National Labour Federation Cooperative of India Ltd, v. DIT(E),

ITA 1143/DEL/2008 | 2005-2006
Pronouncement Date: 05-02-2010 | Result: Dismissed

Appeal Details

RSA Number 114320114 RSA 2008
Assessee PAN NTACT1980N
Bench Delhi
Appeal Number ITA 1143/DEL/2008
Duration Of Justice 1 year(s) 10 month(s) 4 day(s)
Appellant National Labour Federation Cooperative of India Ltd,
Respondent DIT(E),
Appeal Type Income Tax Appeal
Pronouncement Date 05-02-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 05-02-2010
Date Of Final Hearing 28-01-2010
Next Hearing Date 28-01-2010
Assessment Year 2005-2006
Appeal Filed On 31-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `F : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI B.P. JAIN ACCOUNTANT MEMBER I.T.A. NO.1143/DEL/2008 ASSESSMENT YEAR : 2005-06 NATIONAL LABOUR FEDERATION DIRECTOR OF INCOME-TA X COOPERATIVE OF INDIA LTD. VS. (EXEMPTION) DELHI. PLOT NO.11 INSTITUTIONAL AREA SARITA VIHAR NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.N. PRASAD AR. RESPONDENT BY : SHRI H.K. LAL SR. DR. O R D E R PER B.P. JAIN ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED DIRECTOR OF INCOME-TAX (EXEMPTION) DELHI DATED 28 TH SEPTEMBER 2007 UNDER SECTION 12AA(1)(B) READ WITH SECTION 12A OF T HE INCOME-TAX ACT 1961 (THE ACT) PERTAINING TO THE ASSESSMENT YEAR 20 05-06. 2. THE ASSESSEE HAS ALSO FILED THE APPLICATION FOR CONDONATION OF DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL. THE ORDER O F THE DIRECTOR OF INCOME- TAX (EXEMPTION) WAS SERVED ON THE ASSESSEE ON 16.10 .2007 AND THE APPEAL BEFORE THE TRIBUNAL HAS BEEN FILED ON 31.03.2008. THE ASSESSEE HAS SUBMITTED IN THE APPLICATION FOR CONDONATION OF DEL AY AS UNDER:- 2 2) THAT THE APPELLANT IS A REGISTERED MULTI-STATE CO-OPERATIVE SOCIETY. THEY ARE HAVING BOARD OF DIRECTORS WHO AR E GOVERNING THE SAID SOCIETY UNDER THE PROVISION OF T HE MULTI- STATE CO-OPERATIVE SOCIETY ACT 2002. THERE OBJECT AND FUNCTIONING NOT CONFINED TO ONE STATE AND SERVING T HE INTERESTS OF MEMBERS IN MORE THAN ONE STATE TO FACILITATE TH E VOLUNTARY FORMATION AND DEMOCRATIC FUNCTIONING OF CO-OPERATIV E AS PEOPLES INSTITUTIONS BASED ON SELF HELP AND MUTUAL AID AND ENABLE THEM TO PROMOTE THEIR ECONOMIC AND SOCIAL BE TTERMENT WITHIN AUTONOMY INCIDENTAL THERETO. 3) THUS AS SAID ABOVE APPELLANT ARE BUSY IN SOCIAL AND CHARITABLE ACTIVITIES MOREOVER MEMBER OF THE BOARD OF DIRECTORS ARE ALSO BUSY TO CONDUCT AND FULFILL THE ABOVE SAID SOCIAL WORK IN DIFFERENT STATES. 