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PETITIONER: INDIAN CHAMBERS OF COMMERCE

       Vs.

RESPONDENT: C.I.T., WEST BENGAL II, CALCUTTA

DATE OF JUDGMENT17/09/1975

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. GUPTA, A.C. FAZALALI, SYED MURTAZA

CITATION:  1976 AIR  348            1976 SCR  (1) 830  1976 SCC  (1) 324  CITATOR INFO :  F          1976 SC1016  (13)  RF         1977 SC2211  (13)  RF         1978 SC1443  (8)  O          1980 SC 387  (12,13,18,22,42,47,49)  RF         1981 SC1408  (9,10)  R          1981 SC1922  (8)

ACT:      Income   Tax Act  (43 of  1961 ),  s.2  (xv)-Charitable purposes scope  of Burden of proof--Activity for profit what is.

HEADNOTE:      Under   the   Income-tax   Act 1961  one of  the  items not included   in  the  total  income  of  an  assessee  for purposes of   tax  is   under    s.11  income  derived  from property held   under  trust wholly  for charitable purpose. Charitable purpose  is defined   in  s.2   (xv). Chambers of commerce, promoting  the trade  interest   of the commercial community,  have   been  regarded   as  pursuing  charitable purposes within the meaning of s.2 (xv). But under cover  of charitable purposes  C’ they  have been indulging in various activities,   and deriving  tax free profit. Therefore, s. 2 (xv)   was amended  by adding a clause at the end. Under the amended  definition, unless the context‘ otherwise requires, charitable   purpose includes  the advancement of any object of general  public  utility not involving the carrying on of any activity for profit. ^      HELD:   The income of the assesses, which are  chambers of   commerce,  from three sources, namely, (a)  arbitration fees levied    by  them;  (b)  fees  collected  for  issuing certificates  of origin;  and (c) share of profit in another company for  issue   of certificates    of    weighment  and measurement, which   services   are  extended to members and non-members. 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 advancement of the  object  involve activities  bringing  in  money? (c)

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If so,   are  such  activities undertaken  (1) for profit or (ii) without  profit. Even   if’   (a) and  (b) are answered affirmatively, if  (c) (1)  is also   answered affirmatively the claim for exemption collapses. [844B-C]      (2)   Section 2  (xv) must  be interpreted  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  wholly  for charitable purposes’ may still forfeit the claim to exemption  in respect of such takings or  incomes as  may come  to it  from   pursuing any activity for  profit. By  the new  definition the benefit of exclusion from  total  income    is  taken  away  where,  in accomplishing   a   charitable    purpose,  the  institution engages   itself   in activities   for   profit If’ it wants immunity  from    taxation    the  means    of    fulfilling charitable purposes  must   be   unsullied  by profit-making ventures. The  advancement of  the object of  general public utility must  not involve  the carrying  on of any  activity for profit. otherwise, it will lead to the absurd conclusion that a   Chamber   of  Commerce may  run a  printing  press, advertisement business,  market exploration activity or even export   promotion business   and  levy huge  sums from  its customer whether  they  are members  of  the organisation or not and  still   claim   a  blanket exemption  from  tax  on the score  that the   objects   of   general  public utility which it  had set forth for itself implied  these activities even though  profits or surpluses may arise therefrom. If it runs  special   types  of   services  for   the  benefit  of manufacturers   and charges  remuneration from  them. it  us undoubtedly   an activity  which.  if  carried on by 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 undertaking by a business organisation is ordinarily assumed to  be   for  profit   unless  expressly   or  by  necessary implication. Or  by eloquent  surrounding circumstances  the making  of’  profit stands clearly negatived.  For  example. if’ there   is a restructure provision in the bye-laws which insists that   the  charges levied  for services  of  public utility rendered  are   to   be on a ’no profit’ basis, that is, that  it  shall  not charge more 831 than is  actually needed  for the  rendering of the services then it earns the benefit of s.2(xv). It may not be an exact equivalent such  mathematical precision  being impossible in such case  and there may be little surplus at the end of the year; but  the broad  inhibition against  making profit is a good guarantee  that the  carrying on of the activity is not for profit.[839F-840D. G-841C]      (3) The  answer to  the question whether an activity is one for  or not for profit depends on the facts. An activity which yields  profit or  gain in the ordinary course must be presumed to  have been  done for profit or gain There may be activities, where‘  without intent  or purpose  the activity may yield profit. Even then it may legitimately be said that the activity  is for  profit in  the  sense  that  it  is  ‘ appropriate or adapted to such profit. [844C E-F]      (4) If  The activity is prone to yielding income and in fact results  in profit the Revenue will examine the reality or pretence  of the  condition that  the activity is not for profit  But; if the broad basis that the activity is not for profit is made out, by the assessee, the Revenue will not be meticulous and charge every chance excess or random surplus.

