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 CA No 2129 of 1970
G C Sharma B B Ahuja and section P Nayar for the respondents in CA 2129 of 1970
J Ramamurthy and D N Gupta for intervener No I in CA No 2129 of 1970
A K Sen and D N Gupta for Intervener No 2 in CA No 2129 of 1970
835 J Ramamurthi and D N Gupta for Intervener No3 in CA No 2129 of 1970
G C Sharma B B Ahuja and section P Nayar for the appellants in CAS
NOS2455 245772
A K Sen and D N Gupta for respondent in CAs
2455 5772
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 section 215 of the Income Tax Act 1961 Act No 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 section 111 read with section 215 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 section 215 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 vs CIT  Mysore1 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 section 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 section 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 SCR 471 836 seeking to make profits for its Members
In the light of this Court s decision in CIT vs Andhra Chamber of Commerce1 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 Ms 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 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 vs CIT2 observed while considering the import of section 215 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 Ms Calcutta Licensed Measurers which issued weighment and measurement certificates charging a fee therefore the return for the assessment year showed a profit of Rs 158690 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 2 1975 100 ITR 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 section 215 applied but the High Court on a reference under section 2561 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 section 215 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 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 section 28 will ordinarily apply to its income unless section 11 read with section 215 excludes it from taxability
The income drawn from non members by the Chamber will clearly be taxable unless section 215 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 section 11 from the charging provision
At this stage we may read section 215 215 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 Housel 1 Lok Sabha Dabates Vol
LVl1961 p3073 Aug181961 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 section 215 is a term of art and embraces objects of general public utility
But under cover of charitable purposes a crop of camouflaged organisations 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 section 215 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 section 215 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 section 215 itself read in the light of the guidelines in Lok Shikshana Trust supra 
Taking a close up of section 215 with special emphasis on 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 section 215 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 section 215 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 section 215
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 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 section 215
For instance a funeral home an SPCA 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 servicesmay be it may not be an exact equivalent such mathematical precision being impossible in the case of variablesmay 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 section 215 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 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 section 215 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 215 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 215 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 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 vs 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 section 215 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
The assessee company was conducting a profitable business of running chit funds and its memorandum 1 1944 12  486
2 C 1
T vs Dharmodayam Co 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 section 215 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  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 orgain 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 section 215
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 Ms Calcutta Licensed Measurers
True the issuance of weighment and measurement certificates is a great facility for traders and under the 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 of association which sets any limit on making a large profit this way
And after all any institutionor 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 
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
VPS Appeals partly allowed


Summary:
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 s11 income derived from property held under trust wholly for charitable purpose
Charitable purpose is defined in s2 xv
Chambers of commerce promoting the trade interest of the commercial community have been regarded as pursuing charitable purposes within the meaning of s2 xv
But under cover of charitable purposes C  they have been indulging in various activities and deriving tax free profit
Therefore section 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 tax845E 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 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 s2xv
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 profit839F 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
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 vs CIT Mysore 1976 1 SCR 471
CIT vs Andhra Chamber of Commerce 1965 55 ITR 722 applied
CIT vs Dharmodayam Co 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 ITR 722 Commissioner of Income tax vs Andhra Chamber of Commerce
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 under Entry 18 and Entry 6 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 L1127SCI75 832 The carrying on of the activities of granting certificate of origin andor weighment and measurement and arbitration are not activities for profit hut are in he nature of services andor 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 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 section 111 d with section 215 of the Act
See The Sole Trustee Loka Shikshana Trust vs Commissioner of Income tax Mysore
The purpose andor dominant object must be distinguished from the powers which are incidental to the carrying out of the objects of The Trust
See of Income tax vs Breach Candy Swimming Bath Trust
1918 Appeal Cases 514 Cotman vs Brougham 4
Under section 215 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
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 Re Trustees of The Tribune
All India Spinners Association vs Commissioner of Income tax of Income tax vs And1a Chamber of Commerce Andhra Pradesh State Transport Corporation vs Commissioner of Income tax
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
All India Spinners Association vs Commissioner of Income 833 of Income tax Bombay City vs Breach Candy Swimming Bath Trust
K Trust Bombay vs Commissioner of Income tax Excess profit Tax Bombay
of Income tax Kerala  Coimbatore vs P Krishna Warriar
7 In any event the activities of arbitration and granting certificates of origin and weighment andor measurement are not activities for profit
of Income tax Kerala v Indian Chamber of Commerce
Commissioner of Income tax vs Kochin Chamber of Commerce
1975 40 Taxation III 15 Commissioner of Income tax Kerala vs Ernakulam Chamber of Commerce
As such the Chamber is entitled to exemption under section 11 read with 215 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 2a 2b 2c 2d 2z 3h 3i 3p 2q 3v 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 section 2 15 of the Income tax Act 1961
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 section 28iii 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
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
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 section 215 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 section 215 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
Unless the memorandum or articles governing a Trust or any Institution prohibated the making of profit by 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 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
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 vs Commissioner of Income tax Mysore 35 ITR p
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
215 of the Act