{"id":90335,"date":"1959-03-26T00:00:00","date_gmt":"1959-03-25T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/the-commissioner-of-income-tax-vs-the-calcutta-stock-exchange-on-26-march-1959-2"},"modified":"2015-07-03T11:21:57","modified_gmt":"2015-07-03T05:51:57","slug":"the-commissioner-of-income-tax-vs-the-calcutta-stock-exchange-on-26-march-1959-2","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/the-commissioner-of-income-tax-vs-the-calcutta-stock-exchange-on-26-march-1959-2","title":{"rendered":"The Commissioner Of Income-Tax, … vs The Calcutta Stock Exchange … on 26 March, 1959"},"content":{"rendered":"
Supreme Court of India<\/div>\n
The Commissioner Of Income-Tax, … vs The Calcutta Stock Exchange … on 26 March, 1959<\/div>\n
Equivalent citations: 1959 AIR 763, \t\t 1959 SCR Supl. (2) 459<\/div>\n
Author: B P Sinha<\/div>\n
Bench: Sinha, Bhuvneshwar P.<\/div>\n
           PETITIONER:\nTHE COMMISSIONER OF INCOME-TAX, WEST BENGAL\n\n\tVs.\n\nRESPONDENT:\nTHE CALCUTTA STOCK EXCHANGE ASSOCIATION LTD.\n\nDATE OF JUDGMENT:\n26\/03\/1959\n\nBENCH:\nSINHA, BHUVNESHWAR P.\nBENCH:\nSINHA, BHUVNESHWAR P.\nKAPUR, J.L.\nHIDAYATULLAH, M.\n\nCITATION:\n 1959 AIR  763\t\t  1959 SCR  Supl. (2) 459\n CITATOR INFO :\n F\t    1961 SC1144\t (5)\n\n\nACT:\nIncome Tax-Stock Exchange Association-Authoriscd Assistants-\nAdmission  fee and monthly subscriptions in respect of\tthem\npaid  by members-Fee for Putting the names of  companies  on\nQuotations  List-lncome\t therefrom-Assessability  to   tax-\"\nPerforming specific services \", Meaning of-Indian Income-tax\nAct, 1922 (XI of 1922), s. 10(6).\n\n\n\nHEADNOTE:\nBy sub-s. 6 of s. 10 of the Indian Income-tax Act, 1922:  \"A\ntrade,\t professional  or  similar  association\t  performing\nspecific   services   for  its\tmembers\t  for\tremuneration\ndefinitely related to those services shall be deemed for the\npurpose\t of this section to carry on business in respect  of\nthose services, and the profits and gains therefrom shall be\nliable to tax accordingly.\"\nThe  members  of  the respondent  company,  whose  principal\nobject was to facilitate the transaction of business on\t the\nStock  Exchange,  were enabled under the by-laws to  have  a\ncertain\t number of Authorised Assistants so that the  latter\ncould use the premises of the company and transact  business\ntherein\t in the names and on behalf of the members who,\t for\nthat  purpose,\twere  required to  pay\tadmission  fees\t and\nmonthly\t subscriptions in respect of each of them.  The\t by-\nlaws  of  the  company also provided  that  no\tdealings  in\nrespect\t of the shares of any particular company  should  be\npermitted on the Stock Exchange, unless an application\tmade\nby  a member of the respondent company and accompanied by  a\nfee of Rs. 1000, for putting the name of that company on the\nQuotations List was approved by the prescribed Authority  of\nthe  respondent\t company.   During the\taccounting  year  in\nquestion  the  company received from its  members  admission\nfees   and  subscriptions  in  respect\tof  the\t  Authorized\nAssistants  and fees for putting the names of  companies  on\nthe Quotations List.  The question was whether the aforesaid\namount\twas liable to be taxed under s. 10(6) of the  Indian\nIncome-tax Act, 1922.\nHeld,  that  with  reference to\t a  trade,  professional  or\nsimilar\t association,  the performing of  specific  services\nunder  s.  10(6) of the Indian Income-tax  Act,\t 1922,\tmean\nconferring  on\tits  members  some  tangible  benefit  which\notherwise would not be available to them as such, except for\npayment\t received  by the association in  respect  of  those\nservices.\n460\nAccordingly,  the income received by the respondent  company\ntowards the admission fees and the subscriptions in  respect\nof  the Authorized Assistants, being the price paid for\t the\nservices  of  the  respondent  company\tin  making  suitable\narrangements for an absentee member to transact business  on\nhis  behalf and in his name by his representative  or  agent\nwithin the Stock Exchange, as well as the fees received from\nmembers for enlisting the names of companies not already  on\nthe Quotations List so as to permit transactions in  respect\nof  the shares of the companies concerned, was\tremuneration\ndefinitely related to specific services performed by\t the\nrespondent for its members within the meaning of s.10(6)  of\nthe Indian Income-tax Act, 1922, and was assessable to income\n-tax.\nNative\t Share\tand  Stock  Brokers'  Association   v.\t The\nCommissioner  of  Income-tax, Bombay [1946] 14\tI.T.R.\t628,\napproved.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 204 of 1958.