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[844G-845A]      (5) The  assesses contention  that the  Revenue  should only look  at the  dominant intent  or real  object  of  the assessee and that if its activity is wrapped up entangled or intertwined with a public utility object then any incidental profit arising  from it  is not  taxable. does  not afford a valid or satisfactory test. [841D-F.]      (6) Equally  The contention  of the  Revenue  that  all activities which  are prone  to produce  profits  should  be excluded is not correct. [840E-F]      (7) In  the present  case the issuance of weighment and measurement certificates  the issuance  of  certificates  of origin and  the settlement  of disputes  by arbitration  are great facilities for trader of general public utility. There is  however   nothing  in  the  memorandum  or  articles  of association of  the assesses which provides for only nominal fees and  sets a  limit on  making large  profits  from  the services. [845B-E G-H]      Loka Shikshana  Trust v.  C.I.T. Mysore [1976] 1 S.C.R: 471. C.I.T.  v. Andhra  Chamber of Commerce [1965] 55 I.T.R. 722 applied.      C.I.T.  v.   Dharmodayam  Co.   [1974]  94  L.T.R.  113 overruled.                          ARGUMENTS      For the appellant      l. The  primary or  dominant or  real  objects  of  the Indian Chamber  Of Commerce  are to promote protect, aid and stimulate trade,  commerce and  industry in India. (Clause 3 of the  Memorandum of  Association). The Income received was to be  applied solely  for the  promotion of the objects and upon dissolution  no property  was to be paid or distributed among the members but was to be given or transferred to some other institution  having similar objects.  (Clauses 4 and 8 of the  Memorandum of  Association). It is well settled that These objects  which lead  to economic  prosperity and enure for the  benefit of  the entire  community  are  objects  of general public utility and as such as charitable.           See [1965]  SC 55  ITR 722  Commissioner of Income      tax v. Andhra Chamber of Commerce.      2. The  Indian Chamber  of Commerce provides inter alia for arbitration  facilities so  that trade  disputes may  be speedily and  efficiently settled.  It further  provides for certificates of  origin and  certificates of  weighment  and measurement to  be issued  under  the  Commercial  Documents Evidence Act, 1939 under Entry 18 Part I and Entry 6 Part II of  the   Schedule  to   the  said  Act  respectively  These certificates can  only be  issued by  certain bodies such as recognised  chambers   of  commerce.  The  certificates  are necessary for facilitating trade. 5-L1127SCI/75 832 The carrying on of the activities of granting certificate of origin and/or weighment and measurement  and arbitration are not activities  for profit  hut are in he nature of services and/or facilities  provided to  the commercial community. As fees are  charged the  result at  the end  of  the  year  is sometimes a  loss and on times surplus. The dominant purpose for these  service is  not profit  making  but  rendering  a statutory service  for trade  and  commerce  generally.  The services cannot  be gratuitous  as  the  Chamber  cannot  be expected to  be a charitable institution like as Dharamsala. The fees charged are related to the services rendered by way of quid  pro quo.  Quid pro  quo does not mean an equivalent mathematically. If  incidental to  the  advancement  of  the objects of general public utility some services are rendered

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for fees  as a  result of  which income  results it does not means that  the objects  of the Chamber involves carrying on Any activity  for profit  in the  sense of  that being.. the dominent object. The dominant or real purpose is not to earn profit or  income but to serve trade and help the commercial community. As such the above mentioned activities carried on by the  Chamber will not be activities for profit. involving in the  dominant object  of the  Chamber.  In  order  to  be activities for  profit  the  involvement  of  profit  making should be  by the  object and must be of such a degree or to such an  extent as  to lead  to the  influence  that  profit making is  the real  object.  Since  the  real  or  dominant objects of  the Chamber are not for profit and profit is not an essential  ingredient  but  a  mere  bye-product  of  the activities of  the Chamber.  The income  must be  held to be exempt under S. 11(1) d with S. 2(15) of the Act.           See [1976]  1 S.C.R.  471 The  Sole  Trustee  Loka      Shikshana Trust  v. Commissioner of Income-tax, Mysore.      D      3.  The   purpose  and/or   dominant  object   must  be distinguished from  the powers  which are  incidental to the carrying out of the objects of The Trust.      See 27  ITR 279-Commissioner  of Income-tax  v.  Breach      Candy Swimming Bath Trust.           [1918] Appeal  Cases 514 Cotman v. Brougham [1970]      1 Ch. 199.      4. Under  S. 2(15)  of the Act the words carrying on of any activity for profit must mean an activity whose dominant object is  profit making  and  not  an  activity  which  may incidentally result in some profit as a bye-product. Of this meaning is  not given then there. will be no activity of any institution doing  work of general public utility which will he exempt  including activities  like  those  of  All  India Spinners Association.      5. If  the primary  and dominant  purpose is charitable then even  if there are some incidental powers which are not charitable it  will not prevent the trust from being a valid charity. The  intention will  have to  be gleaned  from  the Constitution of the Trust or the Memorandum of Association.           See 7 ITR 415-In Re: Trustees of The Tribune.           12 ITR  482  All  India  Spinners  Association  v.      Commissioner of Income tax           55 ITR  722-Commissioner of  Income-tax v. And/1/a      Chamber of Commerce           100  ITR   392  Andhra   Pradesh  State  Transport      Corporation v. Commissioner of Income tax.      6. Under  Section 11  of the  Income-tax Act 1961 it is the income derived from property held under trust wholly for charitable purposes which is not to be included in the total income. The  word property  is .  Of  wide  import  and  can include a  business or an undertaking or fees and restaurant charges etc.           12 ITR  482  All  India  Spinners  Association  v.      Commissioner of Income 833           27 ITR 279-Commissioner of Income-tax, Bombay City      v. Breach Candy Swimming Bath Trust.           32 ITR  535-J K  Trust, Bombay  v. Commissioner of      Income-tax, Excess profit Tax, Bombay.           53 ITR  176-Commissioner of  Income-tax, Kerala  &      Coimbatore v. P. Krishna Warriar.      7 In  any  event  the  activities  of  arbitration  and granting  certificates   of  origin   and  weighment  and/or measurement are not activities "for profit".           80 ITR  645-Commissioner of  Income-tax, Kerala  v

