http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 11  

PETITIONER: THE COMMISSIONER OF INCOME-TAX, WEST BENGAL

       Vs.

RESPONDENT: THE CALCUTTA STOCK EXCHANGE ASSOCIATION LTD.

DATE OF JUDGMENT: 26/03/1959

BENCH: SINHA, BHUVNESHWAR P. BENCH: SINHA, BHUVNESHWAR P. KAPUR, J.L. HIDAYATULLAH, M.

CITATION:  1959 AIR  763            1959 SCR  Supl. (2) 459  CITATOR INFO :  F          1961 SC1144  (5)

ACT: Income Tax-Stock Exchange Association-Authoriscd Assistants- Admission  fee and monthly subscriptions in respect of  them paid  by members-Fee for Putting the names of  companies  on Quotations  List-lncome  therefrom-Assessability  to   tax-" Performing specific services ", Meaning of-Indian Income-tax Act, 1922 (XI of 1922), s. 10(6).

HEADNOTE: By sub-s. 6 of s. 10 of the Indian Income-tax Act, 1922:  "A trade,   professional  or  similar  association   performing specific   services   for  its  members   for   remuneration definitely related to those services shall be deemed for the purpose  of this section to carry on business in respect  of those services, and the profits and gains therefrom shall be liable to tax accordingly." The  members  of  the respondent  company,  whose  principal object was to facilitate the transaction of business on  the Stock  Exchange,  were enabled under the by-laws to  have  a certain  number of Authorised Assistants so that the  latter could use the premises of the company and transact  business therein  in the names and on behalf of the members who,  for that  purpose,  were  required to  pay  admission  fees  and monthly  subscriptions in respect of each of them.  The  by- laws  of  the  company also provided  that  no  dealings  in respect  of the shares of any particular company  should  be permitted on the Stock Exchange, unless an application  made by  a member of the respondent company and accompanied by  a fee of Rs. 1000, for putting the name of that company on the Quotations List was approved by the prescribed Authority  of the  respondent  company.   During the  accounting  year  in question  the  company received from its  members  admission fees   and  subscriptions  in  respect  of  the   Authorized Assistants  and fees for putting the names of  companies  on the Quotations List.  The question was whether the aforesaid amount  was liable to be taxed under s. 10(6) of the  Indian Income-tax Act, 1922. Held,  that  with  reference to  a  trade,  professional  or similar  association,  the performing of  specific  services

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 11  

under  s.  10(6) of the Indian Income-tax  Act,  1922,  mean conferring  on  its  members  some  tangible  benefit  which otherwise would not be available to them as such, except for payment  received  by the association in  respect  of  those services. 460 Accordingly,  the income received by the respondent  company towards the admission fees and the subscriptions in  respect of  the Authorized Assistants, being the price paid for  the services  of  the  respondent  company  in  making  suitable arrangements for an absentee member to transact business  on his  behalf and in his name by his representative  or  agent within the Stock Exchange, as well as the fees received from members for enlisting the names of companies not already  on the Quotations List so as to permit transactions in  respect of  the shares of the companies concerned, was  remuneration definitely related to specific services performed by     the respondent for its members within the meaning of s.10(6)  of the Indian Income-tax Act, 1922, and was assessable to income -tax. Native   Share  and  Stock  Brokers’  Association   v.   The Commissioner  of  Income-tax, Bombay [1946] 14  I.T.R.  628, approved.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 204 of 1958. Appeal  from the judgment and decree dated January 6,  1956, of the Calcutta High Court in Income-tax Reference No. 74 of 1953. K.   N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the appellant. Radha Binod Pal, Panchanan Pal and D. N. Mukherjee, for  the respondents. 1959.  March 26.  The Judgment of the Court was delivered by SINHA, J.-The question for determination in this appeal on a certificate  of  fitness  granted  by  the  High  Court   of Calcutta, is whether the respondent’s admitted income tinder certain  heads,  is  chargeable  to  income-tax  under   the provisions  of s. 10(6) of the Indian Income-tax  Act,  1922 (XI  of  1922) (hereinafter referred to as  the  Act).   The Calcutta High Court, by its judgment dated January 6,  1956, answered the question in the negative, disagreeing with  the determination  of the Income-tax Appellate Tribunal  by  its order dated April 23, 1949. The  facts  of  this case, upon which the  decision  of  the appeal  depends,  may  shortly be  stated  as  follows:  The respondent  is a limited liability company  incorporated  on June  7,  1933, with a view to taking over  the  assets  and liabilities  of an unincorporated association called  "  The Calcutta Stock Exchange Association 461 and  to carrying on the affairs of the Stock Exchange  which had been founded by that Association.  The principal  object of  the Respondent Company is to facilitate the  transaction of business on the Calcutta Stock Exchange.  In view of that objective,  the  Company  had to  make  rules  and  by-laws, regulating  the mode and the conditions in, and subject  to, which  the  business  of  the  Stock  Exchange  had  to   be transacted.  The Company is composed of " members " who  may be  either individuals or firms, who, except in the case  of parties   who  had  been  members  of   the   unincorporated Association  have  to  be elected as  such,  and  upon  such elections, have to acquire a share of the Company and pay an

