Decided on April 20,1947

Upper India Chamber Of Commerce, Cawnpore Appellant


- (1.) These are applications by the assessee under Section 66 (1) of the Income-tax Act to refer to the Court certain questions of law said to arise out of the orders of the Tribunal made in Regular Assessment Appeals Nos. 23 and 24 (U.P.) of 1940-41. Those appeals related to two consecutive assessment years viz., 1938-39 and 1939-40, and as the questions arising for determination were identical, were dealt with together. As the points involved in these references are also common, it will be convenient to consolidate the two applications and dispose of them through a common statement of the case.
(2.) The facts of the matter are not in dispute and are in a narrow compass. The Upper India Chamber of Commerce, Cawnpore, is a company limited by guarantee registered under Section 26 of the Indian Companies Act. It would appear from the memorandum of association that the main object was to promote and protect the trade, commence and manufactures of the United Provinces of Agra and Oudh. Judging from this avowed purpose and other objects set out in article 3 of the memorandum it is plain that it was in essence a body brought into existence to safeguard the interests of the trade. Admittedly no share capital was laid out nor was any business to be transacted for the purpose of earning profit nor was it ever contemplated that any dividends should be distributed amongst its members. In fact at no time during the two accounting years in question, nor for that matter at any time, did the company engage in any business or trade activity. The institution was registered as a company almost exclusively for the purpose of limiting the liability of its members.
(3.) With reference to the assessment years 1938-39 and 1930-40 the Income-tax Officer, Cawnpore, assessed the Chamber as a company at the maximum rate applicable and further refused to take the expenditure side of the profit and loss account into consideration in computing the assessable income. The Income-tax Officer also took into account for the purpose of assessment the annual letting value of the entire house in which the offices of the Chamber are located even though one half of the premises were used for the office, the other half being occupied by the secretary as a residence. It was claimed on behalf of the Chamber that upon the facts of the case since the Chamber was not engaging in any business activity it should not be treated as a company for the purpose of assessment under the Income-tax Act that in the event of its being so regarded due allowance should be made for the admissible expenditure and with regard to the house property it was contended that with reference to the portion occupied by the office of the Chamber, proportionate deduction should be made. All these contentions were negatived both by the Income-tax Officer and by the Appellate Assistant Commissioner. On appeal before us we found ourselves in agreement with the findings of the Appellate Assistant Commissioner and rejected the appeals in to to respect of both the assessment years. The Chamber has now asked that the case be stated to the Court claiming that the following questions of law arise out of the order of the Tribunal:- (1) Whether in the circumstances set out in the application, the applicant Chamber can be regarded as a "company" for the purposes of income-tax; and (2) Whether a company admittedly not doing "business" can be taxed upon the annual value of that part of its property used for the purpose of its vocation.;

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