Dipak Kumar Sen, J.:— Calcutta Hydraulic Press Association, the assessee, was registered under the Indian Trade Unions Act, 1926, in or about April, 1952. The objects of the assessee as appearing in its rules and regulations are, inter alia, as follows:
“The object of the association is to regulate relations between the members and their employees and between member and members and additionally the objects of the association are to include the following:
(b) to impose restrictive conditions on the conduct of the trade;
(c) to adjust and/or control the production and working of the jute press houses in the membership of the association;
(d) to secure by agreement advantageous terms from balers in relation to baling in jute press houses;
(e) to protect the members of the association against competition;
(f) to secure the enactment of legislation beneficial to the trade;
(g) to secure the repeal of any legislation or prevent the passing of legislation which is damaging or may in any way damage the trade;
(h) to collect, classify and circulate statistics;
(i) to adopt common forms of agreements;
(j) to establish funds for the purposes of the members and/or for the benefit of employees of the members;
(k) to assist or amalgamate with other associations or societies or federations of associations or societies, having for the objects or one of their objects the promotion of the interests of the jute trade;
(l) to do all such other lawful things as are incidental or conducive to the attainment of the above objects or any of them.
2. In the assessment year 1962–63, the relevant accounting periods being the year ending on the 31st December, 1961, in respect of its general fund and the year ending on the 30th June, 1961, in respect of its operating fund, the assessee filed a return showing a loss of Rs. 4,909. The assessee claimed that as a mutual association its income could not be charged to tax. The source of the income of the general fund being only the subscription of members the ITO accepted such claim of the assessee and did not take into account either the income or the expenditure relating to this fund in computing the taxable income of the assessee. But the ITO found that the sources of the operating fund were, (a) deductions from production agreements, and (b) interest and dividend from investments. The income from the first source was found to be derived by rendering a specific service to some of its members and as such chargeable to income-tax under s. 28(H) of the I.T Act, 1961. The income accruing to the operating fund from the other source, viz., interests from securities and dividend, were claimed by the assessee as exempt from income-tax under s. 10(24) of the I.T Act, 1961.
3. The ITO, however, held that, as the activities of the assessee did not relate to regulation of the relation of its members and their employees but were confined mainly to the protection and promotion of the trade interests of its members, it could not be said that the assessee was an association formed primarily for the purpose of regulating relations between workmen and workmen. As such the assessee's income from “interest on securities and dividend “was not exempt from tax as claimed and was chargeable to tax. The income of the assessee was assessed accordingly. Similar assessments were made in the assessment years 1963–64, 1964–65 and 1965–66. Being aggrieved, the assessee preferred appeals from the said assessments. The AAC found that the assessee was registered under the Indian Trade Unions Act, 1926, and, construing its rules and regulations, concluded that the assessee had been constituted primarily for the purpose of regulating the relations between workmen and employers as also workmen and workmen, and that the other objects enumerated in the rules were only additional objects which may or may not be performed. He held that the provisions of s. 10(24) of the Act were attracted in the facts and that the income of the assessee from interest and dividend could not be included in the taxable income of the assessee. The appeals of the assessee were accordingly allowed.
4. The revenue preferred a consolidated appeal in respect of all the assessment years involved to the Income-tax Appellate Tribunal. It was contended in the appeal on behalf of the revenue that the objects of the assessee as set out in its rules indicated that its activities did not come within the scope of s. 10(24). It was contended on behalf of the assessee on the other hand that the main purpose of the assessee was the promotion of good relationship between its members and their employees and the clauses in its rules to the contrary were merely incidental or additional.
5. The Tribunal noted that the assessee was an association formed by the employers but construing the object cl. (iii) held that the assessee was an association formed primarily for the purpose of regulating relations between the employers and their workmen. The Tribunal found further that the assessee was administering a welfare fund utilised only for the benefit of the workers. This constituted an activity for the promotion of good relationship between employers and their workmen. The Tribunal confirmed the decision of the AAC and the appeals of the revenue were dismissed.