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    Indian Chamber of Commerce.           87 ITR  83- Commissioner  of  Income-tax v. Kochin      Chamber of Commerce.           [1975] 40 Taxation (III) 15-Commissioner of Income      tax Kerala v. Ernakulam Chamber of Commerce.      As such  the Chamber  is entitled  to  exemption  under section 11 read with 2(15) of the Income-tax Act.      For the Respondent      1. The  Appellant  Chamber  of  commerce  was  deriving income  by   performing  three   kinds  of  services  namely providing arbitration  facilities for  standard weights  and measurements to  traders in general. This was in furtherance of its  objects clause  2(a); 2(b);  2(c); 2(d); 2(z); 3(h); 3(i); 3(p);  2(q); 3(v) The performance of such services for remuneration clearly was an activity for profit and the said activity was  closely linked  with.  Or  involved  with  the advancement of  the aforesaid  objects of  the Chamber. Such close linking  and involvement by itself rendered the object non-charitable within  the meaning  of  s.  2  (15)  of  the Income-tax Act 1961.      2. If  the Chamber  of Commerce performed the same kind of services  for it  members for  remuneration the income so derived was  certainly liable to tax under s. 28(iii) of the Income-tax Act,  1961. The  position  became  worse  if  the income was  so derived  by rendering  such services  to  non member traders in general.      3. It was assumed by the Tribunal and by the High Court for which there was no warrant that the income from the said three sources  was income  derived from  property held under trust and the case proceeded on such assumption although the High Court  doubted the validity of such an assumption as is clear from  the text  of their  judgment at pp. 76-77 of the Paper Book.  The High Court. therefore proceeded to consider only whether the production of the income from the aforesaid three sources  was involved  with  the  advancement  of  any object of general public utility. The Tribunal had held that such income was derived by carrying out the ancillary object of the  Trust and not the main object although it found as a fact that  the income  was deriv  d  from;  carrying  on  an activity for profit. The High Court did not recognise such . distinction and it was urged that the High Court was right.      4.  No  valid  reason  could  be  found  for  making  a distinction between  any individual  or any  association  of persons on the one hand, and the appellant on the other hand in respect  of  producing  taxable  income  by  carrying  on identical activities  for profit.  It was  beyond any  doubt that ii  an Individual  or an  association  of  persons  had carried on  similar activities from profit they would not be entitled to  any exemption from tax. The appellant therefore could not  be placed  at a  better level especially when the words of Statute themselves had debarred it from getting the exemption. Prior  to  the  introduction  of  the  qualifying clause in s. 2(15) of the Current Act such bodies or 834 Organisations were  undoubtedly enjoying exemption by virtue of  the  repealed    Indian  Income-tax  Act  of  1922.  The Legislature clearly  intended to  remove  this  unreasonable distinction by  adding the  qualifying clause as it is found in s.  2(15) of the Income-tax Act, 1961. The effect of such amendment  of  the  definition  was  that  the  institutions otherwise regarded as charitable trusts have now been placed at par with any private organisation or individual who would render the same kind of services to the public for profit.      5. Unless  the memorandum or articles governing a Trust or any  Institution  prohibated  the  making  of  profit  by

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carrying on  any activity  or the earning of the profits was not ruled  out and  in fact profit resulted, the Court would assume that  the activity  was carried  on  for  profit.  In support of  this  the  Revenue    counsel  relied  upon  the judgment of the Supreme Court recently delivered in the case of Sole  Trustee Loke  Shikshana Trust  [1976] 1 S.C.R. 471. There was  no such  prohibition in the regulations governing the  activities  of  the  Indian  Chamber  of  Commerce  and therefore its case fell squarely within the principles valid by the Supreme Court in the case of Loke Shikshana Trust.      6. In order that an activity might be called a business activity or  any  other  activity  for  profit  it  was  not necessary to  show that it was an organised activity or that it was  indulged in  with a  motive on making profit. it was well established  that it  was not  the motive  of a  person doing in  act which  decided whether the act done by him was carrying on  an activity  for  profit  .  If  any  activity. business of  otherwise in  fact produced  an income that was taxable income  and was  none the  less so  because  it  was carried on  without  the  motive  of  producing  an  income. Reference was invited in this connection to the observations o the  Supreme Court  in the  case of  P. Krishna  Menon  v. Commissioner of Income-tax, Mysore (35 I.T.R.-p. 48).      7. Even  in the  ease of  classical charities  such  as promotion of  education and  giving  of  medical  relief  no exemption is available if these two activities of charitable nature are  carried on  for purposes  of profit. A fortiori, the exemption  will be  denied in the case of advancement of an object  of general public utility howsoever charitable it may otherwise  be regarded  in character  if the advancement involved the   carrying  on  an  activity  for  profit.  The intention  of   Legislature  was  fully  vindicated  in  the language employed ins. 2(15) of the Act.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2129 of 1970.      From the Judgment and order dated the 29th May, 1970 of the Calcutta  High Court  in Income  Tax Reference  No. I of 1967 and             Civil Appeals Nos. 2455-2457 of 1972      Appeals by  Special Leave  from the  judgment and order dated the  25th February,  1972 of  the Kerala High Court in Income Tax Reference Nos. 9, to and 11 of 1970.      A. K.  Sen, Mrs.  Leila Seth,  o. P.  Khaitalz and B. P Maheshwari for the appellant in C.A. No. 2129 of 1970.      G. C.  Sharma, B.  B. Ahuja  and S.  P. Nayar  for  the respondents in C.A. 2129 of 1970.      J. Ramamurthy  and D. N. Gupta for intervener No. I, in C.A. No. 2129 of 1970.      A. K.  Sen and D. N. Gupta for Intervener No. 2 in C.A. No. 2129 of 1970. 835      J. Ramamurthi  and D.  N. Gupta  for Intervener No.3 in C.A. No. 2129 of 1970.      G. C.  Sharma B.  B. Ahuja  and S.  P.  Nayar  for  the appellants in C.AS. NOS.2455-2457/72.      A K  Sen and  D. N.  Gupta for respondent in C.As. Nos. 2455- 57/72.      The Judgment of the Court was delivered by      KRISHNA IYER,  J. These  four  appeals  raise  but  one question, turning  on the meaning of charitable purpose’, as defined in  s. 2(15)  of‘ the  Income Tax Act, 1961 (Act No.

