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PETITIONER: C.I.T. BOMBAY

       Vs.

RESPONDENT: BAR COUNCIL OF MAHARASHTRABAR COUNCIL OF INDIABAR COUNCIL OF

DATE OF JUDGMENT22/04/1981

BENCH: TULZAPURKAR, V.D. BENCH: TULZAPURKAR, V.D. VENKATARAMIAH, E.S. (J)

CITATION:  1981 AIR 1462            1981 SCR  (3) 542  1981 SCC  (3) 308        1981 SCALE  (1)679  CITATOR INFO :  R          1986 SC1054  (7,10)

ACT:      Income tax  Act, 1961, section 2(15) and 11-Whether the Bar Councils  constituted under the Advocates Act, 1961, are bodies intended  to advance  any object  of  general  public utility falling within section 2(15) for purposes of section 11 of the Act.

HEADNOTE:      The income  derived by  the Bar  Council of Maharashtra from securities  (interest)  and  other  income  by  way  of enrollment fees  during the  accounting periods  relevant to the assessment  years 1962-63,1963-64,1964-65  was subjected to  tax  by  the  Income  Tax  Officer.  Since  the  Central Government had  accorded approval  to the  assessee for  the purpose of section 10(23A) during the pendency of the appeal before the  Tribunal by  a notification dated August 5, 1966 with effect  from December  28,1961, the  Tribunal held that the assessee Council was entitled to exemption under section 10(23A) in  respect of its income by way of enrollment fees. The  Tribunal  remanded  the  case  back  to  the  Appellate Assistant Commissioner  and directed  him to  dispose of the case by  examining the  question as to the purpose for which the  securities  were  held  by  the  assessee  Council.  It observed  that   if  the   said  securities  were  held  for educational purpose or for any other charitable purpose then the exemption  under section  11 would  be admissible to the extent available  under  the  law.  The  High  Court,  on  a reference made  at the  instance  of  the  assessee-Council, answered the  question: "Whether  on the  facts and  in  the circumstances of  the case,  the assessee-Council  could  be taken to be a body intended to advance any object of general public utility  falling within section 2(15) for purposes of section 11 of the Act ?" in favour of the assessee and hence the appeals  by Revenue  after obtaining  special leave from the Court.      Dismissing the appeals, the Court ^      HELD: 1. Having regard to the Preamble of the Advocates Act, 1961 and the nature of the various obligatory functions including the one under clause (d) enjoined upon every State

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Bar Council  under section  6(1) of the Advocates Act, it is clear that the primary or dominant purpose of an institution like the  assessee Council  is the advancement of the object of general  public utility  within the  meaning  of  section 2(15) of  the Income  Tax Act,  1961 and  as such the income from securities held by the assessee-Council would be exempt from any  tax liability  under section  11 of the Income Tax Act, 1961. [551 E-G] 543      2. If  the primary  or dominant  purpose of  a trust or institution was  charitable any other object which by itself might not  be charitable  but which  was merely ancillary or incidental to  the primary  or dominant  purpose  would  not prevent the trust or institution from being a valid charity. The restrictive  words "not  involving the  carrying on  any activity for profit" in section 2(15) of the Income Tax Act, 1961,  qualify   "object"  and   not  the   advancement   or accomplishment thereof.  In other words, the true meaning of the restrictive words is that when the purpose of a trust or institution was  the advancement  of an  object  of  general public utility  it was that object of general public utility and not  its accomplishment  or carrying  out which must not involve the  carrying on  of any  activity for profit. Here, admittedly, the  State Bar Councils are not indulging in any activity for  profit and  hence the question of applying the restrictive words  in s.2(15)  does not arise. [547 C-F, 548 G-H]      Commissioner of Income Tax, Madras v. Andhra Chamber of Commerce, 55 ITR 722; Additional Commissioner of Income Tax, Gujarat v.  Surat Art  Silk Cloth Manufacturers Association, 121 ITR 2, reiterated.