\nAppeal\tfrom the judgment and decree dated January 6,  1956,
\nof the Calcutta High Court in Income-tax Reference No. 74 of
\n1953.\n<\/p>\n
K.   N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the
\nappellant.\n<\/p>\n
Radha Binod Pal, Panchanan Pal and D. N. Mukherjee, for\t the
\nrespondents.\n<\/p>\n
1959.  March 26.  The Judgment of the Court was delivered by
\nSINHA, J.-The question for determination in this appeal on a
\ncertificate  of\t fitness  granted  by  the  High  Court\t  of
\nCalcutta, is whether the respondent’s admitted income tinder
\ncertain\t heads,\t is  chargeable\t to  income-tax\t under\t the
\nprovisions  of s. 10(6) of the Indian Income-tax  Act,\t1922
\n(XI  of\t 1922) (hereinafter referred to as  the\t Act).\t The
\nCalcutta High Court, by its judgment dated January 6,  1956,
\nanswered the question in the negative, disagreeing with\t the
\ndetermination  of the Income-tax Appellate Tribunal  by\t its
\norder dated April 23, 1949.\n<\/p>\n
The  facts  of\tthis case, upon which the  decision  of\t the
\nappeal\tdepends,  may  shortly be  stated  as  follows:\t The
\nrespondent  is a limited liability company  incorporated  on
\nJune  7,  1933, with a view to taking over  the\t assets\t and
\nliabilities  of an unincorporated association called  ”\t The
\nCalcutta Stock Exchange Association
\n461<\/span>
\nand  to carrying on the affairs of the Stock Exchange  which
\nhad been founded by that Association.  The principal  object
\nof  the Respondent Company is to facilitate the\t transaction
\nof business on the Calcutta Stock Exchange.  In view of that
\nobjective,  the\t Company  had to  make\trules  and  by-laws,
\nregulating  the mode and the conditions in, and subject\t to,
\nwhich  the  business  of  the  Stock  Exchange\thad  to\t  be
\ntransacted.  The Company is composed of ” members ” who\t may
\nbe  either individuals or firms, who, except in the case  of
\nparties\t  who  had  been  members  of\tthe   unincorporated
\nAssociation  have  to  be elected as  such,  and  upon\tsuch
\nelections, have to acquire a share of the Company and pay an
\nentrance   fee.\t   The\tmembers\t have  to  pay\t a   monthly
\nsubscription according to the by-laws of the Company.  Under
\nthe  by-laws  of  the Respondent  Company,  members  with  a
\ncertain standing, are allowed to have “Authorized Assistants
\n“,  upto  a  maximum  of six  in  number.   Such  Authorized
\nAssistants  are\t permitted the use of the  premises  of\t the
\nAssociation  and to transact business therein in  the  names
\nand  on behalf of the members employing them.\tThe  members
\nhave to pay an admission fee for such Authorized  Assistants
\naccording to the following scale :<\/p>\n
(a)  for the first two Assistants   Rs.1,000\n<\/p>\n
(b)  for the third Assistant\t  Rs.2,000\n<\/p>\n
(c)  for the fourth Assistant\t    Rs.3,000\n<\/p>\n
(d)  for the fifth Assistant\t  Rs.4,000\n<\/p>\n
(e)  for the sixth Assistant\t    Rs.5,000\n<\/p>\n
(f)  for replacement\t\t    Rs.1,000
\nThe last item of replacement fee of Rs. 1,000\/- is meant  to
\ncover  the  fee for substituting one Assistant\tby  another.
\nBefore these by-laws were amended with effect from July\t 10,
\n1944, a member could have more than six such Assistants, but
\nthe  number  was limited to six by the new  amendment  which
\nalso  provided\tthat  ”\t Members  who  have  more  than\t six
\nAssistants, at present, shall not be allowed any replacement
\nunless the number of Assistants in their firms has come down
\nto  six (maximum fixed).” Rule (5), as amended, is in  these
\nterms:-\n<\/p>\n
462<\/span><\/p>\n
“Every\tcandidate applying for admission as Assistant  to  a
\nmember must serve at least for one year as a probationer  in
\nthe  firm of that member.  A probationer must apply  to\t the
\nCommittee (through the member in whose office he will  serve
\nas  probationer)  in such form as may be prescribed  by\t the
\nCommittee by paying Rs. 100\/- as probationer fee which\twill
\nnot be refunded in any circumstances “.\n<\/p>\n
It  would,  thus,  appear that the  rules  relating  to\t the
\nadmission  of members’ Assistants, confer the  benefit\tupon
\nthose  members\tonly-either  individuals  or  firms-who\t are
\nqualified according to the by-laws to have such\t Assistants,
\nand  who  have\tpaid  admission\t fees  and  pay\t a   monthly
\nsubscription  in respect of each of them, besides their\t own
\ndues,  to  the Company.\t The number of such  Assistants\t has
\nbeen  sought by the by-laws to be limited upto a maximum  of
\nsix,  by  imposing a progressively enhanced  admission\tfee,
\napparently, with a view to discouraging the employment of  a
\nlarge  crowd of such ” Authorized Assistants”.\tThe  by-laws
\nalso  provide that “an authorized assistant shall not  enter
\ninto any contracts on his own behalf and all contracts\tmade
\nby him shall be made in the name of the member employing him
\nand such member shall be absolutely responsible for the\t due
\nfulfilment  of all such contracts and for  all\ttransactions
\nentered\t into by the authorized assistant on his behalf”  It
\nis also contemplated by the by-laws that tickets have to  be
\nissued\tto the Authorized Assistants, besides  the  members’
\ntickets.   The bylaws also contemplate that a  member  shall
\ngive to the prescribed Authority of the Company an immediate
\nnotice\tin writing, of the termination of the employment  by
\nhim  of any Authorized Assistant, and on  such\ttermination,
\nthe  right  of\tthe  Assistant\tto  use\t the  rooms  of\t the
\nAssociation, shall cease, and he shall not be at liberty  to
\ntransact business in the name and on behalf of his employer.
