(a) To promote and protect trade, commerce and
industries of India, in the Province of Madras and in
particular in the Andhra country.
( b) To aid, stimulate and promote the development of trade, commerce and
industries in India or
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C.l.T., MADRAS V. CHAMBER OF COMMERCE (Shah J.)
567
any part thereof with capital principally provided by
Indians or under the management of Indians.
( c) To watch over and protect the general commercial interests of India or any part thereof
and
the
interests of the Andhras in particular engaged in trade,
commerce or manufacture in India and in particular
the Andhra Desa.
(y) To do all such other things as may be conducive to the
preservation
and extension of trade,
commerce, industries' and manufactures or incidental
to the attainment of the above objects or any of them.
C Clauses (d) to (x) are incidental to the principal objects.
By cl. 4 of the Memorandum of Association it was provided
that the income and property of the assessee shall be applied
solely towards the promotion of its objects as set forth therein
and no portion thereof -shall be paid or. transferred, directly or
D indirectly, by way of dividends, bonuses or otherwise howsoever
by way pf profit to its members.
On December 2, 1944 the assessee purchased a building and
made substantial alterations, additions and improvements therein.
The assessee then moved its offices into that building on May 14,
194 7 and let out to tenants the portion not required for its use.
E The income of the asscssee is obtained from subscriptions and
donations collected from its members and rent received from the
building.
The following table sets out in columns 3 & 4 the
net annual value of the property less the statutory deductions
pennissible under s. 9 of the Income-tax Act, 1922 and the net
excess of expenditure over the income of the asscssee (other than
F the rental income) incurred in connection with all its activities
for the assessment years relating to which dispute arises in this
group of appeals :
Previous year
Assessment
Amount
Net excess
(calendar year)
year
Rs.
Rs.
G
(1)
(2)
(3)
(4)
1947
1948-49
3,400
7,431
1948
1949-50
6,154
7,139
1949
1950-51
6,928
5,266
1950
1951-52
5,740
10,173
1952
1953-54
8,072
13,672
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1953
1954-55
8,072
17,397
In proceedings for assessment before the Second Additional
lncomC-:tax Officer, City Circle I, Madras, it was contended that
LISup./65-l l
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SUPREME
COURT
REPORTS
(1965] I S.C.R.
the annual value of the building was not assessable in its hands
as the asscssee was a charitable institution within the meaning of
J. 4(3 )(i) of the Income-tax Act, 1922.
In the alt~rnative, it
was contended that the excess of expenditure over income should
be set off against such income if·the annual value is held assessable.
The Income-tax Officer rejected the contentions of the
assessee and assessed its income from property on the basis of
net annual value in the six assessment years without debiting the
expenditure in excess of income (other than rent) against the
net annual value.
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The assessee appealed to the
Appellate Assistant Commissioner against all the orders
of assessments.
The
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Assistant Commissioner held that the assessee not being a
charitable institution the income in
question was not exempt
under s. 4(3)(i).
He also rejected the alternative contention,
for in his view, there was no specific profit-making activity of
the assessee the loss from which could be set off against its other
income.
Appeals were then taken to the Income-tax Appellate Tribunal.
The Tribunal held that the assessee was not exempt within
the meaning of s. 4 ( 3) ( i) from liability
to pay income-tax,
because the activities of the assessee were intended for the benefit
primarily of its members and "embraced only collective action on
behalf of all its constituent members" which "could not be said
to be the result of any trade or business or vocation carried on
by it".
At the instance of the assessee the Tribunal referred the following questions to the High Court :
" ( I ) Whether the aforesaid income from property
owned by the assessee is exempt under s. 4 ( 3) ( i) for
the aforesaid six years of assessment ?
(2) H the answer to the abcive question is in the
negative, whether the activities of the assessee amount
to a trade or business, the profit or loss from which
is assessable under s. 10 ?"
The High Court answered the first question in the affirmative and
did not record a formal answer on the second question.
Against
the order of the High Court, these appeals are preferred by the
Commissioner of Income-tax, with certificate granted by the High
Court under s. 66A (2) of the Indian Income-tax Act.