4) THAT THEREFORE TILL THE MEMBERS GOVERNING BODY /BOARD OF DIRECTORS DOES NOT GET-TOGETHER AND RESOLVE TO MAK E APPEAL AGAINST IMPUGNED ORDER AND PASS THE RESOLUTION OF T HE SAME AND AUTHORIZED SOME BODY TO LOOK AFTER THIS CASE IT CA NNOT BE DECIDED BY ANY ONE MEMBER. HENCE THE FILING OF APP EAL BEEN DELAYED AND FALL UNDER THE LIMITATION ACT. 5) THAT DUE TO THE ABOVE CIRCUMSTANCES THE DELAY CAUSED IN FILING THIS APPEAL IS AS APPELLANT ARE BUSY IN SOCI AL WORK WHICH IS NEITHER INTENTIONALLY NOR BY NEGLIGENCE. 6) THAT THE APPEAL IS UNDER MERIT AND FOR THE SAKE OF BREVITY BALANCE ARE BEEN PART AND PARCEL TO THE APPEAL. TH US IF THE APPEAL IS NOT ADMITTED ONLY ON THE GROUND OF LIMITA TION THE MERIT OF THE APPEAL WILL SUFFER IRREPARABLE LOSS. 7) THAT FOR THE SAKE OF NATURAL JUSTICE THE ABOVE D ELAY IN FILING THE APPEAL MAY PLEASE BE CONDONE. THE LEARNED DR SHRI H.K. LAL OPPOSED THE SAID CONDO NATION. 3. WE HAVE HEARD THE PARTIES. THERE APPEARS TO BE A SUFFICIENT CAUSE FOR DELAY IN FILING THE APPEAL AS ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE 3 SHRI S.N. PRASAD THAT THE MEMBERS OF THE GOVERNING BODY ARE FROM DIFFERENT STATES AND THEY HAVE TO PASS THE RESOLUTION. THOUG H NO CORRESPONDENCE TO THE SAID PLEADINGS WERE PLACED ON RECORD BUT IN THE INTEREST OF JUSTICE WE FEEL PROPER TO CONDONE SAID DELAY IN FILING THE APPEAL. 4. THE ASSESSEE HAS FILED THE CONCISE GROUNDS OF AP PEAL WHICH HAVE BEEN TAKEN ON RECORD AND READ AS UNDER:- 1. THAT THE LD. DIRECTOR INCOME TAX (E) HAS ERRED IN LAW AS WELL AS ON FACTS IN REJECTING THE APPLICATION UNDER SECTION 12AA OF THE IT ACT FOR GRANT OF REGISTRATION. A. BECAUSE INCOME OF THE SOCIETY IS NOT WHOLLY USED FO R THE ACTIVITIES OF THE SOCIETY BUT WAS UTILIZED FOR PAYM ENT OF DIVIDEND. HE HAS FAILED TO NOTICE THAT NO DIVIDEND HAS BEEN PAID BY THE SOCIETY TO ITS MEMBERS. B. BECAUSE OF WRONGLY INTERPRETING THE OBJECT OF THE S OCIETY AS NOT BEING CHARITABLE IN NATURE. 2. THAT THE ORDER PASSED BY THE DIT(E) IS BAD IN LA W BEING PASSED WITHOUT APPLICATION OF MIND. 5. BRIEF FACTS OF THE CASE AS EMERGED FROM THE ORDE R OF THE DIRECTOR OF INCOME-TAX (EXEMPTION) AT PAGES 1 TO 3 IN PARA 3 TO 5 ARE AS UNDER:- 3. I HAVE CONSIDERED THE DETAILS FURNISHED BY THE APPLICANT AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE APPLICANT IS A MULTI STATE COOPERATIVE SOCIETY AND IT WAS REGISTER ED UNDER THE MULTI UNIT COOPERATIVE SOCIETIES ACT 1942 AS NATIO NAL FEDERATION OF LABOUR COOPERATIVE LTD. ON 12-11-1981 AS PER THE CERTIFICATE OF THE REGISTRATION ISSUED BY THE CENTR AL REGISTRAR OF COOPERATIVE SOCIETIES. LATER ON UNDER THE MULTI S TATE COOPERATIVE SOCIETIES ACT 2002 THE NAME OF THE AP PLICANT SOCIETY WAS CHANGED TO NATIONAL LABOUR COOPERATIVE FEDERATION 