COMMISSIONER OF INCOME TAX Vs. COTTON TEXTILES EXPORT PROMOTION COUNCIL

JUDGEMENT

(1.) THE question of law that has been referred for our decision in this case is : "whether, on the facts and in the circumstances of the case, the assessee's income is exempt under section 4 (3) (i) of the Income-tax Act ?"

(2.) THE circumstances under which the question arises are briefly as follows : The assessee is the Cotton Textiles Export Promotion Council, which was registered as a company on the 4th October, 1954. The Government of India exempted the company from adding the word "limited" after it by virtue of a notification No. 29 (160)-CL/54 dated September 24, 1954, promulgated under their powers under section 26 of the Indian Companies Act.

(3.) THE reason for the exemption is found in the objects and purposes for which the Council was established. Its principal general object, as stated in its memorandum of association, so to be promote, support, protect, maintain and increase the export of cloth and yarn, but inter alia, it was a body which undertook many other activities with the idea, as its name implies, of promoting the export of cotton textiles from this country. With that end in view, among its several objects were the objects of undertaking market studies, sending out trade missions, collecting statistics and other information regarding the manufacture or trade in cloth and yarn in various countries, propagating information useful to that trade, laying down standards of quality and packing in respect of cloth and yarn, and so on. Under the licence granted to the council under section 26 it was provided that the conditions and provisions contained in its memorandum of association shall, in all respects, govern the Council. As regards its income its income and property, it was provided in clause (2) of the licence that "the income and property. . . . . . whensoever derived shall be applied solely towards the promotion of the objects of the association as set forth in its memorandum of association and that no portion thereof shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit. . . ", the remuneration to any of its officers or servants being excepted. It was also provided in the licence that the licence granted and the registration of the association shall cease on violation of any of the conditions thereof.