We are concerned in this group of appeals with the assessment of income of the assessee in the years 1948-49 to 1954-55
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569
A with the omission of the assessment year 1952-53.
Between the
years 1948-49 to 1952-53 there has
been some change in
s. 4(3)(i) which before it was amended by Act 25of1953 with
effect from April 1, 1952 read as follows:
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"Any income, profits or gains
falling within the
following classes shall not be included in the total income of the person receiving them :
(i) Any income derived froll). property held under
trust or other legal obligation wliolly for religious or charitable purposes, and in the case of
property so held in part only for 'such purposes,
the income applied, or finally
set apart for
application thereto."
By the last paqi.graph of subs. (3) "charitable purpose" was
defined as including relief of the poor, education, medical relief,
and the advancement of any other object of general public utility, but nothing contained in cl. (i) or cl. (i-a) or cl. (ii) shall
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operate to exempt from the provisions of the Act that part of
the income of a private religious_ trust which does not enure for
the benefit of the public.
By the amendment made by s. 3 of
the Indian Income-tax (Amendment) Act 25 of 1953, els. (i)
and ( i-a) as they originally
stood were amal5amated. It is
common ground that by the amendment, no alteration which has
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a material bearing on the question to be decided in these appeals
has been made.
Income from property qualifies for exemption under s. 4(3) (i)
if two conditions co-exist (i) the property is held under trust or
other legal obligation; and (ii) it is so held wholly or in part
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for religious or charitable purposes•.
The building which the
assessee owns. is by virtue of cl. 4 of the Memorandum of Association held under a legal obligation to apply its income to
purposes specifi.ed In the Memorandum of Association. It is not
the case of the assessee that the objects of incorporation are
relief of the poor, education or medical relief, and the only quesG
tion canvassed at the Bar is whether the purposes for which the
assessee stands incorporated are objects of general public utility,
within the meaning .of the expression "charitable purpose" in
s. 4(3).
The ptincipal objects of the assessee are to promote and
protect trade, commerce and industries and to aid, stimulate and
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promote the development of trade, commerce and industries in
India or :my part thereof.
By the achievement of these objects,
it is not intended to serve merely the interests of the members of
570
SUPREMF.
COURT
REPORTS
(1965] I S.C.R.
the assessee.
Advancement or promotion of trade, commerce
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and industry leading to economic prosperity ~nures for the benefit
of the entire comrnuntiy.
That prosperity would be shared also
by those who engage in trade, commerce and industry but on
that account the purpose is not rendered anytheless an object
of general public utility. It may be remembered that promotion
and protection of trade, commerce and industry cannot be equatB
ed with promotion and protection of activities
and
interests
merely of persons engaged in trade, commerce and industry.
In Commissioners of Inland Revenue v. Yorkshire Agricultural Society(') an association called the Yorkshire Agricultural
Society was formed with the object of holding annual meetings c
for the exhibition of fanning stock, implements etc., and for the
general promotion of agriculture.
All prizes were open to competition in the United Kingdom, but certain
privileges
were
attached to membership
of the Society.
The income of the
Society was derived from entry fees and gate receipts, local subscriptions for prizes, interest on investment~, and subscriptions of D
members.
It was held by the Court of Appeal that on the facts
found by the Commissioners the Society was established for a
charitable purpose and that pnrpose continued notwitlt~tancling
the incidental benefits enjoyed by members of the Society; and
that those benefits did not prevent the Society from being established for a "charitable purpose only".
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In Hal,.bury's Laws of England, 3rd Edn., Vol. 4 at p. 236,
Art. 517, it is stated :
"An association or institution may benefit its members in the course of carrying out its main charitable
purpose and this alone will not prevent it from being a
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charity.
It is a question of fact whether there is so
much pers()nal benefit, intellectual or professional, to
the members of a society or body of persons as to be
incapable of being disregarded."
In The Institution of Civil Engineers v. The Commissioners of
Inland Revenue(') it was held that the Institution of Civil EngiG
neers founded and incorporated by Royal Charter for the general
advancement of mechanical science, and more particularly for
promoting the acquisition
of that species of knowledge which
constitutes the profession of a civil engineer was a body of persons established for charitable purposes only.