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XLIII of  1961) (for  short. the Act) . They may be disposed of by  one common  judgment, although  the two  High  Courts (Calcutta and  Kerala) from where the appeals have come have taken contrary views on the single point in issue.      What are  the words  set for  earning  exemption  by  a combined application  of s.  11(1) read with s. 2(15) of the Act? What  is  the  para  meter  of  the  legal  concept  of charitable purpose  ? Are  the triune activities, which have yielded income  and have  been assessed to tax, eligible for exemption as falling within the scope of s. 2(15) as it  now stands ?  These points  of law,  in the  conspectus of facts presented in  the case,  have been  argued in  the light  of conflicting decisions  of the  High Courts  and illumined in part by  a very  recent pronouncement  of this Court in Loka Shikshana Trust v. C.I.T.., Mysore.(1)      The assesses  are the  Indian Chambers  of Commerce and the  Cochin   Chambers  of  Commerce.  their  memoranda  and articles of  association  are substantially  similar and so the facts in the first  case alone need be slated and the question of law discussed with  reference to  that  case  only.  Hardly  any distinction on  facts or  law which  desiderata  a  separate consideration exists.      The Indian  Chamber of Commerce is a company registered under  s.   26  of  the  Indian  Companies  Act,  1913.  Its memorandum and  articles of  association spell out the broad objects and  there is  no doubt  that they  fall within  the sweep of the expression ’the advancement of any . . . Object of general  public utility’  as set down in s. 2 (15) of the Act.  Briefly   put,  they  are  primarily  promotional  and protective  of  Indian  trade  interests  and  other  allied service operations.  A general  concluding clause authorizes it ’to  do all  other things  as may  be  Conducive  to  the development o  trade, commerce and industries or incidental to attainment  of the  above objects  or any of them’. It is clear from  clauses 4 and 8 of the Memorandum of Association that the  Members of  the Chamber do not and cannot stand to gain personally  since no portion of ’income and property of the association’ shall be paid . . . directly or indirectly, by way of dividend or bonus or otherwise howsoever by way of profit to  the persons  who at any time are . . . Members of the Association  . .  . ’.  Even on  the dissolution  of the Association the  Members  cannot  claim  any  share  in  the assets.  These  highlight  the  fundamental  fact  that  the Chamber, by  and large, strives to advance the general trade interests of India and Indians without [916] 1 S.C.R. 471 836 seeking to  make profits  for its  Members. In  the light of this  Court’s  decision  in  C.I.T  v.,  Andhra  Chamber  of Commerce(1) one  may readily state that the Chambers advance objects of general public utility and, prima facie more into the exclusionary  area of  charitable purpose.  However, the bone of  contention in  this case is as to whether the three source of  income, viz.,  (a) arbitration fees levied by the Chamber; (b)  fees collected for the certificates of origin; and (c)  share of  profit in M/s. Calcutta Licensed Measures for issue  of certificates of weighment and Measurement fall within the  exclusion. It  may be  mentioned that  all these three services  were extended to Members and non-Members or, rather, to  the trade  generally. Had  the  law  bearing  on ’charitable purpose’  been what  it was  prior to  1961, the Chamber would  have won hands down may be. But then there is a  significant  change  in  the  definition  of  ’charitable purpose’ by the addition of nine new words which cut back on

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the amplitude  of the  expression  in  the  prior  Act.  The straight question  to be  answered here  is whether  in plan English the  there activities  which have yielded profits to the chamber  involve ’the  carrying on  of any  activity for profit’,  uncomplicated  by  casuistic,  nicetics,  semantic nuances and  case-law conflicts.  Unfortunately, legislative simplicity has not been accomplished by the draftsman in the amended   definition   and,   consequently,   interpretative complexity persists.  The Judges  of the Andhra Pradesh High Court in A. P. State Road Transport Corporation v. C.I.T.(2) observed, while  considering the  import of  s. 2(15) of the 1961 Act:           "It  is  one  of  the  fundamental  principles  in      legislation and  the  drafting  of  statutes  that  the      provisions contained therein should be clear and cogent      and, more  so, with regard to the fiscal statutes which      impose a  burden on the public. But, in this case, what      we find  is that  the amendment, instead of being clear      and  cogent,  is  complicated  and  courts  have  taken      different views in interpreting the same." We dare say that achieving greater simplicity and clarity in statute law  will be  taken  up  by  the  draftsmen  of  the legislative bills to avoid playing linguistic games in Court and  promotion  of  interpretative  litigation  Lawyers  and legislators must stop confusing each other and start talking to their  real audience  the  people-so  that  communication problems may  not lead to prolific forensic battles. We must confess to  having been  hard  put  to  it  to  get  at  the controlling distinction between activities which fall on one side or  the other of ’charitable purpose’. The assesses the Indian Chamber of Commerce,, was assessed for the accounting year 1963-64  on the income which arose from the three heads of arbitration fees, fees for certificates of origin and the share  of   profits  in  the  firm  M/s.  Calcutta  Licensed Measurers   which    issued   weighment    and   measurement certificates charging  a fee  therefore the  return for  the assessment year showed a profit of Rs. 1,58,690/- made up of a small amount from arbitration fees, and a similar sum from fees for  issue of  certificates of origin but a substantial sum by  way of  share of  income from  the fees  charged for weighment and  measurement. Although  the Income-tax officer repelled the claim OF      (1) [1965] 55 I.T.R. 722.         (2) [1975] 100 I.T.R.                                                    392, 397. 837 charitable purpose’  on the  view that these activities were for profit  the Appellate  Tribunal  took  a  contrary  view reversing the  concurrent findings of the Income-tax officer and the  Appellate Assistant Commissioner. The conclusion of the Tribunal was that s. 2(15) applied but the High Court on a reference  under  s.  256(1)  of  the  Act,  answered  the question in favour of the Revenue.      We have  indicated earlier that the various High Courts have taken  contrary views.  Kerala has consistently held on facts substantially  identical that  s. 2(15)  is attracted. Andhra Pradesh has concurred, while Calcutta and Mysore have ranged themselves on the opposite side. A recent decision of this  Court   earlier  mentioned   has  given  some  telling guidelines although  the precise facet pressed before us may not be said to have been wholly covered by it.      The scheme  of the  Act may be briefly indicated to the extent it  is relevant,  before entering  on the discussion. ’Income’ is  taxable,  but  certain  incomes  shall  not  be included in  the total  incomes of the previous years of the person in  receipt of  the income.  Section 11 excludes from