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 11  

entrance   fee.    The  members  have  to  pay   a   monthly subscription according to the by-laws of the Company.  Under the  by-laws  of  the Respondent  Company,  members  with  a certain standing, are allowed to have "Authorized Assistants ",  upto  a  maximum  of six  in  number.   Such  Authorized Assistants  are  permitted the use of the  premises  of  the Association  and to transact business therein in  the  names and  on behalf of the members employing them.   The  members have to pay an admission fee for such Authorized  Assistants according to the following scale : (a)  for the first two Assistants   Rs.1,000 (b)  for the third Assistant      Rs.2,000 (c)  for the fourth Assistant       Rs.3,000 (d)  for the fifth Assistant      Rs.4,000 (e)  for the sixth Assistant        Rs.5,000 (f)  for replacement                Rs.1,000 The last item of replacement fee of Rs. 1,000/- is meant  to cover  the  fee for substituting one Assistant  by  another. Before these by-laws were amended with effect from July  10, 1944, a member could have more than six such Assistants, but the  number  was limited to six by the new  amendment  which also  provided  that  "  Members  who  have  more  than  six Assistants, at present, shall not be allowed any replacement unless the number of Assistants in their firms has come down to  six (maximum fixed)." Rule (5), as amended, is in  these terms:- 462 "Every  candidate applying for admission as Assistant  to  a member must serve at least for one year as a probationer  in the  firm of that member.  A probationer must apply  to  the Committee (through the member in whose office he will  serve as  probationer)  in such form as may be prescribed  by  the Committee by paying Rs. 100/- as probationer fee which  will not be refunded in any circumstances ". It  would,  thus,  appear that the  rules  relating  to  the admission  of members’ Assistants, confer the  benefit  upon those  members  only-either  individuals  or  firms-who  are qualified according to the by-laws to have such  Assistants, and  who  have  paid  admission  fees  and  pay  a   monthly subscription  in respect of each of them, besides their  own dues,  to  the Company.  The number of such  Assistants  has been  sought by the by-laws to be limited upto a maximum  of six,  by  imposing a progressively enhanced  admission  fee, apparently, with a view to discouraging the employment of  a large  crowd of such " Authorized Assistants".  The  by-laws also  provide that "an authorized assistant shall not  enter into any contracts on his own behalf and all contracts  made by him shall be made in the name of the member employing him and such member shall be absolutely responsible for the  due fulfilment  of all such contracts and for  all  transactions entered  into by the authorized assistant on his behalf"  It is also contemplated by the by-laws that tickets have to  be issued  to the Authorized Assistants, besides  the  members’ tickets.   The bylaws also contemplate that a  member  shall give to the prescribed Authority of the Company an immediate notice  in writing, of the termination of the employment  by him  of any Authorized Assistant, and on  such  termination, the  right  of  the  Assistant  to  use  the  rooms  of  the Association, shall cease, and he shall not be at liberty  to transact business in the name and on behalf of his employer. The  by-laws also make provision for the supervision of  the work of the Authorized Assistants to see that they  function within the limits of their powers, and do not transact 463 business  on  behalf of persons or firms  other  than  those