6. On an application of the CIT, West Bengal-V, under s. 256(1) of the I.T Act, 1961, the Tribunal has drawn up a statement of case and has referred to this court for its opinion the following question of law arising from its order:
“Whether, on the facts and in the circumstances of the case and having regard to the rules and regulations, the assessee association was formed primarily for the purpose of regulating relations between employers and their workmen and the case, therefore, fell within the purview of section 10(24), thus excluding the income from interest on securities and dividend income from the total income of the assessee?”
7. At the hearing Mr. B.K Bagchi, learned advocate for the revenue, submitted that in the rules of the assessee a number of objects were mentioned, all of which enjoyed equal status and there was no basis to determine which of them was the primary object. He submitted further that on a proper construction of s. 10(24) of the Act, it would be seen that the section did not bring within its ambit an assessee whose object was to regulate the relationship between a group of employers and a corresponding group of workmen. Under the said rules and regulations, it could be seen, no employee was or could be a member of the assessee. Further, it did not appear that it was compulsory for either employers or employees to be the members of the association. One of the special objects of the assessee in the rules was the regulation of the relationship between members and members. Accordingly, Mr. Bagchi contended that the assessee could not be said to have been formed primarily for the purpose of regulating relations between the employers and their workmen. The assessee also could not be said to be a trade union within the meaning of s. 10(24) of the Act and was not entitled to the benefits conferred thereunder. The objects and the activities of the assessee, he submitted, were mainly to enhance the private gains of its members and nothing else.
8. In support of his contentions Mr. Bagchi cited the following decisions:
(a) East India Industries (Madras) P. Ltd. v. CIT, [1967] 65 ITR 611 (SC). In this case a trust had been established for various objects, including charitable and religious objects. The deed provided that the objects would be independent of each other and that the trustees would apply the property of the trust in carrying out all or such objects of the trust as in their discretion they may deem fit. The question arose whether the property of the trust was wholly for the charitable purposes within the meaning of s. 4(3)(i) of the Indian I.T Act, 1922, and whether donations made by the assessee to the trust were exempt from tax under s. 15B. The Supreme Court held on the facts that the trust property was not held wholly for the religious or charitable purposes within the meaning of the section and that the assessee was not entitled to claim deduction under s. 15B of the Indian I.T’ Act,.1922, in respect of donations made to the trust.
(b) CIT v. Indian Sugar Mills Association, [1974] 97 ITR 486 (SC). The question here was also whether the income derived by the Sugar Mills Association, the assessee, from its sugar export division was exempt under s. 4(3)(i) of the Indian I.T Act, 1922. Construing the objects of the assessee as specified in its rules and regulations, the Supreme Court held that several objects constituted the primary purpose of the association and were incidental to one another. Some of the objects were not for charitable purpose within the meaning of the Act. At least one rule permitted distribution of profits among the members under certain conditions and introduced an element of private gain which was inconsistent with public utility. It was held that the income of the association from its business in sugar was not exempt as being wholly for charitable purposes.
(c) Dharmaposhanam Company, Kerala v. Commissioner Of Income Tax, Kerala , [1978] 114 ITR 463 (SC). The facts in this case were that an association, registered as a company, was permitted by its memorandum of association to carry on business in conducting kuries and money-lending. It was also provided that the profits would not be divided amongst its members but the residue after meeting the expenses of the company would be utilised for promoting education, industry, social welfare and such other purposes of common good as resolved in the association's general meetings. The question arose whether the business of the association was held in trust for a charitable purpose within the meaning of s. 2(15) of the I.T Act, 1961, and whether its income from such business was exempt from tax under s. 11(1)(a) of the Act. The Supreme Court held that, though the objects were referable to the general residuary head “Charitable purposes “, yet the condition that they did not involve the carrying on of any activity for profit was not satisfied and consequently the assessee was not entitled to exemption.
(d) Mohammad Ibrahim Riza Malak v. CIT, [1930] LR 57 IA 260 : AIR 1930 PC 226.