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the computation  income derived  from  property  held  under trust wholly for charitable purpose. The Chamber of Commerce is a  trade association  which renders  specific services to its members  and there  fore s.  28 will ordinarily apply to its income, unless s. 11 read with s. 2(15) excludes it from taxability. The income drawn from non members by the Chamber will clearly be taxable unless s. 2(15) comes to its rescue. Thus the pivotal issue is as to whether the three channel of income may  be treated  as charitable purposes and therefore eschewed by s. 11 from the charging provision.      At this stage we may read s. 2(15):           "2(15) In  this Act,  unless the context otherwise      requires,           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 of any activity for profit.’ The  obvious   change  as   between  the  old  and  the  new definitions is  the exclusionary provision introduced in the last  few   words.  The   history   which   compelled   this definitional  modification   was  the  abuse  to  which  the charitable disposition of the statute to charitable purposes was  subjected  by  exploiting  businessmen.  You  create  a charity, earn  exemption from  the taxing  provision and run big industries virtually enjoying the profits with a seeming veneer of charity a situation which exsus-citated Parliament and constrained  it to  engraft a  clause deprivatory of the exemption if  the institution fulfilling charitable purposes undertook activities  for profit and thus sought to hoodwink the statute.  The Finance  Minister’s speech  in  the  House explicates the  reason for  the  restrictive  condition.  He stated in the House;(l)      (1)   Lok    Sabha   Dabates,    Vol.LVl.1961,   p.3073 (Aug.18,1961) 838           The definition  of  ’charitable  purpose  in  that      clause is   it  present so widely worded that it can be      taken advantage  of even  by commercial concerns which,      while ostensibly  serving a  public purpose,  get fully      paid for  the benefits  provided by  them, namely,  the      newspaper industry  which while  running its concern on      commercial  lines   can  claim   that  by   circulating      newspapers it  was improving  the general  knowledge of      the public.  In order  to prevent  the misuse  of  this      definition in  such cases,  the Select  Committee  felt      that the  words ’not  involving the  carrying on or and      activity for profit’ should be added to the definition. Beg J., in Lok Shikshana  Trust (supra) has adverted to this statement as  throwing light  on the new provision. The evil sought to  be abolished is thus clear. The interpretation of the  provision   must  naturally   fall  in  line  with  the advancement of  the object.  Of course, there are borderline cases where  it becomes  difficult to  decide at first sight whether the  undertaking which  yields profit is a deceptive device or  a bonafide  adventure which  results  in  nominal surplus although  substantially intended only to advance the charitable object.      Chambers of  Commerce dot  this  country  and,  by  and large, they  have the same complex of objects. They exist to promote the  trading interests  of the  Commercial community and, after  the Andhra Chamber of Commerce Case (supra) have been  regarded   as  pursuing   charitable  purposes.   This expression, defined  in s.  2(15), is  a  term  of  art  and embraces objects of general public utility. But, under cover of charitable  purposes, a crop of camouflaged organisations

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sprung up. The mask was charitable, but the heart was hunger for tax  free profit.  When Parliament  found  this  dubious growth of  charitable chameleons, the definition in s. 2(15) was altered to suppress the mischief by qualifying the broad object of  ’general ’public  utility’ with the additive ’not involving the  carrying on  of any activity for profit’. The core of  the dispute  before us  is whether this intentional addition of  a ’cut back’ clause expels the Chamber from the tax exemption  zone in respect of the triune profit fetching sub-enterprises undertakes by way of service or facility for the trading community.      The rival  constructions put  forward by counsel at the bar may  now be  noticed. Shri  A. K. Sen’s argument for the Chamber is  that the controlling distinction between what is ’charitable purpose’ and what is not lies in discovering the dominant  intent   as  distinguished   from  the  subsidiary consequence,  the   principal  object"  not  the  incidental inflow, the  profit motive  of the  operation as against the service oriented  activity which  may or  may not en passant yield an  income His  stress, a  la the  Kerala cases, is on whether  the   activity  is   wrapped  up,   entangled   and intertwined with  the public  utility object.  If it is, the resultant  surplus   is  not   an  exigible   income.  Such, certainly,  are  the  passwords  and  touch-stones  used  in several Kerala  decisions. If  this  be  the  parameter,  he argues, the three activities are saved because 839 they render service, promote trade and facilitate the wheels of business  to move. They do not form activities for making profit; they  are in  fulfillment  of  the  objects  of  the Chamber.      Shri Sharma  for the  Revenue reads  into  the  amended definition a  total exclusion  from the  charmed  circle  of charitable  purposes  all  activities  which  are  prone  to produce profits.  The telling  test, according to this view, is to  see that  the means,  like the  ends, are charitable, untainted by  gainful stimulus  and purged  of the potential for profit  in reality By this canon the Chamber’s desire to serve  businessmen   by  offering  arbitral  or  certificate facilities  in  return  for  a  price  is  prima,  facie  an ’activity for  profit’ unless  the circumstances, express or necessarily  implicit  eloquently  proclaim  a  ’no  profit’ foundation for  the undertaking.  The linkage is not between object of  public utility  and the  challenged activity  but between the  methodology adopted for the advancement of such objects and proneness for profit flowing from such method or activity. If  this standpoint  be sound,  the three services which have  yielded profits,  although wrapped in, entangled or  inter-twined   with  the   object  of   promoting  trade interests, are  still liable  to tax, there being no visible limitation on  the revenues  that Any  arise from  them  and these precise  activities could  be carried  on  by  private individuals for profit      The legal  break-through lies along a realistic line of reasoning taking  care to avoid the extreme position of Shri Sharma which  will render the last limb of s. 2(15) illusory or ineffectual  and as  serviceable  for  tax  exemption  of charities as  the appendix  to the  human physiology. In our view the  key to  the problem  is furnished  not merely by a careful  ,.  Took  at  the  history  of  the  evil  and  the Parliamentary debate  at least the Finance Minister’s speech on the  new change  but the language of s. 2(15) itself read in the  light of  the  guidelines  in  Lok  Shikshana  Trust (supra) .      Taking a  close-up of s. 2(15) with special emphasis on