The Special Commissioners having regard in particular to the provisions of the
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supplemental charter of 1922, by which the corporate membcm
(!} (1928) I K.B. 611.
(2) t6 T.C. 158.
C.I.T., MADRAS V. CHAMBER OF COMMERCE (Shah J.)
571
A of the Institution were authorised to use the title of member, or
associate member, as the case might be, found that a substantial
part of the objects of the Institution was to benefit the members
and rejected the claim of the Institution for exemption. The
Court of King's Bench disagreeing with the Special Commi5>
sioners held that the benefit of members was purely incidental to
B the main purpose of · the Institution which was established for
charitable purposes only.
The Court of Appeal found that the
only purpose for which the Institution was established was the
promotion of science and that purpose had never been added
to or· varied by any of the supplemental charters : it followed
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therefore that the Institution was established for charitable pur~
poses only, notwithstanding
that it is of advantage to a civil
engineer in his profession to be a member of the Institution, this
result not being a purpose for which the Institution was established, but being incidental to and consequent upon the way in
which the Institution carries out the charitable purpose for which
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alone it was established.
In the promotion of trade, commerce and industries of India
the public is vitally interested and
if by the activities of the
assessee that object is achieved, it would be within the meaning
of s. 4(3)(i) of the Act an advancement of an object of general
E public utility.
In enacting the last paragraph of s. 4(3) the
legislature has used language of . great amplitude.
"Charitable
purpose" includes not only relief of the poor, education and
medical relief alone, but advancement of other objects of general
public utility as well.
The clause is intended to
serve as a
special definition of the expression "charitable purpose" for the
F Act : it is again inclusive and not exhaustive or exclusive.
Even
if the object or purpose may not be regarded as charitable in its
popular signification as not tending to give relief to the poor or
for advancement of education or medical relief, it would still be
included in the expression "charitable purpose" if it advances an
object of general public utility.
The expression "object of geneG ral public utility" .• however is not restricted to objects beneficial
to the whole mankind.
An object beneficial to a section of the
public is an object of general public utility.
To serve a charitable purpose, it is not necessary that the object should be to
benefit the whole of mankind or even all persons living in a
particular country or Province.
It is sufficient if the intention
H be to benefit a section of the public as distinguished from specified
individuals.
Observations
to the contrary made by
Beaumont C.J., in Commissioner of Income-tax Bombay Presi-
572
SUPREME
COURT
REPORTS
(1965] I S.C.R.
dency, Sind and Ba/11chis1an v. The Grain Merchanls' Association
of Bombay(') that "an object of general public utility means an
object of public utility which is available to the general public
as distinct from any section of the public" and that objects of
an association "to benefit works of public utility confined to a
section of the public, i.e. those interested in commerce" are not
objects of general public utility, do not correctly interpret the
expression "objects of general public utility".
The section of
the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a
public or impersonal nature : where there is no common quality
uniting the potential beneficiaries
into a class, it may not be
regarded as valid.
It is true that in this case there is in fact no trust in respect
of the income derived from the building owned by the assessee.
But the property and the income therefrom is held under a legal
obligation, for by the terms of the permission granted by the
Government to the assessee to exclude from its name the use of
the word "limited", and by the express terms of cl. 4 of the
Memorandum of Association the property and its income are not
liable to be utilised only for the purposes set out in the Memorandum of Association.
Counsel for the revenue submitted that the purposes of the
assessce are vague and indefinite.
He submitted that if a competent Court were called upon. as it may be called upon to administer the obligation imposed by the Memorandum of Association.
the Court would on account of vagueness of the objects decline
to do so, and therefore the purposes cannot
be regarded as
charitable.
In the alternative, counsel contended that the benefit
which is contemplated by the Memorandum of Association was
not the benefit to the public generally, but the benefit to· its
members to carry
on their business more profitably.
Jn the
further alternative, relying upon cl. 3 ( g) of the Memorandum of
Association. counsel contended that the objects of the assessee
were political, it being open to the assessee to arpropriate the
entire income for political purposes.
But the primary objects of the assessee are to promote and
protect trade, commerce and industries and to aid, stimulate and
promote the development of trade, commerce and industries and
to watch over and protect the general commercial interests of
India or any part thereof.
