- (1.) The common question that falls for consideration in these appeals filed by the Delhi Stock Exchange Association Ltd. (hereinafter referred to as the assessee) is whether the assessee is entitled to claim exemption from payment of income tax under Section 11 of the Income Tax Act, 1961 (hereinafter referred to as the Act) for the reason that the income of the assessee was derived from property held under trust for charitable purposes. The appeals relate to assessment years covering the period prior to December 1973.
(2.) The assessee is a company limited by shares. It was incorporated in the year 1947 with a view to acquire and take over, as a going concern the activities, functions and business of the Delhi Stock and Share Exchange Limited and the Delhi Stock and Share Brokers Association Ltd. The object for which the assessee was established was generally that of conducting a Stock Exchange and thus to promote and regulate the business in stocks, share, debentures and other securities, to frame rules and bye-laws for regulating the conditions subject to which business on the Stock Exchange could be transacted and the like. The assessee derived income by way of membership fees, rent from property and interest on securities. The claim of the assessee for exemption under Section 11 of the Act was rejected by the Income Tax Officer and the Appellate Assistant Commissioner on appeal.
(3.) The Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal) also rejected the said claim. It held that the running of a Stock Exchange was an object of general public utility and that its objects did not cease to be charitable because some surplus was realised by the Stock Exchange by reason of its receipts from its members or because it derived income from property. The Tribunal was, however, of the view that the income of the assessee could not be said to have been derived from property held under trust wholly for religious or charitable purposes. The Tribunal has referred to the judgment of this Court in Delhi Stock Exchange Association Ltd. v. Commissioner of income Tax, 41 ITR 495 , wherein after considering the Memorandum and Articles of Association of the assessee, this Court had observed that the surplus of the assessee a could be distributed between the shareholders or employees or even their relations. The Tribunal was of the view that the aim and object of the trust has to be determined by reference to the manner in which the surplus derived from the activity could be disposed of and the absence of any prohibition for dividend to the shareholders and specific provision for creating funds for the benefit of shareholders, employees or their relations clearly showed that the surplus of the activity carried on by the assessee was definitely for the benefit of the shareholders, employees or their relations and could not by any manner or means to be treated as held for charitable purpose. According to the Tribunal, the mere fact that no dividends were declared or that the assessee did not carry on the object of general public utility did not in any manner establish the trust for using the income for charitable purpose inasmuch as the income could be used for distribution as dividends or for creating funds for the benefit of shareholders, employees and their dependents.;