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the last  concluding words, we have to interpret ’charitable purpose’ in such manner that we do not burke any word, treat any expression  as redundant  or  miss  the  accent  of  the amendatory phrase.  So viewed,  an institution which carries out charitable  purpose out of income ’derived from property held under  trust wholly  for charitable purposes’ may still forfeit the claim to exemption in respect of such takings or incomes as  may come  to it  from pursuing  any activity for profit. Notwithstanding  the possibility of obscurity and of dual  meanings   when   the   emphasis   is   shifted   from ’advancement’ to  ’object’ used in s. 2(15), we are clear in our  minds  that  by  the  new  definition  the  benefit  of exclusion  from   total  income   is  taken  away  where  in accomplishing a  charitable purpose  the institution engages itself in  activities for profit. The Calcutta decisions are right in  linking; activities for profit with advancement of the object.  If you  want immunity from taxation, your means of fulfilling  charitable  purposes  must  be  unsullied  by profit making  ventures. The 11 advancement of the object of general public  utility must  not involve the carrying on of any activity  for profit If it does, you forfeit. The Kerala decisions fall  into the  fallacy of emphasizing the linkage between the  objects of  public  utility  and  the  activity carried on. 840 According to  that view,.  whatever the  activity, if  it is intertwined with,  A wrapped in or entangled with the object of charitable  purpose even if profit results therefrom, the immunity from  taxation is still available. This will result in absurd  conclusions. Let  us take  this very  case  of  a Chamber of  Commerce which  strives to  promote the  general interests of  the trading  community.  If  it  runs  certain special types  of services  for the benefit of manufacturers and charges  remuneration from  them, it  is undoubtedly  an activity which,  if carried on by private agencies, would be taxable. Why  should the  Chamber be  granted exemption  for making income  by methods which in the hands of other people would have  been exigible  to tax ? This would end up in the conclusion that  a Chamber  of Commerce  may run  a printing press, advertisement business market exploration activity or even export  promotion business  and levy huge sums from its customers whether  they are  members of  the organisation or not and  still claim  a blanket  exemption from  tax on  the score that  the objects  of general  public utility which it has set  for itself  implied these  activities  even  though profits or  surpluses may  arise therefrom.  Therefore,  the emphasis is  not on  the object  of public  utility and  the carrying on  of related  activity for  profit. On  the other hand, if  in the  advancement of  these objects  the Chamber resorts to  carrying  on  of  activities  for  profit,  then necessarily s. 2(15) cannot confer cover. The advancement of charitable objects must not involve profit making activites. That is the mandate of the new amendment.      The opposite  position in  its extreme  form is equally untenable. While  Shri Sharma  is right  that merely because service is rendered to traders escapement from tax liability does not  follow. Every  type of  service-oriented activity, where some  charge is levied from the beneficiary and at the end of  the year  some surplus is left behind, does not lose the benefit  of s. 2(15). For, then., one cannot conceive of any object  of general  public utility which can be advanced by the Chamber of Commerce. For every such activity some fee will have  to be  levied if  the  Chamber  is  not  to  turn bankrupt and  merely because  a fee  is  levied  one  cannot castigate the  activity as one for profit. Therefore it is a

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false dilemma  to talk  of activity  for profit  as  against activity rendered  free. The  true demarcating  line lies in between.      In our  view, the ingredients essential to earn freedom from  tax   are  discernible   from   the   definition,   if insightfully read  against the brooding presence of the evil to be suppressed and the beneficial object to be served. The policy of  the statute  is to give tax relief for charitable purpose, but  what falls  outside  the  pale  of  charitable purpose  ?  The  institution  must  confine  itself  to  the carrying on  of activities  which are  not for profit. It is not enough  if the  object be one of general public utility. The attainment  of that  object shall not involve activities for profit.  What then  is  an  activity  for  profit  ?  An undertaking by a business organisation is ordinarily assumed to  be   for  profit   unless  expressly   or  by  necessary implication or  by eloquent  surrounding  circumstances  the making of profit stands loudly negatived. We will illustrate to illumine. If there is a restrictive provision in the bye- laws of 841 the charitable  organisation which  insists that the charges levied for  services of public utility rendered are to be on a ’no  profit’ basis,  it .  clearly earns the benefit of s. 2(15). For  instance, a  funeral  home,  an  S.P.C.A.  Or  a cooperative may  render services  to the  public but write a condition into  its constitution  that it  shall not  charge more than  is actually  needed  for  the  rendering  of  the services,may be  it may  not be  an exact  equivalent,  such mathematical precision  being  impossible  in  the  case  of variables,may be a little surplus is left over at the end of the year  the broad  inhibition against  making profit  is a good guarantee  that the  carrying on of the activity is not for pro  fit. As  an antithesis,  take a  funeral home or an animal welfare  organisation  or  a  super  bazaar  run  for general public utility by an institution which charges large sums  and   makes  huge  profits.  Indubitably  they  render services  of  general  public  utility.  Their  objects  are charitable but their activities are for profit Take the case of a  blood bank  which    collects  blood  on  payment  and supplies blood  for a  higher price  thereby  making  profit Undoubtedly the  blood bank  may be  said to  be  a  general public utility but if it advances its public utility by sale of blood as an activity for (making) profit, it is difficult to call its purposes charitable. It is just blood business !      In the  United States,  for instance,  there  are  many funeral homes  which make  considerable profits.  There  are super  bazaars  and  animal  welfare  institutions  in  many countries which  may be  run on  a profit motive. Inevitably these activities  are caught  in the  meshes of the tax law. Readymade  nostrums   like  ’dominant  intent’"  ’incidental profits’, ’real  object’ as  against  ’ostensible  purpose’, ’entangled’, ’wrapped  in,’ ’inter-twined’ and the like fail as criteria  in critical  cases,  although  they  have  been liberally used in judicial vocabulary. In this branch of law verbal labels  are convenient but not infallible. We have to be  careful   not  to   be  victimised   by  adjectives  and appellations which  mislead, if  pressed too  far,  although they may loosely serve in the ordinary run of case.      To  sum  up,  s.  2(15)  excludes  from  exemption  the carrying on  of activities for profit even i they are linked with the  objectives of  general public utility, because the statute  interdicts,   for  purposes   of  tax  relief,  the advancement of  such objects  by involvement in the carrying on of  activities for  profit. We  appreciate  the  involved