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 11  

employing them. During the accounting year 1944-45 assessment year 1945-46), the Respondent Company received from its members the sum  of Rs.  60,750/- as entrance fees, and the sum of Rs.  15,687/- as  subscription in’ respect of the  Authorized  Assistants. The  Company also received during the aforesaid year, a  sum of  Rs. 16,000/- as fees for putting the names of  companies on the Quotations List.  Unless a particular company’s  name is placed on the Quotations List, no dealings in respect  of the  shares  of  that company are  permitted  on  the  Stock Exchange.   An  application has to be made by  a  member  to place  on  the  Quotations  List  any  company  not  already included  in  that List, and on approval by  the  prescribed Authority  of  the  Company, the name of  the  company  thus proposed, is included in the List upon payment of a  certain fee.    The  companies  themselves  cannot  apply   to   the Association for such enlistment.  The application has to  be made by a member, and has to be accompanied by a fee of  Rs. 1,000/-,  and  it is only after the necessary  scrutiny  and investigation into the affairs of the proposed company  have been made, that the enlistment applied for is granted.  That is  another source of income to the Respondent Company.   It is  no  more necessary to refer to another item  of  income, which  was  admitted, during the course  of  the  assessment proceedings  in their appellate stage, to be liable  to  the payment  of  tax.  We are, thus, concerned  in  the  present controversy  with  the aforesaid sums of Rs.  60,750/-,  Rs. 15,687/-  and Rs. 16,000/-which were held by the  Income-tax Officer, by his order dated March 27, 1946, to be liable  to income-tax.  The Income-tax Officer rejected the  contention raised on behalf of the assessee Company that the Authorized Assistants aforesaid were themselves members of the Company, and  that  therefore,  the moneys received  from  them  were exempt  from  taxation.   He  also  held  that  though   the Respondent Company was a mutual Association, each one of the three  items of income, referred to above, was  remuneration definitely related 464 to specific services performed, and was thus, chargeable  to tax  within the meaning of s. 10(6) of the Act.  On  appeal, the  Appellate  Assistant Commissioner, by his  order  dated June  30, 1947, considered the points at great  length,  and came  to the conclusion that the authorized Assistants  were not  members  or  substitute  members.   He  held  that  the Authorized  Assistants were no more than representatives  of the  members who employ them, and they transact business  on their behalf, and that the Association had framed rules  and by-laws,   regulating   the   admission,   supervision   and discontinuance of such Authorized Assistants.  For coming to this  conclusion, he relied upon the decision of the  Bombay High  Court in the case of Native Share and  Stock  Brokers’ Association v. The Commissioner of Income-tax(1).  The  case was  then  taken up in appeal to  the  Income-tax  Appellate Tribunal,  which dismissed the appeal.  The Tribunal  agreed with  the  finding  of  the  taxing  authorities  that   the Authorized Assistants were not members of the Company within the  meaning of the Articles of Association of the  Company, and  that  their  position was analogous to that  of  the  " authorised  clerks  in  Native  Share  and  Stock   Brokers’ Association  at  Bombay ". In the course of its  order,  the Tribunal observed as follows:- "  The provision made in the regulations of the company,  by which a member can take advantage of sending his  authorised assistants  to the company for transacting the  business  in the  member name is nothing but giving extra  facilities  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 11  