These objects are not vague or inde-
(I) 6 l.T.R. 427.
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0.1.T., MADRAS V. CHAMBER OF COMMERCE (Shah].)
573
A finite as objects of general public utility.
An object of general
public utility, such as promotion, protection, aiding and stimulation of trade, commerce and industries
need not, to be valid
specify the modus or the steps by which the objects may be
achieved or secured. It cannot be said that if called upon to
B
administer an institution of which the objects are of the nature
set out, the Court would decline to do so merely on the ground
that the method by whic:\l trade, commerce or industry is to be
promoted or protected, aided or stimulated or the general commercial interests of India are to be watched over or protected
are not specified.
Analogy of cases like Runchordas . VandraC wandas v. Parvati Bhai(') in which the Privy Council declared
a devise under a will in favour of "dharam" void, is misleading.
In that case the devise was declared void, because the expression
"dharam" in the view of the Judicial Committee being law, virtue, legal or moral duty was too general and too indefinite for
the courts to enforce.
D
Observations by Lord Simonds in Commissioners of Inland
Revenue v. National Anti-Vivisection Society( 2 ) that "One of
the tests, and a crucial test, whether a trust is charitable lies in
the competence of the Court to control and reform it. . . . . .
that it is the King as parens patriae who is the guardian of charity,
and that it is the right and duty of his Attorney-General to interE
venue and to inform "the Court if the trustees of a charitable
trust fall short of their duty.· So too it is his duty to assist the
,Court, if need be, in the formulation of a scheme for the execution of a charitable trust. · But . . . . is it for a moment to
be supposed that it is the function of the Attorney-General on
behalf of the Crown to intervene and demand that a trust shall
F be established and administered by the Court, the object ot which
is to alter the law in a manner highly prejudicial, as he and
His Majesty's Government may think,
to the welfare of the
State ?" do not assist the case of the revenue.
In the view of
Lord Simonds the object of the trust was political and, therefore,
G void, and not because it was vague or indefinite.
H
In Baddi!ley and others (Trustees of the Newtown Trust) v.
Commissioners of Inland Revenue(') certain properties were
conveyed to trustees by two conveyances, in one case on trust,
inter alia, for the promotion of the religious, social and physical
well-being of persons resident· in the County Boroughs of West
Ham and Leyton by the provision of ·facilities · for religious
(I) L.R. 26 I.A. 71..
(2) 28 T.C. 311, 367.
(3) 35 T.C. 661.
S74
SUPllEMI!
COUllT
l!EPORTS
(1965) I S.C.R.
services and instruction and for the social and physical training
A
and recreation of such aforementioned persons who were members
or likely to become members of the Methodist Church and of
insufficient means otherwise to enjoy the advantages provided
and by promoting and encouraging all forms of such activities
as were calculated to contribute to the health and well-being of
such persons, and in the other case on similar trusts omitting B
reference to religious services and instruction and otherwise substituting "moral" for "religious".
These trusts were, it was held,
not for charitable purposes only. The case arose under the Stamp
Act of 1891, and it was contended that the trusts being charitable
stamp duty al a lower
rate was chargeable.
The House of
Lords held that the trust was not charitable.
It was observed
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by Lord Simonds that "the moral, social, and physical well-being
of the community or any part of it is a laudable object of benevolence and philanthropy, but its ambit is far too wide to include
purposes which the Jaw regards as charitable".
These ca5es have, in our judgment, no bearing on the interD
pretation of the language used in the Memorandum of Association of the assessee.
The argument that it is only for the benefit of the memben
or the -trading classes in Andhra ;Desa that the funds of the
a~
could be utilised does not stand scrutiny.
It is clear E
from the diverse clauses in paragraph 3 of the Memorandum of
Association that the objects were not merely to benefit the members of the assessee or even the trading community of Andhra
Desa.
Reliance was placed upon the membership clause in the
Articles of Association and it was submitted that only persons
speaking Telugu language and residing in Andhra Desa
[as i'
defined in cl. I (s) of the Articles of Association]
could
be
members.
But that argument is wholly unfounded.