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language we  use but when legislative draftsmanship declines to be  simple, interpretative  complexity becomes a judicial necessity.      Lok Shikshana  Trust (supra)  is the latest-perhaps the only case  of this  Court-dealing directly with s. 2(15)  of the Act.  Khanna J., speaking on behalf of himself and Gupta J.. Observed:           "As a  result of  the addition  of the  words ’not      involving the  carrying on  of any activity for profit’      at the  end of  the definition  in section 2(15) of the      Act even if the purpose of the trust is ’advancement of      any other  object of  general public utility’, it would      not be  considered to be ’charitable purpose’ unless it      is shown  that the  above purpose  does not involve the      carrying on of any activity for profit. The result 842      thus of  the change  in the definition is that in order      to bring  A  a  case  within  the  fourth  category  of      charitable purpose,  it would be necessary to show that      ( 1  ) the  purpose of  the trust is the advancement of      any other  object of  general public utility, and ( 2 )      the above  purpose does  not involve the carrying on of      any activity for profit. Both the above conditions must      be fulfilled  before the  purpose of  the trust  can be      held to be charitable purpose."            *                *:              *           "It  is   true  that   there  are   some  business      activities like mutual insurance and cooperative stores      of which profit making is not an essential, ingredient,      but that  is so  because of  a self  imposed and innate      restriction on making profit in the carrying on of that      particular type  of business.  Ordinarily profit motive      is a  normal incidence  of business activity and if the      activity of  a trust  consists  of  carrying  on  of  a      business and  there are  no restrictions  on its making      profit, the  court  would be well justified on assuming      in the  absence of  some indication  that the  contrary      that the  object of  the trust involves the carrying on      of an activity for profit."                                             (emphasis. ours)           "By the  use of  the expression ’profit motive’ it      is not intended that profit must in fact be earned. Nor      does the  expression cover  a mere  desire to make some      monetary gain  out of a transaction or even a series of      transactions. It predicates a motive which pervades the      whole series  of transactions effected by the person in      the course of his activity."       *        *         *              *           "We are  not impressed  by the  submission of  the      learned counsel  for the  appellant that  profit  under      section 2(15) of the Act means private profit. The word      used in  the definition given in the above provision is      profit and  not private  profit and  it  would  not  be      permissible to  read in  the above  definition the word      ’private’ as qualifying profit even though such word is      not there." Beg J.,  spoke on the subject with different accent but drew pointed attention to one aspect:           "The deed  puts no  condition upon  the conduct of      the .1  newspaper and publishing business from which we      co infer  that it  was to be on ’no profit and no loss’      basis. I  mention  this  as  learned  counsel  for  the      appellant repeatedly  asserted that this was the really      basic purpose  and principle  for the  conduct  of  the      business of  the trust  before us. This assertion seems

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    to be  based on  nothing more substantial than that the      trust deed itself does not expressly make profit 843      making the  object of the trust. But, as I have already      indicated, the  absence of  such a  condition from  the      trust deed would not determine its true character. That      character  is   determined  for   more  certainly   and      convincingly  by  the  absence  of  terms  which  could      eliminate or  prevent profit  making from  becoming the      real or  dominant purpose  of the trust. It is what the      provisions of the trust make possible or permit coupled      with what  had been  actually done without a illegality      in the  way of  profit making,  in the  case before us,      under the  cover of  the provisions  of the deed, which      enable us  to decipher  the   meaning and determine the      predominantly profit making character of the trust."                                             (emphasis, ours) We  do  not  think  it  necessary  to  discuss  the  various decisions of  the High  Courts cited  before us  nor need we seek light  from the English Cases either. After all, Indian law must bear Indian impress derived from Indian life.      In All India Spinners’ Association v. Commr. Of Income- tax Bombay,  (1) Lord  Wright,  speaking  for  the  Judicial Committee d considering the subject of ’charitable purposes’ as justifying exemption from Income-tax, observed:           ‘It is  now recognised that the Indian Act must be      construed on its actual words and is not to be governed      by English decisions on the topic."                 *   . : *          *:         *           "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."       *          *                     * Crypto-colonial inclinations  have sometimes  induced Indian draftsmen and  jurists to  draw inspiration from English law but, for  reasons felicitously  expressed by Lord Wright, we are adopting  interpretation of  s. 2(15)  according to  the language used  there and  against the  background of  Indian life.      Coming to  the facts  of the present case, the criteria we have evolved have to be applied.      Among the  Kerala Cases which went on the wrong test we wish lo  mention one" Dharmodayam.( 2). The assessee company was conducting  a profitable  business of running chit funds and its memorandum      (1) [1944] 12 1. T. R. 482. 486.      (2) C. 1. T. v. Dharmodayam Co. [1974] 941. T. R. 113. 844 of association  had as  one of its objects to do the needful for the  promotion of  charity, education  and industry. The court found it possible on these facts to (grant the benefit of s.  2(15) by a recondite reasoning. If this ratio were to hold good  businessmen have  a  highroad  to  tax  avoidance Dharmodayam (supra)  shows how dangerous the consequence can be if the provisions were misconstrued.      The true  test is  to ask  for answers to the following question (a),  Is the  object of the assessee one of general public utility?  (b) Does  the  advancement  of  the  object involve activities  bringing in moneys ? (c) If so, are such activities undertaken  (i) for profit or (ii) without profit