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2115 to 2117 of 1980.      Appeals by  special leave  from the  judgment and order dated the  8 the  August, 1978  of the  Bombay High Court in Income Tax Reference No. 142 of 1969.      S. C. Manchanda and A. Subhashini for the Appellant.      V. N.  Ganpule and  Mrs.  Veena  Devi  Khanna  for  the Respondent.      V. N. Ganpule for Intervener No. 1.      S. C. Patel for Intervener No. 2.      The Judgment of the Court was delivered by      TULZAPURKAR, J.  These appeals  by special  leave raise the question: "whether on the facts and in the circumstances of the case the assessee-Council could be taken to be a body intended to  advance any  object of  general public  utility falling within  s. 2(15) for purposes of s. 11 of the Income Tax Act, 1961 ?"      The facts  giving rise  to the  aforesaid question  may briefly be  stated. The  respondent assessee-Bar  Council of Maharashtra-is  a   body  corporate  established  under  the Advocate’s Act,  1961 (Act 25 of 1961) which came into force on December 28, 1961. During the accounting periods relevant to the  assessment years  1962-63, 1963-64  and 1964-65  the assessee derived income from 544 securities (interest)  and other income by way of enrollment fees particulars whereof, are as follows: Assessment year      Interest on securities     Other Income 1962-63               Rs. 3,779                 Rs  28,035 1963-64               Rs. 8,629                 Rs 3,04,103

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1964-65               Rs. 9,356                 Rs   96,322      The Income Tax Officer subjected to tax the income from both the  sources  for  all  the  three  years.  In  appeals preferred to  the Appellate  Assistant Commissioner  it  was contended  by   the  assessee   that  its  other  income  by enrollment fees was exempt under s. 10 (23A) and interest on securities was exempt from tax under s. 11 of the Income Tax Act, 1961.  The Appellate  Assistant Commissioner  negatived the exemption claimed under s. 10(23A) in the absence of the Central Government’s  notification according approval to the association and  with regard  to the  claim for exemption in respect of  the interest  on securities  he held that it was not established  that the  securities were held on trust for any charitable  purpose. He  took the  view  that  the  main object of  the assessee-Council  was to  benefit  the  legal profession (its  Members) and, therefore, the object was not one of  general public utility. Accordingly he confirmed the assessment orders for the three years.      The matter  was carried in further appeal to the Income Tax Appellate  Tribunal and  since by  that time the Central Government had  accorded approval  to the  assessee for  the purpose of  s. 10  (23A) by  a notification  dated August 5, 1966 with  effect from  December 28, 1961, the Tribunal held that the assessee-Council was entitled to exemption under s. 10(23A) in  respect of its income by way of enrollment fees. In regard to the income by way of interest on the securities the Tribunal observed that the character of the body holding the securities was not by itself decisive, that safeguarding the rights, privileges and interest of advocates on its roll could not be said to be an object of general public utility, that the  real question  to be  considered under  s. 11  was whether the  securities were held for any charitable purpose or not  and the tribunal found that there was no evidence or material on  record touching  this  aspect.  It,  therefore, remanded  the   case  back   to  the   Appellate   Assistant Commissioner and  directed him  to dispose  of the  case  by examining the  question as  to the  purpose  for  which  the securities were held by 545 the  assessee-Council.   It  observed   that  if   the  said securities were  held for  educational purpose  or  for  any other charitable  purpose then  the exemption  under  s.  11 would be  admissible to  the extent available under the law. At the instance of the assessee Council the question set out at the  commencement of  this judgment  was referred  to the High Court  for its decision under s. 256(1) of the Act. The High  Court   took  the  view  that  having  regard  to  the obligatory functions enjoined upon a State Bar Council under s.6 of  the Advocate’s  Act the  assessee-Council  could  be regarded as  a body  constituted for  general public utility and that  the entire income of the body would be exempt from tax under  s.11 of the Income Tax Act, 1961. In its view the advancement of  any object  beneficial to  the public  or  a section of  the public  as distinct  from an individual or a group of  individuals  would  be  a  charitable  purpose  as defined in  s.2 (15)  of the Income Tax Act and in this view of the  matter the  High Court  answered the question in the affirmative and  against the Revenue. It is this view of the High Court that is being challenged by the Revenue before us in these appeals.      In support  of the  appeals  counsel  for  the  Revenue sought to  raise two  contentions. First,  he urged that the relief claimed  under s.11 was ruled out by reason of relief having been  obtained by  the assessee-Council in respect of its income from enrollment fees under s.10 (23A) of the Act.