By sub-cl.
(iii) of cl. 5 a Chamber of Commerce ot Trade Association
protecting and promoting Indian trade, commerce and industry
is eligible for election as a member of the Chamber and the
representative of such a Chamber of Commerce or Trade Ass~ G
ciation need not necessarily be able to speak and write Telugu.
Similarly by sub-cl. (iv) a Company or Corporation having its
principal office or registered office in Andhra Desa or a branch
in Andhra Desa is eligible to become a member in its conventional or corporate name and the representative of such a Company or Corporation need not necessarily be able to speak or ff
write Telugu.
Again under sub-cl. ( v) a Partner of a Firm of
a "Private Partnership Concern" or a Joint Family Business
C.I.T., MADRAS V. CHAMBER OF COMMERCE (Shah /.)
575
A concern, or a Solefl'roprietory concern having its principal office
or registered office in Andhra Desa or a branch in Andhra Desa
is eligible for membership of the Chamber and the representative of such a member need not necessarily be able to speak· or
write Te1ugu.
Finally, by sub-cl.
(vi) an individual residing
anywhere in India and connected in' any manner with trade,
industry and commerce is eligible for membership of the Chamber provided his mother tongue is Telugu or he can both speak
and write
Telugu.
There is no geographieal limitation upon
the membership qualification, nor is there limitation about the
capacity to speak or write Telugu.
Vfe should not be taken as
holding that if there were such restrictions, the character of the
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assessee as an institution for promotion of charitable objecu
would thereby be necessarily effected.
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Clause 3(g) of the Memorandum of Association on which
strong reliance was placed reads as follows :
"To urge or oppose legislative and other measures
affecting trade, commerce or manufactures and to procure change of law and practice affecting trade, commerce and manufactures and in particular those affecting
trade, commerce and industries in which Andhras are
concerned and obtain by all acknowledged means the
removal, as far as possible.,. of all grievances affecting
merch.ants as a body
and mercantile interests in
general."
But cl. 3 (g) is not the primary object of the assessee :
it is
merely incidental to the primary objects of promotion or protection of trade, commerce and industries, or to aid, stimulate
and promote the development of trade, commerce and industries
or to watch over and protect the general commercial interests.
The expression "object of general public utility" in s. 4(3)
would prima facie include all objects which promote the welfare
of the general public.
It cannot be said that merely a purpose
G would cease to be charitable even if public welfare is intended
to be served thereby if it includes the taking of steps to urge or
oppose legislation affecting trade, commerce or manufacture. If
the primary putpose be advancemen~ of objects of general public
utility, it would remain charitable even if an incidental entry
into the political domain for achieving that purpose e.g. promoH
tion of or opposition to legislation concerning that purpose, is
contemplated.
In In re The Trustees of the Tribune(')
the
(I) 71.T.R. 415.
576
SUPREME
COURT
REPORTS
[1965] I S.C.R.
Judicial Committee of the Privy Council was called upon to A
consider whether a trust created under . a will to maintain a
printing press and newspaper in an efficient condition, and to
keep up the liberal policy of the newspaper, devoting the surplus
income of the press and newspaper after defraying all current
expenses in improving the newspaper and placing it on a footing
of permanency and further providing that in case the paper ceased B
. to function or for any other reason the surplus of the income
conld not be applied ~ the object mentioned above, the same
should be applied for the maintenance of ·a collei;e which had
been established out of the funds of another trust created by the
same testator, was a charitable purpose within the meaning of C
. s. 4 ( 3). The Judicial Committee expressed the view that the
object of the settler was to supply the. province with an organ of
educated public opinion and this was prima facie an object of
general public utility, and observed :
''These English decisions-arc in point in so far
only as they illustrate the manner in which political
·objects, in the wide sense which includes projects for
legislation in the interests of particular causes, affect
the question whether the Court can regard a trust as
being one of general public utility. In the ·original
letter of reference it. was not suggested by the Commissioner that the newspaper was intended . by its
founder to be a mere vehicle of political propaganda,
and in the case of Sardar Dyal Singh it seems unreasonable to doubt that his object was to benefit the people
of Upper India by providing them with an English
newspaper-the dissemination of news and the ventilation of opinion upon, all matters of public interest.