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? Even if (a) and (b) are answered affirmatively, if (c) (i) is  answered   affirmatively,  the   claim   for   exemption collapses. The  solution to the problem of an activity being one for  or irrespective  of profit is gathered on a footing or facts.  What is  the real  nature of  the activity?   one which is ordinarily carried on by ordinary people for gain’? Is there a built in prescription in the constitution against making a  profit? Has  there been  in practice,  profit from this venture  ? Although  this last is a weak test. The mere fact  that   a  service   is  rendered   is  no   answer  to chargeability  because   all  income  is  often  derived  by rendering some service or other.      Further, what  is an activity for profit depends on the correct connotation  of the preposition. ’For’ used with the active participle  of a  verb means ’for the purpose of (Sec judgment of  Westbury C.,  1127) ’For’  has many  shades  of meaning.  It  connotes  the  end  with  reference  to  which anything is done. It also bears the sense of ’appropriate or ’adopted to’:  ’suitable  to  purpose’  vide  Black’s  Legal Dictionary. An activity which yields a profit or.gain in the ordinary course  must be  presumed to  have  been  done  for profit or gain. Of course, an extreme case could be imagined where without  intent  or  purpose  an  activity  may  yield profit. Even  so, it  may  legitimately  be  said  that  the activity is ’appropriate or adapted to such profit’.      We may wind up with a brief rounding off and indication on the  approach. A  pragmatic  condition,  written  or  un- written, proved  by. a  prescription of  profits or  by long years  of   invariable  practice   or  spelt   from   strong surrounding   circumstances    indicative   of   anti-profit motivation such  a condition  will qualify  for  ’charitable purposes’ and  legitimately get round the fiscal hook. Short of it,  the tax  tackle holds  you fast.  A word  about  the burden  of  proof  is  necessary  here.  Income.  Ordinarily chargeable,  can  be  free  from  exigibility  only  if  the assessee discharges  the onus  of bringing himself within s. 2(15). In  so doing, he has to attract and repel attract the condition that  his objects  are of ’general public utility’ and repel  the charge  that he is advancing these objects by involvement in  activities for  profit. Once this broad dual basis is  made out,  the Revenue will not go into meticulous mathematics  and   charge  every  chance  excess  or  random surplus; If  the activity is Prone to yielding income and in fact results in profits, the 845 Revenue  will   examine  the  reality  or  pretence  of  the condition, that  the activity  is  not for profit. Here, one may well  say: ’Suit the action to the word, the word to the action’.      If such  be the  legal criteria  for fixing  charitable purpose, low  does the Indian Chamber fare ? The substantial item of  income comes  from the share of profits in the firm called M/s.  Calcutta Licensed Measurers. True, the issuance of weighment  and    measurement  certificates  is  a  great facility for  traders and  under  the  Commercial  Documents Evidence   Act only recognised institutions arc permitted to issue such  certificates. Recognition  be speaks the status, integrity and  efficiency of  the institution  but does  not transmute a  service for profit into nonprofitable activity. It is  irrelevant whether  this service is in implementation of or  interwoven with trade promotion. What is partinent is whether the  advancement of  trade promotion by issuing such certificates is  done for  a nominal  fee conditioned by the cost of  the operation,  and profit  making by this means is tabooed. For  there is nothing in the memorandum or articles

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of association which sets any limit on making a large profit this way.  And, after all, any institution.or individual may set up  a weighment  and measurement business as a source of income and  if it  is of  sufficient probity  and competence recognition to  may well  be accorded  under the  Commercial Documents Evidence  Act. We cannot mix up or confuse the two concept.  The   activity  of   charging  fees   and  issuing certificates of  origin valuable  as a service though it be, is in  not different  position. Both  these  activities  are amenable to  tax as being carried on for profit, there being nothing to show that the Chamber was undertaking this job on a ’no  profit’ basis.  The presumption, if at all, is that a businessman association  does a business of it. more so when the facility  is available  to members  and non members. Not infrequently  one  comes  across  weighment  stations  where loaded trucks are weighed for payment as a business. So also approved valuers  value property  as business and charge for that service.  Merely because  it is carried on by a Chamber of Commerce  no  difference  in  incidents  arises  and  tax incidence  can   be  repelled  only  if  the  work  is  done explicitly on a ’no profit’ basis. Such is not shown to be  the case here.      The  objects  of  the  Chamber  include  settlement  of disputes among traders by arbitration. This is undoubtedly a service of  general  public  utility  preventing  protracted commercial litigation.  If the  fee charged  for doing so is more or  less commensurate  with the expense the Chamber has to incur,  a minor surplus will not attract tax. But no such restriction is written into the rules governing the Chamber. It may  charge a  heavy sum  and spend  much less for hiring experts to  decide the  dispute. There  is  no  magna  carta hiding the  Indian or  Cochin or  Bengal Chamber of Commerce not to  sell  arbitral  justice.  Suppose  ;  specialist  in mercantile law  and practice  of reputable  integrity offers himself regularly for arbitration of commercial disputes for a high  fee, is  he not  making an  income?  The  difference between the  two is  as between  Tweedledum and  Tweedledee. Surely, if an innate, articulated, restraint on the levy for these undoubted  services to  Trade existed as a fact, so as to remove the slur of activity for profit, then the umbrella of charitable purpose would protect small surpluses. 846      We hold  that the  incomes of the Chambers sought to be taxed  are  taxable.  Civil  Appeal  No.  2129  of  1970  is dismissed and  civil Appeals  Nos. 2455  to 2457 of 1972 are allowed. Parties will bear their respective costs.      Before parting  with the  case we  may as  well make it clear that  our conclusion  would have  been the  same  even without reference  to or  reliance  on  the  speech  of  the Finance Minister we have excerpted earlier. V.P.S.                               Appeals partly allowed. 847