the  members.  By controlling the institution of  authorised assistants  the  company renders specific  services  to  the members  and  in particular to the member  whose  assistants work  for  him.  The amounts received by  the  company  from these  sources  are  clearly covered by  the  provisions  of section 10(6) ". At the instance of the assessee, the Tribunal stated a  case and  referred  the following questions of law  to  the  High Court for its decision under s. 66(1) of the Act:- "  (1)  Whether  on the facts of  this  case  the  Incometax Appellate Tribunal was right in holding that, (1)  [1946] 14 I.T.R. 628. 465 Authorised Assistants were not members of the company and as such the amounts of Rs. 15,687/- and 60,750/- received  from them as subscriptions and entrance fees respectively  should be included in the assessable income. (2)  Were  these  amounts  received  for  specific  services performed  by  the  Association or its  members  within  the meaning  of  sub-section  (6) of section 10  of  the  Indian Income-tax Act ? (3)Whether  the  sums  of Rs.  16,000/-  and  Rs.  600/-were remuneration   definitely  related  to   specific   services performed  by  the Association for its  members  within  the meaning of subsection (6) of section 10 ". The  reference was heard by a Division Bench  consisting  of Sir Trevor Harries, C. J., and Banerjee, J., of the Calcutta High  Court.   Before that Bench, certain  concessions  were made.  It was conceded by Dr. Pal, who also appeared  before that Bench, that the Authorised Assistants were not  members of the Company.  It was also agreed at the bar, on behalf of both the parties, that the two sums of Rs. 60,750 and 15,687 were  not  received  from  the  Authorized  Assistants,   as suggested in the question formulated, and that it was common ground   that  they  were  received  from  members  of   the Association  in  respect  of  their  Authorized  Assistants. Therefore,  the High Court took the view that the  questions framed by the Tribunal did not arise, and that the  Tribunal bad  proceeded on a wrong basis of facts.  The  High  Court, therefore, re-cast the questions in these terms:- "  Whether in the facts and circumstances of this  case  the Income-tax Appellate Tribunal was right in holding that (a)the amounts of Rs. 15,687/- and Rs. 60,750/-received from the members of the Association as subscriptions and entrance fees in respect of Authorized Assistants, and (b)  the  amounts of Rs. 16,000/- and Rs. 600/- received  as fees for enlisting names of newly floated companies and  for recognition  of changes in the styles of firms  respectively should  be  included  in  the assess.  able  income  of  the assessees 59 466 The Tribunal was asked to re-state a case upon the questions as re-cast, extracted above. Accordingly,  the Tribunal drew up a fresh statement of  the case  and  re-submitted it to the High Court.  On  this  re- statement  of  the  case, the matter was heard  by  a  Bench consisting  of Chakravarti, C. J., and Sarkar, J.  The  High Court considered the terms of s. 10(6) of the Act, and  came to the conclusion that the case had not been brought  within those terms.  The High Court, in the course of its  opinion, observed  that  though the assessee is undoubtedly  a  trade association,  it did not perform any specific  services  for its  members for remuneration.  It then examined  in  detail the decision of the Bombay High Court in the case of  Native