While not perhaps impossible it is difficult for a newspaper to avoid having or acquiring a particular political complexion unless indeed it avoids all reference to .
the activities of Governments or legislatures or treats·
of them in an eclectic or inconsistent manner.
The
circumstances of U ppcr India in the last decade of the
ilinetccnth century would doubtless make any paper
published for Indian readers sympathetic
to various
movements for social and political reform.
But their
Lordships having before them material which shows the
character of the newspaper as it was . in fact conducted in the testator's lifetime, have arrived at the
conclusion that questions of politics and legislation
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C.I.T., MADRAS V. CHAMBER OF COMMERCE (Shah J.)
577
were discussed only as many other matters were in this
paper discussed and that it is not made out that a
political
purpose
was the dominant purpose of the
trust."
In All India Spinners' Association v. Commissioner of Incometax, Bombay ( 1 )
the assessee· was formed as an
unregistered
association by a resolution of the All India Congress Committee
for the development
of village industry of hand-spinning and
hand-weaving.
The Association was established as an integral
part of the Congress Organisation, but it had independent existence and powers unaffected and uncontrolled by politics.
The
C objects of the Association, amongst others, were to give financial
assistance to khaddar organisations
by way of loans, gifts or
bounties, to help or establish schools or institutions where handspinning is taught, to help and open khaddar stores, to establish
a khaddar service, to act as agency on behalf of the Congress to
receive self-spun yarn as subscription to the Congress and to
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issue certificates and to do all the things that may be considered
necessary for the furtherance of its objects, with power to make
~egulations for the conduct of affairs of the Association of the
Council and to make such amendments in the present constitution, as may be considered from time to time.
The funds of
the Association consisted mostly of donations and subscriptions.
and out of the funds charkas and handlooms were
purch2.sed
and supplied to the inhabitants free of charge.
Raw cotton was
supplied to the poor people to be spun into yarn and the yarn
so spun along with . the yarn acquired by the Association were
supplied to other poor people for hand-weaving.
The income
of the Association was treated by the Commissioner of Incometax as not exempt under s. 4(3) (i) o( the Indian Income-tax
Act inasmuch as {i) the dominant purpose of the Association
was political, (ii) even assuming it was not political. the dominant purpose was not in any event a valid charitable purpose in
law, and (iii) some of the objects were not clearly charitable
objects.
The Judicial Committee held that the income of the
Association was derived from property held under trust or other
legal obligation wholly for charitable purposes and the English
decisions on the law of charities not based upon any definite ~nd
precise statutory provisions were not helpful in construing the
provisions of s. 4(3)(i) of the Indian Income-tax AcL
The
words of s. 4(3) were largely influenced by Lord Macnaghten's
definition of charity in Pem,el v. Commissioners for
Special
Purposes of Income-Tax('), but that definition had no statutory
(I) 121.T.R. 482.
(2) 11891] A.C, 53
!78
SUPREME
COURT
REPORTS
( 1965] I S.C.R.
authority and was not precisely followed in the most material
A
particulars; the words of the section being "for the advancement
of any other object of general public utility" and not as Lord
Macnaghten said "other purposes beneficial to the community".
The Judicial Committee observed that the primary object of the
Association was relief of the poor and apart from that ground
there was good ground for holding that the purposes of the
B
Association included advancement of other purposes of general
public utility.
The Judicial Committee then held :
"'These words, their Lordships think, would exclude
the object of private gain, such as an undertaking for
commercial profit though all the same it would sul>-
serve general public utility.
But private profit was
eliminated in this case.
Though the connexion in one
sense of the Association with Congress was relied on
as not consistent with 'general public utility' 'because
it might be for the advancement primarily of a particular party, it is sufficiently clear in this case that the
Association's purposes were independent of and were
not affected by the purposes or propaganda of Congress."
c
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The Indian legislature has evolved a definition of the expression "charitable purpose" which departs in its material clause
from the definition judicially supplied in Pemsel's case('), and
decisions of English Courts, which proceed upon interpretation
E
of language different from the Indian statute have little value.