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According to  him s.10  (23A), while  exempting from tax any income of an association or institution established in India having as  its object  the control,  supervision, regulation and  encouragement  of  the  profession  of  law,  medicine, accountancy  and   any  other   profession  as  the  Central Government  may   specify,  has   expressly  excluded   from exemption  such   association’s  or   institution’s   income chargeable  under  the  head  "interest  on  securities"  or "Income from  house properties"  or "any  income received in rendering any  specific service", etc., and, therefore, what has  been  expressly  excluded  from  exemption  under  this provision could  not be  or was  not intended  to be  exempt under s.11  of  the  Act.  In  other  words,  the  assessee- Council’s claim  for exemption  in respect  of  interest  on securities under  s.11 was  ruled out by reason of s.10(23A) of the  Act. Secondly,  counsel contended that on merits the High Court’s  view that  the  assessee-Council  was  a  body constituted for  advancement of  an object of general public utility was  erroneous inasmuch as it was a body established principally for  the purpose  of  safeguarding  the  rights, privileges and  interest of  the advocates  on its  roll and since such objective merely served to benefit the members 546 of the profession it was no charitable purpose as defined by s.2 (15) for purposes of s.11 of the Act. In support of this contention  counsel   placed  reliance   on   some   English decisions.      At the  out set  it may  be stated  that  we  were  not inclined to permit counsel for the Revenue to urge his first contention as in our view the Revenue must be deemed to have given up the same. We may point out that precisely this very contention was raised by the Revenue before the Tribunal and was negatived  by it. The Tribunal on a detailed analysis of the  concerned   provisions  took  the  view  that  the  two provisions were  not mutually  exclusive but  operated under different circumstances,  that s.11  was relatively wider in its scope  and ambit, that while s.10 (23A) granted absolute exemption in  respect of  particular types  of  income  s.11 imposed  certain  conditions  for  the  exemption  but  such exemption was  available  for  all  sources  and  there  was nothing inherently improbable or inconceivable about the two provisions operating  simultaneously and  as such  the claim for exemption  under s.11  was available  to  the  assessee- Council provided  it satisfied  all the requirements of that provision. We  may point  out that  there are  other  allied provisions like  for instance  sub-s. (23C)  in  s.10  which clearly indicate that the Legislature did not intend to rule out s.11  when exemption  was claimable  under such specific provisions of  s.10. It  was after negativing the contention in this  manner that  the Tribunal  went on  to consider the claim for  exemption made by the assessee-Council under s.11 but on  merits found  that there was no material or evidence on record to show whether or not the securities were held by the assessee-Council  for any  of charitable  purposes  and, therefore, it  remanded the case. The remand order was never challenged by  the Revenue  by seeking  a reference  on  the ground that  a remand was unnecessary because s.11 was ruled out by  reason of  exemption having  been  obtained  by  the assessee-Council under  s.10 (23A)  of the  Act nor  was any such contention  raised when  reference was  sought  by  the assessee-Council nor when the matter was being argued in the High Court.  In these  circumstances it  is clear to us that the Revenue  acquiesced in  the view  taken by  the Tribunal that the claim for exemption under s.11 of the Act could not be said  to be ruled out by reason of the provisions of s.10