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 11  

Share and Stock Brokers’ Association v. The Commissioner  of Income-tax (1), relied upon by the Department, and  observed that  the differences pointed out between the case  in  hand and  the case decided by the Bombay High Court, were  "  not vital,  though  they are not immaterial ", but  it  was  not prepared to take the same view of the facts of this case  as had been taken by the Bombay High Court in the case referred to above, or by the Travancore-Cochin High Court in the case of  Commissioner  of  Income-tax  v.  Chamber  of  Commerce, Alleppey (2).  The High Court, accepted the argument of  Dr. Pal,  which  is  also  addressed to us,  that  the  words  " performing  specific  services for " were far  stronger  and more definite than the words " render service to ", and that those  words meant the actual doing of definite acts in  the nature  of services.  The Court further observed that  those words  meant  "  execute  certain  definite  tasks  in   the interests and for the benefit of the latter (that is to say, the  members) under an arrangement of a direct character  ". It further observed that the words " for remuneration" and " definitely related to those services " meant that "  certain specific tasks must be performed or functions of a  specific character must be discharged for payment and such payment is to  be  made to the association as wages for its  labour  in respect of those tasks or functions ". In this connection, (1) [1946] 14 I.T.R. 628. (2) [1955] 27 I.T.R. 535. 467 it may be added that the High Court also made the  following observations  bearing  on the construction  of  the  crucial words of s. 10(6):- "  When  section 10(6) speaks of a  trade,  professional  or other  similar association performing specific services  for its  members  for remuneration, it  contemplates,  I  think, services  in regard to matters outside the  mutual  dealings for which the Association was formed and for the transaction of which it exists as a mutual association.  If  performance of functions even in regard to matters within the objects of the  association as a mutual association be  performance  of specific service within the meaning of the sub-section, dis- charge of no function can be outside it and everything  done would be specific service performed.  That, I do not  think, is what the sub-section means and intends ". It is  manifest that unless the assessee is brought within the terms of sub- s.  (6) of s. 10, the three items of income coming into  the hands of the Association, would not be chargeable to income- tax.  That subsection is in these terms:- "   (6)  A  trade,  professional  or   similar   association performing  specific  services  for its  members  for  remu- neration  definitely  related  to those  services  shall  be deemed for the purpose of this section to carry on  business in  respect  of those services’ and the  profits  and  gains therefrom shall be liable to tax accordingly ". It has to be observed  at the outset that the performing of the  services of  the description mentioned in that sub-section, may  not, but for the words of that section, have amounted to carrying on  business in respect of those services.  The use  of  the word " deemed " shows that the legislature was  deliberately using  the fiction of treating something as  business  which otherwise it may not have been.  It is also noteworthy  that the  sub-section  is couched in rather emphatic  terms.   We have, therefore, to examine the terms of the sub-section  to see  whether the three sums of money in question, or any  of them, are or is within the ambit of those terms.  The  words "  performing specific services ", in our opinion, mean,  in the  context,  "  conferring particular benefits  "  on  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 11  

members.  The word 468 "  services  " is a term of a very wide import, but  in  the context  of s. 10 of the Act, its use excludes  its  theolo- gical  or artistic usage.  With reference to a  trade,  pro- fessional or similar association, the performing of specific services  must mean conferring on its members some  tangible benefit  which otherwise would Dot be available to  them  as such,  except  for payment received by  the  association  in respect  of  those  services.  The word  "  remuneration  ", though it includes " wages ", may mean  payment,      which, strictly speaking, may not be called    wages  ".  It  is  a term of much wider import  including    recompense   ",    " reward  ",  " payment ", etc. It, therefore, appears  to  us that  the learned Chief Justice was not entirely correct  in equating  " remuneration " with " wages ".  The  sub-section further   requires  that  the  remuneration  should   be   " definitely  related  " to the specific services.   In  other words,  it should be shown that those services would not  be available  to the members or such of them as wish  to  avail themselves  of  those services, but  for  specific  payments charged  by  the association as a fee for  performing  those services.    After   these  observations  bearing   on   the interpretation  of the crucial words, we shall  now  examine each of the three items of income, separately, to  determine the  question whether they answer, or any of  them  answers, the  description  of " services " contemplated by  the  sub- section. Firstly,  the sum of Rs. 60,750 has been realised from  such members  as  applied  for and  obtained  permission  of  the Association to have the use of Authorized Assistants  within the  precincts of the Stock Exchange.  There cannot  be  the least  doubt that unless those members paid  the  prescribed entrance  fees for one or more Authorized Assistants upto  a maximum  of  six,  they  could not  have  the  benefit  thus conferred  upon such members.  Ordinarily, a member  has  to transact  business  in the precincts of the  Association  by himself or by his business partner if there is a firm ;  but if that member is a very busy person, and wishes to avail of the services of Authorized Assistants, he has to pay the the prescribed  fee.   A  member of the  Association,  with  the advantage of mutuality, so long as he transacts 469 business within the precincts of the Association, by himself or by his partner in the case of a firm, is not required  to pay any such entrance fee but only the fee payable by  every member  as  such.   The  entrance  fee,  thus,  is   clearly chargeable only from such of the members as avail themselves of the benefit conferred by the rules of the Association  in that  behalf.  The entrance fee is, thus, a price  paid  for the   services  of  the  Association  in   making   suitable arrangements for an absentee member to transact business  on his  behalf and in his name by his representative or  agent. The  entrance  fee  in question, therefore,  cannot  but  be ascribed   to   the  specific  services  rendered   by   the Association  in  respect of Authorized Assistants  who  thus become  competent  to transact business on behalf  of  their principal. Coming next to the sum of Rs. 15,687 which was realised from the  members  by  way of subscription in  respect  of  their Authorized Assistants, it is clear that this sum consists of the   contributions   severally   made   by   the    members periodically,  so  as  to  continue  to  have  the   benefit conferred  by  the Association of having the  use  of  their representative  or agent even during their  absence.   There