\nThe  by-laws also make provision for the supervision of\t the
\nwork of the Authorized Assistants to see that they  function
\nwithin the limits of their powers, and do not transact
\n463<\/span>
\nbusiness  on  behalf of persons or firms  other\t than  those
\nemploying them.\n<\/p>\n
During the accounting year 1944-45 assessment year 1945-46),
\nthe Respondent Company received from its members the sum  of
\nRs.  60,750\/- as entrance fees, and the sum of Rs.  15,687\/-
\nas  subscription in’ respect of the  Authorized\t Assistants.
\nThe  Company also received during the aforesaid year, a\t sum
\nof  Rs. 16,000\/- as fees for putting the names of  companies
\non the Quotations List.\t Unless a particular company’s\tname
\nis placed on the Quotations List, no dealings in respect  of
\nthe  shares  of\t that company are  permitted  on  the  Stock
\nExchange.   An\tapplication has to be made by  a  member  to
\nplace  on  the\tQuotations  List  any  company\tnot  already
\nincluded  in  that List, and on approval by  the  prescribed
\nAuthority  of  the  Company, the name of  the  company\tthus
\nproposed, is included in the List upon payment of a  certain
\nfee.\tThe  companies\tthemselves  cannot  apply   to\t the
\nAssociation for such enlistment.  The application has to  be
\nmade by a member, and has to be accompanied by a fee of\t Rs.
\n1,000\/-,  and  it is only after the necessary  scrutiny\t and
\ninvestigation into the affairs of the proposed company\thave
\nbeen made, that the enlistment applied for is granted.\tThat
\nis  another source of income to the Respondent Company.\t  It
\nis  no\tmore necessary to refer to another item\t of  income,
\nwhich  was  admitted, during the course\t of  the  assessment
\nproceedings  in their appellate stage, to be liable  to\t the
\npayment\t of  tax.  We are, thus, concerned  in\tthe  present
\ncontroversy  with  the aforesaid sums of Rs.  60,750\/-,\t Rs.
\n15,687\/-  and Rs. 16,000\/-which were held by the  Income-tax
\nOfficer, by his order dated March 27, 1946, to be liable  to
\nincome-tax.  The Income-tax Officer rejected the  contention
\nraised on behalf of the assessee Company that the Authorized
\nAssistants aforesaid were themselves members of the Company,
\nand  that  therefore,  the moneys received  from  them\twere
\nexempt\tfrom  taxation.\t  He  also  held  that\tthough\t the
\nRespondent Company was a mutual Association, each one of the
\nthree  items of income, referred to above, was\tremuneration
\ndefinitely related
\n464<\/span>
\nto specific services performed, and was thus, chargeable  to
\ntax  within the meaning of s. 10(6) of the Act.\t On  appeal,
\nthe  Appellate\tAssistant Commissioner, by his\torder  dated
\nJune  30, 1947, considered the points at great\tlength,\t and
\ncame  to the conclusion that the authorized Assistants\twere
\nnot  members  or  substitute  members.\t He  held  that\t the
\nAuthorized  Assistants were no more than representatives  of
\nthe  members who employ them, and they transact business  on
\ntheir behalf, and that the Association had framed rules\t and
\nby-laws,   regulating\tthe   admission,   supervision\t and
\ndiscontinuance of such Authorized Assistants.  For coming to
\nthis  conclusion, he relied upon the decision of the  Bombay
\nHigh  Court in the case of Native Share and  Stock  Brokers’
\nAssociation v. The Commissioner of Income-tax(1).  The\tcase
\nwas  then  taken up in appeal to  the  Income-tax  Appellate
\nTribunal,  which dismissed the appeal.\tThe Tribunal  agreed
\nwith  the  finding  of\tthe  taxing  authorities  that\t the
\nAuthorized Assistants were not members of the Company within
\nthe  meaning of the Articles of Association of the  Company,
\nand  that  their  position was analogous to that  of  the  ”
\nauthorised  clerks  in\tNative\tShare  and  Stock   Brokers’
\nAssociation  at\t Bombay “. In the course of its\t order,\t the
\nTribunal observed as follows:-\n<\/p>\n
”  The provision made in the regulations of the company,  by
\nwhich a member can take advantage of sending his  authorised
\nassistants  to the company for transacting the\tbusiness  in
\nthe  member name is nothing but giving extra  facilities  to
\nthe  members.  By controlling the institution of  authorised
\nassistants  the\t company renders specific  services  to\t the
\nmembers\t and  in particular to the member  whose  assistants
\nwork  for  him.\t The amounts received by  the  company\tfrom
\nthese  sources\tare  clearly covered by\t the  provisions  of