4 OF INDIA LTD. W.E.F. 5-7-2004. AS REGARDS THE FUNCTIONING/OBJECTS OF THE APPLICANT SOCIETY THE B YE LAWS CONTAINING OBJECTS ARE REPRODUCED HEREUNDER:- BY LAWS: OBJECTS:- (II) TO PROMOTE THE ECONOMIC INTEREST OF ITS MEMBER S INCLUDING THEIR AFFILIATED SOCIETIES VIS--VIS NATIONAL FEDER ATION TO OBTAIN WORK FROM WORK AWARDING AGENCIES AND EXECUTING THRO UGH LABOUR COOPERATIVES TO IMPROVE THE FINANCIAL POSIT ION OF NATIONAL FEDERATION AND TO PROVIDE THE REGULAR WORK TO MEMBER LABOUR COOPERATIVES ROUND THE YEAR. (IV) TO ASSIST IN MARKETING IMPORT OR EXPORT AND C ARRY ON AGENCY BUSINESS OR EVERY KIND TO PRODUCE STORE AND DISTRIBUTE MATERIAL REQUIRED OR MANUFACTURED BY THE MEMBER SOC IETIES AND/OR THEIR AFFILIATED UNITS. SHARE CAPITAL: (1) SHARE CERTIFICATE EVERY SOCIETY ADMITTED AS MEMBER SHALL BE ENTITLED TO RECEIVE A SHARE CERTIFICATE GRATIS STATING THE NUMBER OF SHAR ES AND THEIR DISTINCTIVE NUMBERS. THE SHARE CERTIFICATES SHALL BE SIGNED BY THE CHAIRMAN OR ANY DIRECTOR. DULY AUTHORIZED AND THE MANAGING DIRECTOR. THE SHARE CERTIFICATE SHALL BEA R THE SEAL OF NATIONAL FEDERATION. (3) LIEN OF SHARES DIVIDENDS AND DEPOSITS THE NATIONAL FEDERATION SHALL HAVE THE FIRST AND PA RAMOUNT LIEN OR CHARGE UPON ALL THE SHARES DIVIDENDS AND DEPOSI TS OF ANY MEMBER OR PAST MEMBER FOR ALL MONEYS DUE FROM HIM T O THE SOCIETY FROM TIME TO TIME. THE SOCIETY MAY AT ANY TIME SET OFF ANY SUM CREDITED BY OR PAYABLE TO THE MEMBER OR PAS T MEMBER TOWARDS PAYMENT OF ANY LIABILITY OF SUCH MEMBER AS PAST MEMBER. 5 14(F) POWER & FUNCTIONS OF THE BOARD OF DIRECTORS: (XIII) TO RECOMMENDED TO THE GENERAL BODY DISTRIBUT ION OF PROFITS; 4. IN VIEW OF THE ABOVE IT IS VERY MUCH APPARENT T HAT THE INCOME OF THE APPLICANT SOCIETY IS NOT WHOLLY USED FOR THE ACTIVITIES OF THE APPLICANT SOCIETY AND THE SAME IS BEING UTILIZED FOR PAYMENT OF DIVIDEND. MOREOVER SOME OF THE OBJ ECTS OF THE APPLICANT ARE ALSO COMMERCIAL IN NATURE. 5. IN ORDER TO BE ELIGIBLE FOR REGISTRATION U/S 12A A OF THE I.T. ACT 1961 THE FOLLOWING CONDITIONS MUST BE SAT ISFIED: (I) THE OBJECTS OF THE SOCIETY SHOULD BE OF CHARIT ABLE IN NATURE; (II) THE ACTIVITIES OF THE SOCIETY SHOULD BE GENUIN E. IN VIEW OF THE ABOVE DISCUSSIONS THE OBJECTS OF TH E APPLICANT SOCIETY CANNOT BE HELD TO BE CHARITABLE IN NATURE. THEREFORE ONE OF THE CONDITIONS FOR GRANT OF REGISTRATION U/S 12AA IS NOT SATISFIED. THEREFORE I DECLINE TO GRANT REGISTRAT ION U/S 12AA TO THE APPLICANT AND THE APPLICATION FILED BY THE APPL ICANT FOR GRANT OF REGISTRATION U/S 12AA IS REJECTED. