- (1.) THIS is a reference under section 66 (1) of the Indian Income-tax Act for the opinion of the Court on the following question: "whether in the facts and circumstances of this case and on a true construction of the Memorandum of Association of the assessee the income or any portion thereof was exempt from the levy of Income-tax under section 4 (3) (i) of tie Indian Income-tax Act?"
(2.) THE assesses is a society registered under the Societies Registration Act of 1860 on May 6, 1931. According to the statement of case it was getting subscription from persons belonging to the Kedia community scattered all over India. In addition thereto it had income from a house property which was assessed by the Income-tax Officer at Rs. 5,893/ -. The claim of the assessee that it was entitled to exemption under section 4 (3) (i) was negatived by the Income-tax Officer. In appeal to the Appellate Assistant Commissioner that order was varied and it was held that a part of the income from this house property was devoted to charitable objects only. As such a portion of the: income was exempt under section 4 (3) (i ). On a further appeal to the Income-Tax Appellate Tribunal this claim to partial exemption was over-ruled. According to the Tribunal whether the objects of the Society were charitable or not had to be gathered from the Memorandum of Association and if the Association or its Executive Committee was entitled to spend amounts under any of the clauses of the objects clause some of which were charitable in nature and others not the only conclusion to come to was that the institution was not solely for the purpose of charity. Unfortunately it is recorded in the statement of case; "that the income arising out of the said house property was to be spent amongst other activities of running dispensary, schools etc. in the village Ked in Rajasthan, from which place all the Kedias came". On a perusal of the Memorandum of Association this does not appear to be correct. The Tribunal did not think it necessary to go into the question as to whether the Kedia community could be taken to be a sufficient cross section of the public so as to merit exemption under section 4 (3) (i) in view of the various clauses given in the Memorandum of Association and although it appears prima facie that it would have been a serious objection if it had been pressed we do not think it necessary on the facts of the case to refer the matter back to the Tribunal for a finding on that point, namely, what was the meaning of the word "kedia community" as appearing in the Memorandum of Association.
(3.) BEFORE referring to the said Memorandum of Association it is necessary to refer to the Societies Registration Act under which the Association was registered. Under section 1 of this Act "any seven or more persons associated for any literary, scientific or charitable purpose or for any such purpose as is described under section 20 of the Act, may by subscribing their names to a Memorandum of Association and filing the same with the Registrar of Joint Stock Companies form themselves into a Society under this Act". Under section 2 of the Act "the Memorandum of Association shall contain the following things (that is to say), the name of the society the objects of the society the names, addresses, and occupations of the governors, council, directors, committee or other governing body to whom by the rules of this society, the management of its affairs is entrusted". Section 20 of the Act provides "that the following societies may be registered under this Act: Charitable societies, military orphan funds or societies established at the several Presidencies of India, societies established for the promotion of science, literature, or fine arts, for instruction, the diffusion of useful knowledge, the diffusion of political education, the foundation or maintenance of libraries or reading-rooms for general use among the members or open to the public, or public museums and galleries of painting and other works of art, collections of natural history, mechanical and philosophical inventions, instruments or designs.;