\nsection 10(6) “.\n<\/p>\n
At the instance of the assessee, the Tribunal stated a\tcase
\nand  referred  the following questions of law  to  the\tHigh
\nCourt for its decision under s. 66(1) of the Act:-
\n”  (1)\tWhether\t on the facts of  this\tcase  the  Incometax
\nAppellate Tribunal was right in holding that,
\n(1)  [1946] 14 I.T.R. 628.\n<\/p>\n
465<\/span><\/p>\n
Authorised Assistants were not members of the company and as
\nsuch the amounts of Rs. 15,687\/- and 60,750\/- received\tfrom
\nthem as subscriptions and entrance fees respectively  should
\nbe included in the assessable income.\n<\/p>\n
(2)  Were  these  amounts  received  for  specific  services
\nperformed  by  the  Association or its\tmembers\t within\t the
\nmeaning\t of  sub-section  (6) of section 10  of\t the  Indian
\nIncome-tax Act ?\n<\/p>\n
(3)Whether  the\t sums  of Rs.  16,000\/-\t and  Rs.  600\/-were
\nremuneration   definitely  related  to\t specific   services
\nperformed  by  the Association for its\tmembers\t within\t the
\nmeaning of subsection (6) of section 10 “.\n<\/p>\n
The  reference was heard by a Division Bench  consisting  of
\nSir Trevor Harries, C. J., and Banerjee, J., of the Calcutta
\nHigh  Court.   Before that Bench, certain  concessions\twere
\nmade.  It was conceded by Dr. Pal, who also appeared  before
\nthat Bench, that the Authorised Assistants were not  members
\nof the Company.\t It was also agreed at the bar, on behalf of
\nboth the parties, that the two sums of Rs. 60,750 and 15,687
\nwere  not  received  from  the\tAuthorized  Assistants,\t  as
\nsuggested in the question formulated, and that it was common
\nground\t that  they  were  received  from  members  of\t the
\nAssociation  in\t respect  of  their  Authorized\t Assistants.
\nTherefore,  the High Court took the view that the  questions
\nframed by the Tribunal did not arise, and that the  Tribunal
\nbad  proceeded on a wrong basis of facts.  The\tHigh  Court,
\ntherefore, re-cast the questions in these terms:-
\n”  Whether in the facts and circumstances of this  case\t the
\nIncome-tax Appellate Tribunal was right in holding that\n<\/p>\n
(a)the amounts of Rs. 15,687\/- and Rs. 60,750\/-received from
\nthe members of the Association as subscriptions and entrance
\nfees in respect of Authorized Assistants, and\n<\/p>\n
(b)  the  amounts of Rs. 16,000\/- and Rs. 600\/- received  as
\nfees for enlisting names of newly floated companies and\t for
\nrecognition  of changes in the styles of firms\trespectively
\nshould\tbe  included  in  the assess.  able  income  of\t the
\nassessees
\n59<\/span>
\n466<\/span>
\nThe Tribunal was asked to re-state a case upon the questions
\nas re-cast, extracted above.\n<\/p>\n
Accordingly,  the Tribunal drew up a fresh statement of\t the
\ncase  and  re-submitted it to the High Court.  On  this\t re-
\nstatement  of  the  case, the matter was heard\tby  a  Bench
\nconsisting  of Chakravarti, C. J., and Sarkar, J.  The\tHigh
\nCourt considered the terms of s. 10(6) of the Act, and\tcame
\nto the conclusion that the case had not been brought  within
\nthose terms.  The High Court, in the course of its  opinion,
\nobserved  that\tthough the assessee is undoubtedly  a  trade
\nassociation,  it did not perform any specific  services\t for
\nits  members for remuneration.\tIt then examined  in  detail
\nthe decision of the Bombay High Court in the case of  Native
\nShare and Stock Brokers’ Association v. The Commissioner  of
\nIncome-tax (1), relied upon by the Department, and  observed
\nthat  the differences pointed out between the case  in\thand
\nand  the case decided by the Bombay High Court, were  ”\t not
\nvital,\tthough\tthey are not immaterial “, but\tit  was\t not
\nprepared to take the same view of the facts of this case  as
\nhad been taken by the Bombay High Court in the case referred
\nto above, or by the Travancore-Cochin High Court in the case
\nof  Commissioner  of  Income-tax  v.  Chamber  of  Commerce,
\nAlleppey<\/a> (2).  The High Court, accepted the argument of\t Dr.
\nPal,  which  is\t also  addressed to us,\t that  the  words  ”
\nperforming  specific  services for ” were far  stronger\t and
\nmore definite than the words ” render service to “, and that
\nthose  words meant the actual doing of definite acts in\t the
\nnature\tof services.  The Court further observed that  those
\nwords  meant  ”\t execute  certain  definite  tasks  in\t the
\ninterests and for the benefit of the latter (that is to say,
\nthe  members) under an arrangement of a direct character  “.