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 11  

cannot  be the least doubt that this is a  very  substantial benefit  to those members who found it worth their while  to engage  the services of Authorized Assistants.  A member  is not obliged, as indicated above, to have such an  Assistant, but  the fact that he chooses to have such an  Assistant  on payment  of the prescribed fee or subscription,  itself,  is proof positive that a businessman, who ordinarily thinks  in terms  of  money,  has  found it  worth-while  to  have  the services of an Assistant by making an additional payment  to the  Association by way of recompense for the benefit,  thus conferred upon him. Lastly, the sum of Rs. 16,000 represents fees received  from members  for  allowing their application for  enlisting  the names  of companies not already on the Quotations  List,  so that the shares and stocks of these companies, may be placed on  the Stock Market.  As already indicated, it is  not  the company  concerned which has directly to pay this  fee,  but the fee has to 470 be  paid  by  the member who  initiates  the  proposal  and, apparently, finds it worth his while to pay that  prescribed fee  to  the  Association.  He would not  make  the  payment unless he found it worth his while to do so Apparently, such a member is interested in placing the stocks of that company on  the market.  It cannot, therefore, be denied  that  that sum of money is definitely related to the specific  services performed by the Association, namely, to permit transactions in  respect  of the shares of the company  concerned,  which services would not otherwise be available to the members  as a body or to the individual member or members interested  in that company. In our opinion, therefore, each one of the three sources  of income  to the Association, accrues to it on account of  its performing  those specific services in accordance  with  its rules  and by laws.  Each one of the three distinct  sources of revenue to the Association, is specifically  attributable to  the distinct services performed by the  Association  for its  members  or such of them as avail themselves  of  those benefits.   And  each one of those  services  is  separately charged for, according to the rate or schedule laid down  by the  rules and by-laws of the Association.  In our  opinion, therefore,  the  requirements of sub-s. (6) of s.  10,  have been fulfilled in the present case. But  we have yet to deal with the last argument accepted  by the High Court, with reference to the terms of sub-s. (6) of s. 10, namely, that the services contemplated therein,  have reference to " matters outside the mutual dealings for which the  Association was formed ". In the first place, there  is no warrant for limiting the application of the words used by the  legislature,  in  the  way  suggested.   Secondly,  the mutuality  of the Association extends only to such  benefits as accrue to every member on the payment made by him to  the Association, but even if additional items of payment have to be  made  for  additional services to be  performed  by  the Association only for such of the members as avail themselves of  those  benefits, it cannot be said  that  the  mutuality extends  to those additional benefits also.  It is,  in  our opinion, 471 equally  wrong  to  suggest that the  services  in  question should have been outside the objects of the Association.  If the  Association renders services to such of its members  as avail  themselves  of such services as are  not  within  the scope  of the business activities of the Association,  those benefits, if any, would not be’ conferred by the Association