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT TH E ACTIVITIES OF THE SOCIETY ARE FOR CHARITABLE PURPOSE AND THEREFORE EVEN IF T HE DIVIDEND IS DISTRIBUTED REGISTRATION UNDER SECTION 12AA OF THE AC T CANNOT BE DENIED. HE RELIED UPON THE DECISION OF HONBLE HIGH COURT IN THE CASE OF UP FOREST CORPORATION 129 TAXMAN 526 IN THIS REGARD WHEREAS THE LEARNED DR RELIED UPON THE ORDER OF THE LEARNED DIRECTOR OF INCOME-TA X (EXEMPTION). 6. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERI AL AVAILABLE ON RECORD. AS PER THE OBJECTS OF THE SOCIETY AS OBSER VED BY THE DIRECTOR OF 6 INCOME-TAX (EXEMPTION) THE INCOME OF THE SOCIETY I S NOT WHOLLY USED FOR THE ACTIVITIES FOR THE CHARITABLE PURPOSE AND THE SAME IS BEING UTILIZED FOR THE PURPOSE OF MAKING DIVIDEND AND SOME OF THE OBJECTS ARE ALSO COMMERCIAL IN NATURE. OUR ATTENTION WAS INVITED TO PARA 25 OF TH E BYE LAWS WHICH READS AS UNDER:- 25. UTILIZATION OF NET PROFIT: THE BALANCE OF THE NET PROFIT MAY BE UTILIZED FOR ALL OR ANY OF THE FOLLOWING PURPOSE:- A) PAYMENT OF DIVIDEND TO MEMBERS ON THEIR PAID UP CAPITAL AT THE RATE OR 2%; B) ANY OTHER PRIVILEGES TO MEMBERS IF ANY AS SPECI FIED IN THE BYE-LAWS; C) CONTRIBUTION TO THE EDUCATION FUND AT THE RATE O F 5% OR MORE AND NOT EXCEEDING 10%. THE FUND MAY BE UTILIZ ED FOR THE EDUCATION AND TRAINING OF MEMBERS DIRECTOR S AND EMPLOYEES AS APPROVED BY THE BOARD OF DIRECTORS; D) DONATION FOR THE DEVELOPMENT OF THE COOPERATIVE MOVEMENT OR CHARITABLE PURPOSE AS DEFINED IS SECTIO N 2 OF THE CHARITABLE ENDOWMENT ACT 1980 NOT EXCEEDING 5%. E) PAYMENT OF EX-GRATIA AMOUNT TO EMPLOYEES AS APPROVED BY THE BOARD OF DIRECTORS; F) THE REMAINING UN-DISBURSED PROFIT SHALL BE ADDED TO RESERVE FUND. HAVING EXAMINED THE MATERIAL ON RECORD IT IS EVIDE NT THAT THE OBJECT AND THE APPLICATION OF THE UTILIZATION OF THE RECEIPTS OF T HE ASSESSEE ARE NOT IN 7 CONSONANCE WITH THE SCOPE AND OBJECT DEFINED UNDER THE PROVISIONS OF SECTION 2(15) OF THE ACT FOR WHICH THE ASSESSEE IS NEITHER COVERED IN THE RESIDUARY CLAUSE NAMELY `OBJECT OF GENERAL PUBLIC U TILITY. SECTION 2(15) OF THE ACT IS EXTRACTED HEREIN:- 2(15) CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR EDUCATION MEDICAL RELIEF AND THE ADVANCEMENT OF A NY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS OR ANY ACTIVITY OF REN DERING ANY SERVICE IN RELATION TO ANY TRADE COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION O R RETENTION OF THE INCOME FROM SUCH ACTIVITY. THE AFORESAID EVIDENCES THAT DISTRIBUTION OF THE DI VIDEND THOUGH TO THE MEMBERS CANNOT BY ANY STRETCH OF IMAGINATION BE COV ERED TO STATE THE SAME TO BE CHARITABLE. 