\nIt further observed that the words ” for remuneration” and ”
\ndefinitely related to those services ” meant that ”  certain
\nspecific tasks must be performed or functions of a  specific
\ncharacter must be discharged for payment and such payment is
\nto  be\tmade to the association as wages for its  labour  in
\nrespect of those tasks or functions “. In this connection,
\n(1) [1946] 14 I.T.R. 628.\n<\/p>\n
(2) [1955] 27 I.T.R. 535.\n<\/p>\n
467<\/span><\/p>\n
it may be added that the High Court also made the  following
\nobservations  bearing  on the construction  of\tthe  crucial
\nwords of s. 10(6):-\n<\/p>\n
”  When\t section 10(6) speaks of a  trade,  professional  or
\nother  similar association performing specific services\t for
\nits  members  for remuneration, it  contemplates,  I  think,
\nservices  in regard to matters outside the  mutual  dealings
\nfor which the Association was formed and for the transaction
\nof which it exists as a mutual association.  If\t performance
\nof functions even in regard to matters within the objects of
\nthe  association as a mutual association be  performance  of
\nspecific service within the meaning of the sub-section, dis-
\ncharge of no function can be outside it and everything\tdone
\nwould be specific service performed.  That, I do not  think,
\nis what the sub-section means and intends “. It is  manifest
\nthat unless the assessee is brought within the terms of sub-
\ns.  (6) of s. 10, the three items of income coming into\t the
\nhands of the Association, would not be chargeable to income-
\ntax.  That subsection is in these terms:-\n<\/p>\n
”   (6)\t A  trade,  professional  or   similar\t association
\nperforming  specific  services\tfor its\t members  for  remu-
\nneration  definitely  related  to those\t services  shall  be
\ndeemed for the purpose of this section to carry on  business
\nin  respect  of those services’ and the\t profits  and  gains
\ntherefrom shall be liable to tax accordingly “. It has to be
\nobserved  at the outset that the performing of the  services
\nof  the description mentioned in that sub-section, may\tnot,
\nbut for the words of that section, have amounted to carrying
\non  business in respect of those services.  The use  of\t the
\nword ” deemed ” shows that the legislature was\tdeliberately
\nusing  the fiction of treating something as  business  which
\notherwise it may not have been.\t It is also noteworthy\tthat
\nthe  sub-section  is couched in rather emphatic\t terms.\t  We
\nhave, therefore, to examine the terms of the sub-section  to
\nsee  whether the three sums of money in question, or any  of
\nthem, are or is within the ambit of those terms.  The  words
\n”  performing specific services “, in our opinion, mean,  in
\nthe  context,  ”  conferring particular benefits  ”  on\t the
\nmembers.  The word
\n468<\/span>
\n”  services  ” is a term of a very wide import, but  in\t the
\ncontext\t of s. 10 of the Act, its use excludes\tits  theolo-
\ngical  or artistic usage.  With reference to a\ttrade,\tpro-
\nfessional or similar association, the performing of specific
\nservices  must mean conferring on its members some  tangible
\nbenefit\t which otherwise would Dot be available to  them  as
\nsuch,  except  for payment received by\tthe  association  in
\nrespect\t of  those  services.  The word\t ”  remuneration  “,
\nthough it includes ” wages “, may mean\tpayment,      which,
\nstrictly speaking, may not be called\twages  “.  It  is  a
\nterm of much wider import  including\trecompense   “,\t   ”
\nreward\t“,  ” payment “, etc. It, therefore, appears  to  us
\nthat  the learned Chief Justice was not entirely correct  in
\nequating  ” remuneration ” with ” wages “.  The\t sub-section
\nfurther\t  requires  that  the  remuneration  should   be   ”
\ndefinitely  related  ” to the specific services.   In  other
\nwords,\tit should be shown that those services would not  be
\navailable  to the members or such of them as wish  to  avail
\nthemselves  of\tthose services, but  for  specific  payments
\ncharged\t by  the association as a fee for  performing  those
\nservices.    After   these  observations  bearing   on\t the
\ninterpretation\tof the crucial words, we shall\tnow  examine
\neach of the three items of income, separately, to  determine
\nthe  question whether they answer, or any of  them  answers,
\nthe  description  of ” services ” contemplated by  the\tsub-
\nsection.\n<\/p>\n
Firstly,  the sum of Rs. 60,750 has been realised from\tsuch
\nmembers\t as  applied  for and  obtained\t permission  of\t the
\nAssociation to have the use of Authorized Assistants  within
\nthe  precincts of the Stock Exchange.  There cannot  be\t the
\nleast  doubt that unless those members paid  the  prescribed
\nentrance  fees for one or more Authorized Assistants upto  a
\nmaximum\t of  six,  they\t could not  have  the  benefit\tthus
\nconferred  upon such members.  Ordinarily, a member  has  to
\ntransact  business  in the precincts of the  Association  by
\nhimself or by his business partner if there is a firm ;\t but
\nif that member is a very busy person, and wishes to avail of
\nthe services of Authorized Assistants, he has to pay the the
\nprescribed  fee.   A  member of the  Association,  with\t the
\nadvantage of mutuality, so long as he transacts
\n469<\/span>
\nbusiness within the precincts of the Association, by himself
\nor by his partner in the case of a firm, is not required  to
\npay any such entrance fee but only the fee payable by  every
\nmember\tas  such.   The\t entrance  fee,\t thus,\tis   clearly
\nchargeable only from such of the members as avail themselves
\nof the benefit conferred by the rules of the Association  in
\nthat  behalf.  The entrance fee is, thus, a price  paid\t for
\nthe   services\tof  the\t Association  in   making   suitable
\narrangements for an absentee member to transact business  on
\nhis  behalf and in his name by his representative or  agent.