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 11  

as such, because the Association has to function within  the scope of its objects of incorporation. Hence, on a true construction of the provisions of the  sub- section in question, we have come to the conclusion that the facts and circumstances of the present case, bring the three items  of  income  of  the  Association  within  the  taxing statute.   In our opinion, the decision of the Bench of  the Bombay  High Court, consisting of Stone, C. J.,  and  Kania, J., (as he then was), in the case of Native Share and  Stock Brokers’  Association  v.  Commissioner  of  Income-tax   is correct,  and  the facts of that case run very  parallel  to those  of  the  case  in band, though  there  may  be  minor differences in the rules and by-laws of the Association then before  the  Bombay  High Court.  In that case,  as  in  the present  one,  the rules of the Stock  Brokers’  Association (the  Bombay Stock Exchange) contemplated a definite  scheme for allowing members to employ authorized clerks and for the admission, conduct, control and supervision of those clerks, for the benefit primarily of the members who employed  them. It  was held by the High Court that the income  received  by the  Association  by  way  of  fees  in  respect  of   those authorized clerks, was within the taxing statute and  liable to income-tax.  After examining in detail the provisions  of the rules and the by-laws of the Association, Stone, C.  J., made the following observations which are equally applicable to  the rules and by-laws of the Association in the  present case :- " In my judgment these rules lay down a definite scheme  and provide an organised arrangement, controlled and  supervised by  the Association for the benefit of its members.   In  my opinion the carrying (1)  [1946] 14 I.T.R. 628. 472 of  their scheme into effect is performing services for  its members  by  the Association.  No doubt the benefit  of  the scheme would redound to the benefit of all members since all would   have  the  advantage  of   disciplined   supervision exercised  over the authorised clerks and remisiers  of  the others.   I  do not think that because the payment  for  the carrying  of the scheme is provided for only by members  who avail  themselves  of the use of the  authorised  clerks  it makes any difference." Kania,  J., (as he then was), in a separate  but  concurring judgment, made the following very pertinent observations:- " A perusal of the rules referred to in the judgment of  the learned   Chief  Justice  shows  that  the  institution   of authorised clerks exists for the benefits only of those  who pay  remuneration of Rs. 100 instead of going to the  market and  carrying  on  their  business  themselves.   Individual members  are permitted to work through an agent.   For  that the  charge is made.  The rules provide for the  application and grant for such permission, registration of the authoris- ed  clerks on the individuals being recognised as clerks  of particular members, supervision over the work of such clerks and particularly to prevent them from registering  contracts either  in their own name or in the name of another  member; and  a  general  supervision over their  good  behaviour  is contemplated............". A  question  was  raised as to whether  these  are  specific services  to be performed for particular members or  whether the rules amount to performance of duties towards members in general.   It  is true that several of the  services  to  be rendered  may  be  helpful to the other  members  for  their business.  Taken as a whole I consider that as a performance of  services by the Association for, the benefit of  members

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 11  

who pay the remuneration." We  have made these copious quotations from the judgment  of the Bombay High Court, because, in our 473 opinion, they truly apply the provisions of sub-s. (6) of s. 10 to associations like the one before us. The  other  case  to  which  our  attention  was  drawn,  is Commissioner of Income-tax v. Chamber of Commerce,  Alleppey (1).  The facts of that case are not similar to those of the case  before  us, but the ratio decidendi of that  case  are relevant.   That  case referred to the Alleppey  Chamber  of Commerce.   The Chamber inaugurated a produce  section  with the  object  of  promoting the  interests  of  merchants  in general,  and  of  those engaged in the  produce  trade,  in particular,  of  acting as arbitrators  and  collecting  and publishing  information  relating  to  the  produce   trade. Members  were admitted to the produce section on payment  of admission  fees, monthly fees and contributions  at  certain prescribed  rates.  The question which was referred  to  the High  Court,  was whether the receipts by way  of  fees  and contributions,  could  be chargeable under s. 10(6)  of  the Act, and it was answered in the affirmative. Though  cases  in  England,  by way  of  precedent  for  the decision  of  the case in hand, have not been cited  at  the Bar, apparently because the scheme of the Income-tax law  in England is different and the words of the statute are not in parti  material  yet there are some cases which  throw  some light  on the controversy before us.  For example, the  case of The Carlisle and Silloth Golf Club v. Smith (Surveyor  of Taxes)   (2  )  related  to  a  golf  club  which  was   not incorporated.   It was admittedly a bonafide members’  club, but  under  one of the terms of its lease, it had  to  admit non-members to play on its course on payment of " green fees " at certain prescribed rates.  Those fees were paid by  non -members.   Receipts  from those fees were  entered  in  the general accounts of the Club, thus, showing an annual excess of receipts over expenditure of the Club as a whole.  It was held  by  Hamilton,  J., (as he then  was),  that  the  Club carried  on  a concern or business in respect  of  which  it received  remuneration which was assessable to  ’income-tax. He pointed out that the (1)  [1955] 27 I.T.R. 535. (2) (1912) 6 Tax Cas. 48. 60 474 receipts  from non-members went to augment the funds of  the Club,  and  the revenue thus received was  applied  for  the purposes  of the Club-towards its general expenditure.   The case  was taken up to the Court of Appeal, and the  decision of that Court is reported in the same Volume at p. 198.  The Court  of  appeal affirmed the decision  and  dismissed  the appeal. The  Judgment of the King’s Bench Division in The  Liverpool Corn Trade Association, Limited v. Monks (H. M. Inspector of Taxes) (1) was based on facts which are similar to the facts of the present case.  In that case, the Liverpool Corn Trade Association,  Limited,  was an incorporated body  under  the Companies  Act, with the object, inter alia,  of  protecting the interests of the corn trade, and of providing a clearing house,  a  market, an exchange, and  arbitration  and  other facilities to the trade.  Membership of the Association  was confined to persons engaged in the corn trade.  Each  member was  required to have one share in the company, and  had  to pay an entrance fee and an annual subscription.  Non-members could  also become subscribers.  Payments were made  to  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11  