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(23A). We,  therefore,  proceed  to  deal  with  the  second contention which  was principally  argued before us in these appeals.      Under s.11  of the Income Tax Act, 1961, subject to the conditions therein  specified, income  derived from property held 547 under trust  wholly for  charitable or religious purposes to the extent  to which such income is applied to such purposes in India  is exempt from the tax liability under the Act and s.2 (15)  gives an  inclusive definition  of the  expression "charitable purpose" thus:      "Charitable  purpose"  includes  relief  of  the  poor,      education, medical  relief and  the advancement  of any      other object  of general  public utility  not involving      the carrying on any activity for profit.      It may  be noticed  that whereas  any object of general public utility was included in the definition of "Charitable purpose"  in  the  1922  Act,  the  present  definition  has inserted the  restrictive words  "not involving the carrying on of  any activity  for profit" which qualify or govern the last head  of charitable  purpose. In Commissioner of Income Tax, Madras  v. Andhra Chamber of Commerce-a case decided by this Court  under the  1922 Act  where the restrictive words were absent-this  Court laid  down that  if the  primary  or dominant purpose  of a  trust or institution was charitable, any other object which by itself might not be charitable but which was  merely ancillary  or incidental to the primary or dominant purpose  would not prevent the trust or institution from being  a valid  charity.  After  the  addition  of  the restrictive words  in the  definition in  the 1961 Act, this Court in  Additional Commissioner  of Income Tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association affirmed that the aforesaid test of primary of dominant purpose of a trust or institution  still holds good, that the restrictive words qualify "object"  and not  the advancement or accomplishment thereof and  that the  true meaning of the restrictive words was that  when the purpose of a trust or institution was the advancement of  an object  of general  public utility at was that  object   of  general   public  utility   and  not  its accomplishment or  carrying out  which must  not involve the carrying on  of any  activity for profit. And applying these tests trading  bodies like  Andhra   chamber of Commerce and Surat Art  Silk Cloth  Manufacturers Association  have  been held to  be institutions  constituted with a view to advance an object of general public utility because their primary or dominant purpose  was to promote and protect industry, trade and commerce  either generally  or in  certain  commodities, even though  some benefit  through some  of their activities did accrue to their members which 548 was regarded  as incidental  and this  Court held  that  the income derived  from diverse  sources by  these institutions (rental income  from property  in the case of Andhra Chamber of Commerce  and income  from annual subscriptions collected from its  members and  commission of a certain percentage of the value  of licences for import of foreign yarn and quotas for purchase  of indigenous  yarn obtained  by the  assessee from its  members in  the  case  of  Surat  Art  Silk  Cloth Manufacturers Association  was  exempt  from  tax  liability under s.11  of the  Act. Reliance on English decisions would not be  of much  avail because  the definition of charitable purposes as  given in  our Act  since it embraces ’any other object of  general public  utility’ goes  further  than  the definition of  charity to be derived from the English cases.