\nThe  entrance  fee  in question, therefore,  cannot  but  be
\nascribed   to\tthe  specific  services\t rendered   by\t the
\nAssociation  in\t respect of Authorized Assistants  who\tthus
\nbecome\tcompetent  to transact business on behalf  of  their
\nprincipal.\n<\/p>\n
Coming next to the sum of Rs. 15,687 which was realised from
\nthe  members  by  way of subscription in  respect  of  their
\nAuthorized Assistants, it is clear that this sum consists of
\nthe   contributions   severally\t  made\t by   the    members
\nperiodically,  so  as  to  continue  to\t have  the   benefit
\nconferred  by  the Association of having the  use  of  their
\nrepresentative\tor agent even during their  absence.   There
\ncannot\tbe the least doubt that this is a  very\t substantial
\nbenefit\t to those members who found it worth their while  to
\nengage\tthe services of Authorized Assistants.\tA member  is
\nnot obliged, as indicated above, to have such an  Assistant,
\nbut  the fact that he chooses to have such an  Assistant  on
\npayment\t of the prescribed fee or subscription,\t itself,  is
\nproof positive that a businessman, who ordinarily thinks  in
\nterms  of  money,  has\tfound it  worth-while  to  have\t the
\nservices of an Assistant by making an additional payment  to
\nthe  Association by way of recompense for the benefit,\tthus
\nconferred upon him.\n<\/p>\n
Lastly, the sum of Rs. 16,000 represents fees received\tfrom
\nmembers\t for  allowing their application for  enlisting\t the
\nnames  of companies not already on the Quotations  List,  so
\nthat the shares and stocks of these companies, may be placed
\non  the Stock Market.  As already indicated, it is  not\t the
\ncompany\t concerned which has directly to pay this  fee,\t but
\nthe fee has to
\n470<\/span>
\nbe  paid  by  the member who  initiates\t the  proposal\tand,
\napparently, finds it worth his while to pay that  prescribed
\nfee  to\t the  Association.  He would not  make\tthe  payment
\nunless he found it worth his while to do so Apparently, such
\na member is interested in placing the stocks of that company
\non  the market.\t It cannot, therefore, be denied  that\tthat
\nsum of money is definitely related to the specific  services
\nperformed by the Association, namely, to permit transactions
\nin  respect  of the shares of the company  concerned,  which
\nservices would not otherwise be available to the members  as
\na body or to the individual member or members interested  in
\nthat company.\n<\/p>\n
In our opinion, therefore, each one of the three sources  of
\nincome\tto the Association, accrues to it on account of\t its
\nperforming  those specific services in accordance  with\t its
\nrules  and by laws.  Each one of the three distinct  sources
\nof revenue to the Association, is specifically\tattributable
\nto  the distinct services performed by the  Association\t for
\nits  members  or such of them as avail themselves  of  those
\nbenefits.   And\t each one of those  services  is  separately
\ncharged for, according to the rate or schedule laid down  by
\nthe  rules and by-laws of the Association.  In our  opinion,
\ntherefore,  the\t requirements of sub-s. (6) of s.  10,\thave
\nbeen fulfilled in the present case.\n<\/p>\n
But  we have yet to deal with the last argument accepted  by
\nthe High Court, with reference to the terms of sub-s. (6) of
\ns. 10, namely, that the services contemplated therein,\thave
\nreference to ” matters outside the mutual dealings for which
\nthe  Association was formed “. In the first place, there  is
\nno warrant for limiting the application of the words used by
\nthe  legislature,  in  the  way\t suggested.   Secondly,\t the
\nmutuality  of the Association extends only to such  benefits
\nas accrue to every member on the payment made by him to\t the
\nAssociation, but even if additional items of payment have to
\nbe  made  for  additional services to be  performed  by\t the
\nAssociation only for such of the members as avail themselves
\nof  those  benefits, it cannot be said\tthat  the  mutuality
\nextends\t to those additional benefits also.  It is,  in\t our
\nopinion,
\n471<\/span>
\nequally\t wrong\tto  suggest that the  services\tin  question
\nshould have been outside the objects of the Association.  If
\nthe  Association renders services to such of its members  as
\navail  themselves  of such services as are  not\t within\t the
\nscope  of the business activities of the Association,  those
\nbenefits, if any, would not be’ conferred by the Association
\nas such, because the Association has to function within\t the
\nscope of its objects of incorporation.\n<\/p>\n
Hence, on a true construction of the provisions of the\tsub-
\nsection in question, we have come to the conclusion that the
\nfacts and circumstances of the present case, bring the three
\nitems  of  income  of  the  Association\t within\t the  taxing
\nstatute.   In our opinion, the decision of the Bench of\t the
\nBombay\tHigh Court, consisting of Stone, C. J.,\t and  Kania,
\nJ., (as he then was), in the case of Native Share and  Stock
\nBrokers’  Association  v.  Commissioner\t of  Income-tax\t  is
\ncorrect,  and  the facts of that case run very\tparallel  to
\nthose  of  the\tcase  in band, though  there  may  be  minor
\ndifferences in the rules and by-laws of the Association then
\nbefore\tthe  Bombay  High Court.  In that case,\t as  in\t the
\npresent\t one,  the rules of the Stock  Brokers’\t Association
\n(the  Bombay Stock Exchange) contemplated a definite  scheme
\nfor allowing members to employ authorized clerks and for the
\nadmission, conduct, control and supervision of those clerks,
\nfor the benefit primarily of the members who employed  them.