We, therefore, do not propose to deal with the large number of
English cases cited at the Bar, except to mention three, which
declared trusts for political purposes invalid.
In Rex v. The Special Commissioners of Income-tax (e~parte F
The Headmasters' Conference) and Rex v.
The Special Commissioners of Income Tax (ex-parre) The Incorporated Association of Preparatory School(')
it was held that a
conference
of Headmasters incorporated under the Companies Act as an
Association limited by guarantee, of which under the Memorandum of Association income was to be applied towards
the
G
promotion of its expressed objects, one of which was the promotion of, or opposition to, legislative or administrative educational
measures, the holding of examinations, etc. was not a body of
persons
established
for
charitable purposes only within the
meaning of the Income Tri Acts.
Similarly an incorporated
Association of Preparatory Schools incorporated under the ComH
panies Act as an Association limited by guarantee,
income
(I) l189tJ A.C. nC ---
(2) 10 T.C. 73
;
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. C.LT., MADRAS V. CHAMBER OF COMMERCE (Shah/.)
57!)
A whereof was to be applied solely towards the promotion of its
expressed objects which included the advancement and promotion of, or opposition to, legislative or administrative educational
measures etc. was not an association whose income was applicable to charitable purposes only. The Court of King's Bench
. held in the case of each of the two trusts that because the income
B
could be utilised for promotion· of, or opposition to, legislative
or administrative' educational measures, and those being the pri-
. mary objects, the income was not liable to be applied solely to
charitable purposes.
In Tl/e Commissioners of Inland Revenue v. The Temperance
c
Council of the Christian Churches of England and Wales( 1 ) a
Council constituted by resolution at a meeting of representatives
of the temperance organisation
of the Christian' Churches of
England and Wales, the purpose of which being united action to
secure legislative ·and other temperance reform was held. not to
be a council established foi charitable purposes· only, nor was
D
its income applicable to charitable purposes only, and that it was
therefore not entitled to the exemption sought.
In Bowman v. Secular Society Ltd.( 2) Lord Parker observed:
"A trust for the attainment of political objects has
always been held invalid, not because it is illegal but
E
because the Court has no_ means of judging whether
a proposed change in the law will or will not be for
the public benefit."
· ·
This Court in a recent judgment, Laxman Ba/want Bhopatkar
by Dr. Dr.ananjaya Ramchandra Gadgil v. Charity Commissioner,
Bombay(') considered whether for the purposes of the Bombay
F
Public Trust Act 29 of 1950 a trust to educate public opinion
and to make people conscious of political rights was a trust for
a charitable purpose. The Court held (Subba Rao J.~ dissenting) that the object for which the trust was founded was political, and political purpose being not a charitable purpose did
not come within the meaning of the expression "for the advancement of any other object of general public utility" in s. 9 ( 4) ·
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of the Bombay Public Trusts Act, 1950. The definition of
"Charitable purpose" in s. 9 of the Bombay Public .Trusts Act
closely follows the language used in the definition given· under
the Income-tax Act s. 4 (3). But in Laxman Ba/want Bhopatkar's case('), as in •he cases of the Courts in England which we
(1) 10 T.C. 748.
(2) [1917] A.C. 406, 441.
C3) [1963] 2 S.C.R. 625.
580
SUPREME
COURT
R~PORTS
[1965) I S.C.R.
have referred to, it was held that the primary or the principal
A
object was political and therefore the trust was not charitable.
In the present case the primary purpose of the assessee was not
to urge or oppose legislative and other measures affecting trade,
commerce or manufactures.
The primary purpose of the asscssee
is, as we have already observed, to promote and protect trade,
B
commerce and industries to aid, stimulate and promote the development of trade, commerce and industries and to watch over
and protect the general
commercial interests of India or any
part thereof.
It is only for the purpose of securing these primary
aims that it was one of the objects mentioned in the Memorandum
of Association that the assessee may take steps to urge or oppose
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legislative or other measures affecting trade, commerce or manufactures.
Such an object must be regarded as purely ancillary
or subsidiary and not the primary object.
The appeals therefore fail and are dismissed with costs. One
hearing fee.
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Appeals dismissed.