7. IT IS THE CONTENTION OF LD. AR THAT WHILE GRANTI NG THE REGISTRATION THE ISSUE WHICH CAN BE EXAMINED IS ONLY WITH RESPECT TO OBJECTS OF THE INSTITUTION AND IF THEY ARE CHARITABLE IN NATURE THEN REGISTR ATION CANNOT BE REFUSED AS THE APPLICATION OF INCOME CAN BE EXAMINED WHILE VERIFYI NG THE CLAIM OF THE ASSESSEE REGARDING GRANT OF EXEMPTION. THUS HE PL EADED THAT EXISTENCE OF DIVIDEND DISBURSEMENT CLAUSE IN THE MEMORANDUM HAS NO RELEVANCE TO DECIDE THE ISSUE REGARDING REGISTRATION TO BE GRANT ED TO THE ASSESSEE. 8 HOWEVER WE FIND NO SUBSTANCE IN SUCH CONTENTION OF LD. AR. WHILE GRANTING REGISTRATION U/S 12A AS PER PROVISIONS OF SECTION 12AA THE COMMISSIONER IS ENTITLED TO CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDE R TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR I NSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THI S BEHALF AND AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST O R INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES HE WILL PASS AN ORDE R IN WRITING EITHER REGISTERING THE SAID TRUST OR INSTITUTION OR IF HE IS NOT SATISFIED THEN PASS AN ORDER IN WRITING REFUSING THE REGISTRATION TO THE T RUST. THE INSTITUTIONS WHICH ARE ENTITLED TO GET EXEMPTION AS SPECIFIED IN SECTI ON 11 (1) ARE THE INSTITUTIONS WHICH ARE WHOLLY FOR CHARITABLE AND RE LIGIOUS PURPOSE. UNLESS AN INSTITUTION IS ESTABLISHED WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES SUCH INSTITUTION IS NOT ELIGIBLE FOR GRANT OF EXEMPTION AND CONSEQUENTLY IT CANNOT BE GIVEN REGISTRATION ALSO U/S 12A OF THE ACT. WHE REVER THERE IS A CLAUSE OF DISTRIBUTION OF PROFIT IN ANY MANNER IN THE DOCUMEN T THROUGH WHICH SUCH INSTITUTION IS ESTABLISHED THE INSTITUTION CANNOT BE SAID TO BE WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. THIS POSITION OF LAW HAS BEEN MADE VERY CLEAR BY THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF DELHI STOCK EXCHANGE ASSOCIATION LTD. VS. CIT 225 ITR 235 (SC) AND THE RELEVANT 9 OBSERVATIONS OF THEIR LORDSHIPS FROM THE SAID DECIS ION DESCRIBING THIS POSITION OF LAW ARE AS UNDER:- SHRI HARISH N. SALVE LEARNED SENIOR COUNSEL APPEA RING FOR THE ASSESSEE HAS URGED THAT THE NATURE OF THE ACTIVITIES OF THE ASSESSEE HAVE TO BE CONSIDERED AS A WHOLE. THE SUB MISSION IS THAT SINCE THE OBJECTS OF THE ASSESSEE HAVE BEEN FO UND TO BE OF GENERAL PUBLIC UTILITY AND THAT NO DIVIDEND HAS BEE N DECLARED BY THE ASSESSEE IT SHOULD BE HELD THAT THE INCOME DER IVED BY THE ASSESSEE IS FROM PROPERTIES HELD FOR CHARITABLE PUR POSES. LEARNED COUNSEL HAS PLACED RELIANCE ON THE LETTERS OF THE CENTRAL GOVERNMENT OBJECTING TO THE GIVING OF PRESENTS BY T HE ASSESSEE TO ITS MEMBERS AND ALSO ON THE DECISION OF THIS COU RT IN CIT V. ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION (19 86) 2 SCC 391. SHRI SALVE HAS ALSO SUBMITTED THAT THE EAR LIER DECISION OF THIS COURT IN DELHI STOCK EXCHANGE ASSOCIATION L TD.S CASE (1961) 41 ITR 495 RELATED TO THE PERIOD PRIOR TO 19 56 AND THAT THEREAFTER THE SECURITIES CONTRACTS (REGULATION) AC T 1956 HAS BEEN ENACTED AND THE ASSESSEE HAS BEEN RECOGNISED A S A STOCK EXCHANGE UNDER THE SAID ACT AND IS BEING TREATED AS A PUBLIC AUTHORITY AMENABLE TO THE JURISDICTION OF THIS COUR T AND THE HIGH COURT UNDER ARTICLES 32 AND 226 OF THE CONSTITUTION . IN ADDL. CIT V. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1980) 121 ITR 1 DECIDED BY A CONSTITU TION BENCH OF THIS COURT WHILE CONSTRUING THE DEFINITION OF T HE EXPRESSION CHARITABLE PURPOSES IN SECTION 2 (15) OF THE ACT THE FOLLOWING TEST LAID DOWN BY BEG J. (AS THE LEARNED CHIEF JUST ICE THEN WAS) IN SOLE TRUSTEE LOKA SHIKSHANA TRUST V. CIT (1975) 101 ITR 234 (SC) HAS BEEN APPROVED (AT PAGE 256) : DOES THE PURPOSE OF A TRUST RESTRICT SPENDING THE INCOME OF A PROFITABLE ACTIVITY EXCLUSIVELY OR PRIMARILY UPON WHAT IS CHARITY IN LAW. IF THE PROFITS MUST NECESSARILY FEED A CHARITABLE PURPOSE UNDER THE TERMS OF THE TRUST T HE MERE FACT THAT THE ACTIVITIES OF THE TRUST YIELD PR OFIT WILL NOT ALTER THE CHARITABLE CHARACTER OF THE TRUS T. 10 THE TEST NOW IS MORE CLEARLY THAN IN THE PAST THE GENUINENESS OF THE PURPOSE TESTED BY THE OBLIGATION CREATED TO SPEND THE MONEY EXCLUSIVELY OR ESSENTIALLY ON CHARITY. WHAT IS THEREFORE REQUIRED IS THAT THERE MUST B E AN OBLIGATION CREATED TO SPEND THE MONEY EXCLUSIVEL Y AND ESSENTIALLY ON CHARITY. IN THE PRESENT CASE AS FOU ND BY THE HIGH COURT AT THE RELEVANT PERIOD THERE WAS NO OBLIGATI ON THAT THE INCOME FROM THE PROPERTIES DERIVED BY THE ASSESSEE WAS TO BE EXCLUSIVELY USED FOR CHARITABLE PURPOSES IT WAS PE RMISSIBLE FOR THE ASSESSEE TO DISTRIBUTE THE WHOLE OR PART OF SUC H INCOME BY WAY OF DIVIDENDS AMONGST ITS SHAREHOLDERS. SUCH A P ROHIBITION WAS IMPOSED ONLY IN DECEMBER 1973 BY THE AMENDMEN T OF ARTICLE 103 (XIV) OF THE ARTICLES OF ASSOCIATION OF THE ASSESSEE. IN OTHER WORDS PRIOR TO THE SAID AMENDMENT INTRODUCED IN DECEMBER 1973 THE ASSESSEE WAS UNDER NO LEGAL OBLI GATION PROHIBITING IT FROM DISTRIBUTING THE INCOME DERIVED BY IT BY WAY OF DIVIDENDS AMONGST ITS SHAREHOLDERS. ON THE VIEW OF THE MATTER IT MUST BE HELD THAT THE HIGH COURT WAS RIG HT IN HOLDING THAT THE ASSESSEE COULD NOT CLAIM EXEMPTION UNDER S ECTION 11 READ WITH SECTION 2(15) OF THE ACT. 8. IN THE ABOVE CASE THE ASSESSEE WAS A LIMITED CO MPANY INCORPORATED IN 1947 WITH A