\nIt  was held by the High Court that the income\treceived  by
\nthe  Association  by  way  of  fees  in\t respect  of   those
\nauthorized clerks, was within the taxing statute and  liable
\nto income-tax.\tAfter examining in detail the provisions  of
\nthe rules and the by-laws of the Association, Stone, C.\t J.,
\nmade the following observations which are equally applicable
\nto  the rules and by-laws of the Association in the  present
\ncase :-\n<\/p>\n
” In my judgment these rules lay down a definite scheme\t and
\nprovide an organised arrangement, controlled and  supervised
\nby  the Association for the benefit of its members.   In  my
\nopinion the carrying
\n(1)  [1946] 14 I.T.R. 628.\n<\/p>\n
472<\/span><\/p>\n
of  their scheme into effect is performing services for\t its
\nmembers\t by  the Association.  No doubt the benefit  of\t the
\nscheme would redound to the benefit of all members since all
\nwould\thave  the  advantage  of   disciplined\t supervision
\nexercised  over the authorised clerks and remisiers  of\t the
\nothers.\t  I  do not think that because the payment  for\t the
\ncarrying  of the scheme is provided for only by members\t who
\navail  themselves  of the use of the  authorised  clerks  it
\nmakes any difference.”\n<\/p>\n
Kania,\tJ., (as he then was), in a separate  but  concurring
\njudgment, made the following very pertinent observations:-
\n” A perusal of the rules referred to in the judgment of\t the
\nlearned\t  Chief\t Justice  shows\t that  the  institution\t  of
\nauthorised clerks exists for the benefits only of those\t who
\npay  remuneration of Rs. 100 instead of going to the  market
\nand  carrying  on  their  business  themselves.\t  Individual
\nmembers\t are permitted to work through an agent.   For\tthat
\nthe  charge is made.  The rules provide for the\t application
\nand grant for such permission, registration of the authoris-
\ned  clerks on the individuals being recognised as clerks  of
\nparticular members, supervision over the work of such clerks
\nand particularly to prevent them from registering  contracts
\neither\tin their own name or in the name of another  member;
\nand  a\tgeneral\t supervision over their\t good  behaviour  is
\ncontemplated…………”.\n<\/p>\n
A  question  was  raised as to whether\tthese  are  specific
\nservices  to be performed for particular members or  whether
\nthe rules amount to performance of duties towards members in
\ngeneral.   It  is true that several of the  services  to  be
\nrendered  may  be  helpful to the other\t members  for  their
\nbusiness.  Taken as a whole I consider that as a performance
\nof  services by the Association for, the benefit of  members
\nwho pay the remuneration.”\n<\/p>\n
We  have made these copious quotations from the judgment  of
\nthe Bombay High Court, because, in our
\n473<\/span>
\nopinion, they truly apply the provisions of sub-s. (6) of s.
\n10 to associations like the one before us.\n<\/p>\n
The  other  case  to  which  our  attention  was  drawn,  is
\nCommissioner of Income-tax v. Chamber of Commerce,  Alleppey<\/a>
\n(1).  The facts of that case are not similar to those of the
\ncase  before  us, but the ratio decidendi of that  case\t are
\nrelevant.   That  case referred to the Alleppey\t Chamber  of
\nCommerce.   The Chamber inaugurated a produce  section\twith
\nthe  object  of\t promoting the\tinterests  of  merchants  in
\ngeneral,  and  of  those engaged in the\t produce  trade,  in
\nparticular,  of\t acting as arbitrators\tand  collecting\t and
\npublishing  information\t relating  to  the  produce   trade.
\nMembers\t were admitted to the produce section on payment  of
\nadmission  fees, monthly fees and contributions\t at  certain
\nprescribed  rates.  The question which was referred  to\t the
\nHigh  Court,  was whether the receipts by way  of  fees\t and
\ncontributions,\tcould  be chargeable under s. 10(6)  of\t the
\nAct, and it was answered in the affirmative.
\nThough\tcases  in  England,  by way  of\t precedent  for\t the
\ndecision  of  the case in hand, have not been cited  at\t the
\nBar, apparently because the scheme of the Income-tax law  in
\nEngland is different and the words of the statute are not in
\nparti  material\t yet there are some cases which\t throw\tsome
\nlight  on the controversy before us.  For example, the\tcase
\nof The Carlisle and Silloth Golf Club v. Smith (Surveyor  of
\nTaxes)\t (2  )\trelated\t to  a\tgolf  club  which  was\t not
\nincorporated.\tIt was admittedly a bonafide members’  club,
\nbut  under  one of the terms of its lease, it had  to  admit
\nnon-members to play on its course on payment of ” green fees
\n” at certain prescribed rates.\tThose fees were paid by\t non\n<\/p>\n
-members.   Receipts  from those fees were  entered  in\t the
\ngeneral accounts of the Club, thus, showing an annual excess
\nof receipts over expenditure of the Club as a whole.  It was
\nheld  by  Hamilton,  J., (as he then  was),  that  the\tClub
\ncarried\t on  a concern or business in respect  of  which  it
\nreceived  remuneration which was assessable to\t‘income-tax.