9. The facts before the Privy Council here were that some property was vested in the assessee as the head of a Mohamedan community and was utilised in part in running certain shops, the profits being treated as part of the income of the community. The deed by which the property was vested directed that the property and income should be used for maintaining the successive heads with suitable dignity providing them with all necessaries of life and for secular and religious education of the members of the community. On such facts the Judicial Committee held that no part of the income was exempt from income-tax under s. 4(3)(i) or (ii) of the Indian I.T Act, 1922, as the purpose of the trust was not wholly charitable or religious, and as no portion of the property had been set apart for charitable purposes so that the same could be identified as appropriated exclusively thereto, Dr. Debi Pal, learned counsel for the assessee, contended in reply that the question referred was confined only to the exemption of income from interest on securities and dividend from tax under s; 10(24). He submitted that the Tribunal has found that the assessee had been registered under the Indian Trade Unions Act, 1926, and construing the objects set out in its rules has found further that the assessee was formed primarily for the purpose of regulating the relations between employers and the workmen. The Tribunal has also found that the assessee was administering a welfare fund utilised only for the benefit of the workers.
10. Dr. Pal urged that in order to claim exemption under s. 10(24) of the Act only two conditions need be satisfied, namely, the assessee must be registered under the Indian Trade Unions” Act, 1926, and it should be formed primarily for the purposes of regulating the relation between workmen and employers or between workmen and workmen. It was an admitted position that the assessee was registered as a trade union and as such the first condition was satisfied. It was also found that the assessee had been formed primarily for the purpose of regulating relations between workmen and employers. Section 10(24) did not lay down that an association must be formed wholly and exclusively for the purposes referred to in the said section so as to be entitled to the benefit of the exemption thereunder.
11. The first object in the rules of the assessee was the regulation of relation between the employers and the employees. The other objects set out in the rules must be construed to be additional or incidental or ancilliary objects. Apart from the rules the actual activities of the assessee were duly considered by the Tribunal for ascertainment of its primary object.
12. In support of his contentions Dr. Pal cited the following decisions:
(a) CIT v. Andhra Chamber of Commerce, [1965] 55 ITR 722. Here the Supreme Court in construing s. 4(3)(i) of the Indian I.T Act, 1922, held that the legislature had used language of great amplitude in defining “charitable purpose “and this definition was inclusive and not exhaustive or exclusive. If its primary purpose was advancement of objects of general public utility an assessee would still be considered to be charitable. Even an incidental entry into the political domain for achieving its charitable purpose by promotion of or opposition to legislation concerning the objects of the assessee would be regarded as a purely ancillary and subsidiary object and not the primary object.
13. Dr. Pal also cited Dharmadeepti, Alwaye, Kerala v. Commissioner Of Income Tax, Kerala, [1978] 114 ITR 454 (SC) for the proposition that the objects of an association have to be looked into to determine what was the primary object and which were the ancillary and incidental objects.
14. For the proposition that the objects clause of an association had to be considered in the background of actual implementation thereof in order to determine which object was primary, Dr. Pal cited North of England Zoological Society v. Chester Rural District Council, [1959] 3 All ER 116 (at p. 121).
15. Dr. Pal contended that the decisions in cases of charitable trusts cited on behalf of the revenue had little application in the facts and circumstances of the instant case inasmuch as in such cases exemption was claimed under s. 4(3)(i) of the Indian I.T Act, 1922. The said section provided that any income derived from any part of the property held under trust wholly for religious and charitable purposes or any income of a religious or charitable institution derived from voluntary contribution and applicable solely for religious and charitable purposes was exempt from tax.
16. It appears to us that the contentions raised on behalf of the assessee are not without substance. The arguments made by learned counsel for the revenue before us were not advanced before the Tribunal and the Tribunal did not have the opportunity to enquire into facts relevant thereto. The only point that was canvassed was that the rules of the assessee enumerated various other objects along with the object of regulating relations between its members and employees. The Tribunal has duly considered the relevant rules and the actual activities of the assessee and come to the conclusion that the primary object of the assessee was the regulation of the relationship of its members and the employees., It cannot be said that such conclusion of the Tribunal is erroneous or perverse. None of the facts found in which the decision of the Tribunal is based has been challenged which thus stand concluded.
17. As contended by Dr. Pal, the decisions cited on behalf of the revenue do not advance the tatter's case inasmuch as the same involve consideration of the question whether any property or income of an assessee was wholly or exclusively used for charitable or religious purposes. This is not the question with which we are concerned. For the reasons as stated above the assessee succeeds in this application. The question is answered in the affirmative and in favour of the assessee. There Will be no order as to costs.
Sudhindra Mohan Guha, J.:— I agree.