M.S.MENON, J. -
(1.) THIS is a reference by the Tribunal, Madras 'B' Bench, on the application of the CIT, Mysore,
Travancore -Cochin and Coorg, Bangalore, the question referred being :
"Whether the sums of Rs. 22,621 and Rs. 14,972 are taxable under s. 10(6) of the Indian IT Act, for 1950 -51 and 1951 -52 assessment years respectively."
(2.) SEC . 10(6) of the Indian IT Act, 1922, provides : "A trade, professional or similar association performing specific services for its members for remuneration definitely related to those services
shall be deemed for the purpose of this section to carry on business in respect of those services,
and the profits and gains therefrom shall be liable to tax accordingly," and the contention of the
Alleppey Chamber of Commerce which found favour with the Tribunal, Madras 'B' Bench, was that
the two amounts in question do not form remuneration definitely related to specific services
performed and so cannot be taxed under the provisions of sub -s. (6) of s. 10 as was done in the
assessment order dt. 15th Sept., 1952, for the years 1950 -51 and 1951 -52. The order of the
Tribunal, Madras 'B' Bench, dt. 30th June, 1953, reads as follows :
''The assessee runs a produce exchange. It collects from its members certain sums of money based on the quantum of transactions passed through it. The Departmental authorities brought this income to tax on the ground that it came within the mischief of the provisions corresponding to s. 10(6) of the Indian IT Act. We are unable to discover any specific services rendered by the exchange in return for the collections made, except maintaining the status of an association and presenting a united front in its dealings with the outside world. No specific services appear to have been rendered by the produce exchange to its members. The only specific service rendered is in respect of arbitration for which a separate fee is charged. The learned advocate admitted that the receipts under the head are chargeable to income -tax. The general collection of so many pies per candy of pepper, etc., is only a general collection. Moreover s. 10(6) clearly lays down that there should be correlation between the remuneration and the services rendered. Such relationship is lacking in this case and therefore it cannot be brought to tax within the meaning of the above referred sub -section. This is supported by the unreported case of Seeds Traders' Association Ltd. vs. CIT (Referred Case No. 33 of 1952). The ITO should therefore delete from the assessments the general collections included in the assessments, already referred to above. 2. The appeals are allowed."
(3.) IT is admitted that only members of the Alleppey Chamber of Commerce can be members of the produce section and there is no dispute on the ground that the services performed are not
"services for its members." The only questions, therefore, that arise for consideration are :
(1) Can the contribution of six pies per candy on the total turnover of the monthly transactions be considered as "remuneration definitely related" to services performed by the Alleppey Chamber of Commerce; and
(2) Can those services be considered as "specific services" within the meaning of s. 10(6) of the Indian IT Act, 1922. The answer to the two questions will depend on the construction of the bye -laws and rules of the produce section which are appended as Annexure A to the order of reference dt. 18th Jan., 1954, Rules 3 and 5 of the rules in Annexure A are the relevant rules for answering question No. (1). They as well as rr. 4, 6 and 7 come under the general heading "membership fees" and read as follows :
"3. An Admission fee of Rs. 25 and a monthly fee of Rs. 5 shall be paid along with an advance of three months' fees before enrolment.
4. Subsequent monthly fees of Rs. 5 per mensem shall be paid by every member within a week of the receipt of the monthly bill and in any case before the end of the month for which the bill has been received.
5. In addition to the above fees, each member shall also contribute six pies per candy on the total turnover of his monthly transactions of either pepper, oil or copra.
6. Members who do not pay the monthly fees and contributions regularly every month are liable to be removed from the register of members by the Committee if such members fail to pay the dues when called upon to do so.
7. Membership fees and contributions due from any member who has a coupon deposit may be deducted from that deposit amount at the time of refund or withdrawal as the case may be."
4. On a reading of rr. 2 to 7 we entertain no doubts that the admission fee of Rs. 25, the monthly fee of Rs. 5 and the contribution under r. 5 all form part of the levy for the services rendered to the members of the produce section and should be considered as "remuneration definitely related to those services." The contention of the assessee that such is not the case is clearly unsustainable and has to be negatived.
The answer to question No. (2) will also depend on the construction of Anncxure A which is the only piece of evidence available in this case. The objects with which the produce section was
formed as given therein read as follows :
''(a) The main objects of the produce section are to promote, support and protect the character, status and interests of the merchants in general, and those engaged in produce trade in particular, to define the customs and usages of such trade, and to make rules and regulations, conducive to just and honourable practices therein, and to consider all questions affecting the interests of produce trade.
(b) to adjust controversies, to arbitrate upon and settle disputes of all kinds, to appoint arbitrators, umpires and experts, to make awards and decisions and generally to encourage and stimulate fair and honourable trading;
(c) to collect, print, publish and circulate statistics and other information relating to the produce trade, and to do all such things necessary or conducive to the promotion of produce trade." The rest of the provisions in Annexure A are only intended to effectuate those objects and detail the privileges and obligations of membership and the financial contributions to be made.