\nHe pointed out that the
\n(1)  [1955] 27 I.T.R. 535.\n<\/p>\n
(2) (1912) 6 Tax Cas. 48.\n<\/p>\n
60<\/span>
\n474<\/span><\/p>\n
receipts  from non-members went to augment the funds of\t the
\nClub,  and  the revenue thus received was  applied  for\t the
\npurposes  of the Club-towards its general expenditure.\t The
\ncase  was taken up to the Court of Appeal, and the  decision
\nof that Court is reported in the same Volume at p. 198.\t The
\nCourt  of  appeal affirmed the decision\t and  dismissed\t the
\nappeal.\n<\/p>\n
The  Judgment of the King’s Bench Division in The  Liverpool
\nCorn Trade Association, Limited v. Monks (H. M. Inspector of
\nTaxes) (1) was based on facts which are similar to the facts
\nof the present case.  In that case, the Liverpool Corn Trade
\nAssociation,  Limited,\twas an incorporated body  under\t the
\nCompanies  Act, with the object, inter alia,  of  protecting
\nthe interests of the corn trade, and of providing a clearing
\nhouse,\ta  market, an exchange, and  arbitration  and  other
\nfacilities to the trade.  Membership of the Association\t was
\nconfined to persons engaged in the corn trade.\tEach  member
\nwas  required to have one share in the company, and  had  to
\npay an entrance fee and an annual subscription.\t Non-members
\ncould  also become subscribers.\t Payments were made  to\t the
\nAssociation  by\t members and others  for  services  rendered
\nthrough the clearing house, etc.  The assessee was taxed  on
\nthe  excess of its receipts over expenditure.  On appeal  to
\nthe Special Commissioners, they upheld the assessment.\t One
\nof  the points raised before the Special Commissioners,\t was
\nthat  transactions  with its members were mutual  ones,\t and
\nthat  any surplus arising from such transactions, was not  a
\nprofit assessable to -income-tax.  On appeal, the High Court
\nagreed with the determination of the Special  Commissioners,
\nand  held  that any profit arising  from  the  Association’s
\ntransactions  with members, was assessable to income tax  as
\npart  of the profits of its business, and that the  entrance
\nfees  and  subscriptions  received  from  members  must\t  be
\nincluded in the computation of such profits.
\nIt was suggested that the service in this case, if any,\t was
\nextremely  trivial and the remuneration which was large\t was
\nfor that reason not definitely related to the
\n(1)  (1926) Tax Cas. 442.\n<\/p>\n
475<\/span><\/p>\n
service.   It  was held by Upjohn, J., in Bradbury  (H.\t  M.
\nInspector  of  Taxes) v. Arnold (1) that the extent  of\t the
\nservices  was  of no materiality.  There, the  question\t was
\nbeing dealt with under Case VI of Schedule D of the  Income-
\ntax Act, 1918.\tThe learned Judge observed :
\n”  There is no doubt that a contract for services  may,\t and
\nclearly does, form a matter for assessment under Case VI  of
\nSchedule  D,  and not the less so that the  services  to  be
\nrendered  are trivial or that they are to be  rendered\tonce
\nand  for all so that the remuneration may be regarded  as  a
\ncasual\tprofit\tarising,  out  of  a  single  and   isolated
\ntransaction”.\n<\/p>\n
The  same  view\t was expressed by  Harman,  J.,\t in  Housden
\n(Inspector of Taxes) v. Marshall (2).  In that case, a well-
\nknown  jockey ‘contracted with a newspaper company  to\tmake
\navailable  to  its nominee ” reminiscences of his  life\t and
\nexperiences on the turf for the purpose of writing a  series
\nof  four  articles  “, and  to\tprovide\t photographs,  press
\ncuttings,  etc.\t  He was paid pound 750.  The  question\t was
\nwhether this amounted to sale of property, or was a  payment
\nfor services rendered.\tIt was held that it was the  latter,
\nand  that  it  did not matter if the  service  rendered\t was
\ntrivial.\n<\/p>\n
In  view of what we have said above as to the nature of\t the
\nservice\t which the Association performed in respect  of\t the
\nAssistants, the payment of the fee was definitely related to
\nthat  service.\tIt is, therefore, plain that the  case\tfell
\nwithin\ts.  10(6) of the Act.  It must, therefore,  be\theld
\nthat  the  question referred to the High Court\tshould\thave
\nbeen  answered in the affirmative, and that the\t High  Court
\nwas in error in giving its opinion to the contrary.
\nThe appeal must, accordingly, be allowed with costs here and
\nbelow.\n<\/p>\n
(1) [1957] 37 Tax Cas. 665, 669.\n<\/p>\n
Appeal allowed.\n<\/p>\n
(2)  [1958] 3 All E.R. 639.\n<\/p>\n
476<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India The Commissioner Of Income-Tax, … vs The Calcutta Stock Exchange … on 26 March, 1959 Equivalent citations: 1959 AIR 763, 1959 SCR Supl. (2) 459 Author: B P Sinha Bench: Sinha, Bhuvneshwar P. PETITIONER: THE COMMISSIONER OF INCOME-TAX, WEST BENGAL Vs. RESPONDENT: THE CALCUTTA STOCK EXCHANGE ASSOCIATION LTD. DATE OF JUDGMENT: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-90335","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nThe Commissioner Of Income-Tax, ... vs The Calcutta Stock Exchange ... on 26 March, 1959 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/the-commissioner-of-income-tax-vs-the-calcutta-stock-exchange-on-26-march-1959-2\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Commissioner Of Income-Tax, ... vs The Calcutta Stock Exchange ... on 26 March, 1959 - 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