Association  by  members and others  for  services  rendered through the clearing house, etc.  The assessee was taxed  on the  excess of its receipts over expenditure.  On appeal  to the Special Commissioners, they upheld the assessment.   One of  the points raised before the Special Commissioners,  was that  transactions  with its members were mutual  ones,  and that  any surplus arising from such transactions, was not  a profit assessable to -income-tax.  On appeal, the High Court agreed with the determination of the Special  Commissioners, and  held  that any profit arising  from  the  Association’s transactions  with members, was assessable to income tax  as part  of the profits of its business, and that the  entrance fees  and  subscriptions  received  from  members  must   be included in the computation of such profits. It was suggested that the service in this case, if any,  was extremely  trivial and the remuneration which was large  was for that reason not definitely related to the (1)  (1926) Tax Cas. 442. 475 service.   It  was held by Upjohn, J., in Bradbury  (H.   M. Inspector  of  Taxes) v. Arnold (1) that the extent  of  the services  was  of no materiality.  There, the  question  was being dealt with under Case VI of Schedule D of the  Income- tax Act, 1918.  The learned Judge observed : "  There is no doubt that a contract for services  may,  and clearly does, form a matter for assessment under Case VI  of Schedule  D,  and not the less so that the  services  to  be rendered  are trivial or that they are to be  rendered  once and  for all so that the remuneration may be regarded  as  a casual  profit  arising,  out  of  a  single  and   isolated transaction". The  same  view  was expressed by  Harman,  J.,  in  Housden (Inspector of Taxes) v. Marshall (2).  In that case, a well- known  jockey ’contracted with a newspaper company  to  make available  to  its nominee " reminiscences of his  life  and experiences on the turf for the purpose of writing a  series of  four  articles  ", and  to  provide  photographs,  press cuttings,  etc.   He was paid pound 750.  The  question  was whether this amounted to sale of property, or was a  payment for services rendered.  It was held that it was the  latter, and  that  it  did not matter if the  service  rendered  was trivial. In  view of what we have said above as to the nature of  the service  which the Association performed in respect  of  the Assistants, the payment of the fee was definitely related to that  service.  It is, therefore, plain that the  case  fell within  s.  10(6) of the Act.  It must, therefore,  be  held that  the  question referred to the High Court  should  have been  answered in the affirmative, and that the  High  Court was in error in giving its opinion to the contrary. The appeal must, accordingly, be allowed with costs here and below. (1) [1957] 37 Tax Cas. 665, 669. Appeal allowed. (2)  [1958] 3 All E.R. 639. 476