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Under English  law of  charity a trust is charitable only if it is  within the  spirit and  intendment of the Preamble to the Statute of Elizabeth (43 Eliz. ch. 4) and all objects of general public  utility are not necessarily charitable, some may or  some may  not be,  depending upon  whether they fall within  the   spirit  and   intendment  of  the  Statute  of Elizabeth. Under  our definition  every  object  of  general public utility  would be  charitable  subject  only  to  the condition imposed  by the  restrictive words inserted in the 1961 Act.  It is  because of  this basic  difference between Indian Law  and English  Law of  charity that Lord Wright in All India  Spinners’ Assn.  v. CIT uttered a warning against blind adherence  to English  decisions on  the subject thus: "The Indian  Act gives a clear and succinct definition which must be  construed according  to  its  actual  language  and meaning. English  decisions have no binding authority on its construction and  though they  may sometimes  afford help or guidance,  cannot  relieve  the  Indian  Courts  from  their responsibility of  applying the  language of  the Act to the particular circumstances  that emerge  under  conditions  of Indian life."      Having regard  to the  aforesaid manner  in  which  the definition of  "charitable purpose"  given in  s.2 (15)  has been interpreted  by this Court the question that arises for consideration in  these appeals  is whether  the securities, interest from  which is  sought  to  be  exempted  from  tax liability, were held by the assessee-Council on trust wholly for a  charitable purpose, namely, for the advancement of an object of  general public  utility? Admittedly the assessee- Council is  not indulging  in any  activity for  profit  and hence the  aspect of  considering the  applicability of  the restrictive words  does not  arise and  the  answer  to  the question must depend upon the 549 nature or  character of  the functions  and activities which the assessee-Council  can undertake under the Advocates Act, 1961 for  it is  clear that  it cannot  go  beyond  what  is prescribed by that Act.      The Preamble  of the  Advocates Act, 1961 shows that it was enacted  with a  view to  amend and  consolidate the law relating to  legal practitioners  and  to  provide  for  the constitution of Bar Councils and an All India Bar. Under s.3 of the  Act Bar  Councils are constituted for various States and the  assessee-Council happens  to be a State Bar Council for Maharashtra.  Section 4  provides that every Bar Council shall be  a body corporate having perpetual succession and a common seal,  with power  to acquire  and hold property both movable and  immovable and  to contract, and may by the name by which  it is  known sue  or be  sued. Section  6  is  the material provision which sets out both obligatory as well as optional functions  of every State Bar Council and so far as is material runs thus:           "6.(1)The functions of a State Bar Council shall                 be-              (a)    to admit  persons as  advocates  on  its                     roll;              (b)    to prepare and maintain such roll;              (c)    to  entertain  and  determine  cases  of                     misconduct  against   advocates  on  its                     roll;              (d)    to safeguard  the rights, privileges and                     interests of advocates on its roll;              (e)    to promote and support law reform;              (ee)   to conduct  seminars and  organise talks                     on legal  topics by  eminent jurists and

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                   publish journals  and  papers  of  legal                     interest;              (eee)  to organise legal aid to the poor in the                     prescribed manner;              (f)    to manage  and invest  the funds  of the                     Bar Council;              (g)    to  provide  for  the  election  of  its                     members;              (h)    to perform all other functions conferred                     on it by or under this Act; 550              (i)    to do  all other  things  necessary  for                     discharging the aforesaid functions.           (2)  A State  Bar Council  may constitute  one  or                more funds  in the  prescribed manner for the                purpose of-           (a)  giving  financial   assistance  to   organise                welfare schemes for the indigent, disabled or                other advocates;           (b)  giving legal aid or advice in accordance with                the rules made in this behalf." Sections  9,   9A  and   10  of  the  Act  provide  for  the constitution  of   various  committees   for  the   purposes mentioned therein.  Section 15  confers  power  on  the  Bar Council to  make rules  to carry  out the  purposes of  this Chapter. The  rest of  the provisions  of the  Act  are  not material for the purpose of the issue under consideration.      Counsel for  the Revenue  contended  that  the  primary object or  purpose with  which the Bar Council of a State is constituted  is   to  benefit   the  members  of  the  legal profession inasmuch as under s.6 (1) (d) it is an obligatory function of  the State  Bar Council  to safeguard the rights privileges and  interests of  the advocates  of its roll and that  other   functions  like   promotion  of   law  reform, conducting law  seminars etc. are incidental objects and the benefit to  the public  is remote  or indirect or incidental and, therefore,  the assessee-Council  could not be regarded as a  body intended  to advance the object of general public utility. It  is impossible  to accept this contention. It is clear that  sub-s. (1)  lays down  the obligatory  functions while  sub-s.   (2)  indicates  what  are  the  optional  or discretionary functions  that could  be  undertaken  by  the State Bar  Council and from amongst the obligatory functions it will  be wrong  to pick out one and say it is the primary or dominant object or purpose. All the clauses of sub-s. (1) will have  to be  considered in  light of the main objective sought to  be achieved  as indicated  in the  Preamble.  The functions mentioned  in cls.  (a) and  (b)  of  sub-s.  (1), namely, to  admit persons  as advocates  on its  roll and to prepare and  maintain such  roll, are  clearly regulatory in character intended  to ensure  that persons  with  requisite qualifications who  are  fit  and  otherwise  proper  to  be advocates are  available for being engaged by the litigating public; the function prescribed in cl. (c) has been enjoined upon  avowedly   with  the   objective  of   protecting  the litigating public  from unscrupulous professionals by taking them to task for any misconduct on 551 their part;  it is also one of the obligatory functions of a State Bar  Council to  promote and  support measures for law reform as also to conduct law seminars and organise talks on legal topics  by eminent  jurists, obviously  with a view to educate the  general public,  the function prescribed by cl. (eee) is  obviously charitable  in nature, the same being to organise legal  aid  to  the  poor.  Amongst  these  various

