Dipak Kumar Sen, J. - (1.) Calcutta Hydraulic Press Association, the assessee, was registered under the Indian Trade Unions Act, 1926, in or about April, 1952. The objects of the assessee as appearing in its rules and regulations are, inter alia, as follows : "The object of the association is to regulate relations between the members and their employees and between member and members and additionally the objects of the association are to include the following: (b) to impose restrictive conditions on the conduct of the trade; (c) to adjust and/or control the production and working of the jute press houses in the membership of the association ; (d) to secure by agreement advantageous terms from balers in relation to baling in jute press houses; (e) to protect the members of the association against competition; (f) to secure the enactment of legislation beneficial to the trade ; (g) to secure the repeal of any legislation or prevent the passing of legislation which is damaging or may in any way damage the trade ; (h) to collect, classify and circulate statistics ; (i) to adopt common forms of agreements ; (j) to establish funds for the purposes of the members and/or for the benefit of employees of the members ; (k) to assist or amalgamate with other associations or societies or federations of associations or societies, having for the objects or one of their objects the promotion of the interests of the jute trade ; (l) to do all such other lawful things as are incidental or conducive to the attainment of the above objects or any of them.
(2.) In the assessment year 1962-63, the relevant accounting periods being the year ending on the 31st December, 1961, in respect of its general fund and the year ending on the 30th June, 1961, in respect of its operating fund, the assessee filed a return showing a loss of Rs. 4,909. The assessee claimed that as a mutual association its income could not be charged to tax. The source of the income of the general fund being only the subscription of members the ITO accepted such claim of the assessee and did not take into account either the income or the expenditure relating to this fund in computing the taxable income of the assessee. But the ITO found that the sources of the operating fund were, (a) deductions from production agreements, and (b) interest and dividend from investments. The income from the first source was found to be derived by rendering a specific service to some of its members and as such chargeable to income-tax under Section 28(ii) of the I. T. Act, 1961. The income accruing to the operating fund from the other source, viz., interests from securities and dividend, were claimed by the assessee as exempt from income-tax under Section 10(24) of the I. T. Act, 1961. The ITO, however, held that, as the activities of the assessee did not relate to regulation of the relation of its members and their employees but were confined mainly to the protection and promotion of the trade interests of its members, it could not be said that the assessee was an association formed primarily for the purpose of regulating relations between workmen and workmen. As such the assessee's income from "interest on securities and dividend" was not exempt from tax as claimed and was chargeable to tax. The income of the assessee was assessed accordingly. Similar assessments were made in the assessment years 1963-64, 1964-65 and 1965-66.
(3.) Being aggrieved, the assessee preferred appeals from the said assessments. The AAC found that the assessee was registered under the Indian Trade Unions Act, 1926, and, construing its rules and regulations, concluded that the assessee had been constituted primarily for the purpose of regulating the relations between workmen and employers as also workmen and workmen, and that the other objects enumerated in the rules were only additional objects which may or may not be performed. He held that the provisions of Section 10(24) of the Act were attracted in the facts and that the income of the assessee from interest and dividend could not be included in the taxable income of the assessee. The appeals of the assessee were accordingly allowed.;