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obligatory functions  one under  cl. (d) is to safeguard the rights, privileges  and interests  of the  advocates on  its roll and  it is  difficult to  regard it  as  a  primary  or dominant  function   or  purpose   for  which  the  body  is constituted, Even  this function  apart from securing speedy discharge of  obligations by  the litigants  to the  lawyers ensures  maintenance  of  high  professional  standards  and independence  of   the  Bar   which  are  necessary  in  the performance of  their duties to the society. In other words, the dominant  purpose of a State Bar Council as reflected by the  various  obligatory  functions  is  to  ensure  quality service of  competent lawyers  to the  litigating public, to spread legal literacy, promote law reforms and provide legal assistance to  the poor  while the  benefit accruing  to the lawyer members  is incidental.  It is  true that  sub-s. (2) provides that a State Bar Council may constitute one or more funds for  the purpose  of giving  financial  assistance  to organise welfare schemes for the indigent, disabled or other advocates; but  it is  an optional or discretionary function to be undertaken by the Council. Apart from that, admittedly the assessee-Council  has not  so far  constituted any  such fund for  the purpose  specified in the instant case. As and when such  a fund  is constituted  a question  may arise for consideration and  the Court  may have to decide whether the function so undertaken by a State Bar Council has become the dominant purpose for which that Council is operating. Having regard to  the Preamble  of the  Act and  the nature  of the various obligatory functions including the one under cl. (d) enjoined upon  every State  Bar Council Under s.6 (1) of the Act, it  is clear that the primary or dominant purpose of an institution like  the assessee-Council is the advancement of the object  of general  public utility within the meaning of s.2 (15)  of the Act, and as such the income from securities held by  the assessee-Council  would be  exempt from any tax liability under s.11 of the Act.      Having come to the aforesaid conclusion on applying the language of our Act to the nature of functions undertaken by a State Bar Council under the Advocates Act 1961 it is truly unnecessary to  deal with the English decisions cited during the course of 552 arguments. However,  we might  indicate that  in  two  cases (Royal College  of Surgeons  case and  the  General  Medical Council’s) case  on an  analysis of the functions undertaken by the  two concerned  institutions under  the Statutes  and Charters governing  them the  Court came  to the  conclusion that the  institutions were  not constituted  for charitable purpose but they were more of professional institutions, the approach being to find out whether the objects satisfied the limited concept  of charity within the spirit and intendment of the  Statute of  Elizabeth. In  the other  two cases (The Yorkshire Agricultural  Society’s case  and The Institute of Civil Engineers’  case the Court took the view that both the institutions  were   constituted  for   charitable  purposes entitled the exemptions under s.37 (1) (b) of the Income Tax Act, 1918,  and the  benefits accruing  to the  members were regarded as incidental.      In the result we are of the opinion that the High Court was right  in answering  the question in the affirmative and in favour  of the  assessee.  The  appeals  are  accordingly dismissed with no order as to costs. S.R.                                      Appeals dismissed. 553

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