VIEW TO ACQUIRE AND TAKE OVER A GOING C ONCERN THE ACTIVITIES FUNCTIONS AND BUSINESS OF THE DELHI STOCK AND SHARE EXCHANGE LTD. AND THE DELHI STOCK AND SHARE BROKERS ASSOCIATION LTD. THE OBJECT FOR WHICH THE ASSESSEE WAS ESTABLISHED WAS GENERAL THAT OF COND UCTING A STOCK EXCHANGE AND THAT TO PROMOTE AND RECALL THE BUSINESS IN STOC KS SHARES DEBENTURES AND OTHER SECURITIES TO FRAME THE RULES AND BY LAWS FOR REGULATING THE CONDITIONS SUBJECT TO WHICH BUSINESS IN STOCK EXCHANGE COULD B E TRANSACTED AND THE LIKE. THE ASSESSEE DERIVED INCOME BY WAY OF MEMBER SHIP FEE RENT FROM 11 PROPERTY AND INTEREST ON SECURITY. THE CLAIM OF TH E ASSESSEE FOR EXEMPTION U/S 11 WAS REJECTED BY THE AO. AFTER CONSIDERING TH E MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE ASSESSEE IT WAS FOU ND BY HONBLE SUPREME COURT THAT THE SURPLUS OF THE ASSESSEE COULD BE DIS TRIBUTED BETWEEN THE SHAREHOLDERS OR EMPLOYEES OR EVEN THEIR RELATIONS. THE TRIBUNAL WAS OF THE VIEW THAT AIMS AND OBJECTS OF THE TRUST MUST HAVE T O BE DETERMINED BY THE REFERENCE TO THE MANNER IN WHICH SURPLUS DERIVED FR OM THE ACTIVITY COULD BE DISPOSED OF AND THE ABSENCE OF ANY PROHIBITION FROM DIVIDEND TO THE SHAREHOLDERS AND SPECIFIC PROVISIONS FOR CREATING F UNDS FOR THE BENEFIT OF SHAREHOLDERS EMPLOYEES OR THEIR RELATION CLEARLY S HOWED THAT THE SURPLUS OF THE ACTIVITY CARRIED ON BY THE ASSESSEE WAS DEFINIT ELY FOR THE BENEFIT OF SHAREHOLDERS EMPLOYEES OR THEIR RELATIONS AND COUL D NOT BY ANY MANNER OR MEANS BE TREATED AS HELD FOR CHARITABLE PURPOSES. ACCORDING TO THE TRIBUNAL THE MERE FACT THAT NO DIVIDENDS WERE DECLARED OR TH E ASSESSEE DID NOT CARRY ON THE OBJECT OF THE GENERAL PUBLIC UTILITY DID NOT IN ANY MANNER ESTABLISH THE TRUST FOR USING THE INCOME FOR CHARITABLE PURPOSE I NASMUCH AS THE INCOME COULD BE USED FOR DISTRIBUTION AS DIVIDENDS OR FOR CREATING FUNDS FOR THE BENEFIT OF SHAREHOLDERS EMPLOYEES AND THEIR DEPEND ENTS AND IT WAS HELD BY HONBLE HIGH COURT THAT THE COMPANY HAVING NOT DIST RIBUTED ANY DIVIDEND WOULD NOT BE OF ANY HELP TO THE ASSESSEE AS THE REQ UIREMENT FOR THE PURPOSE 12 OF EXEMPTION IS NOT THE FACTUAL POSITION BUT WHETH ER IN LAW THE COMPANY IS UNDER AN OBLIGATION TO DEVOTE ITS PROFIT ONLY TO RE LIGIOUS OR CHARITABLE PURPOSES AND THUS THE HONBLE HIGH COURT AGREED W ITH THE FINDINGS OF THE TRIBUNAL WHICH HAS BEEN UPHELD BY THE HONBLE SUPRE ME COURT WITH THE ABOVE OBSERVATIONS WHICH SQUARELY APPLY TO THE CASE OF THE ASSESSEE. 9. IN THIS VIEW OF THE SITUATION THE CONTENTION RA ISED BY LD. AR IS REJECTED. THE EXISTENCE OF ENABLING CLAUSE TO DIST RIBUTE DIVIDEND DISENTITLE THE ASSESSEE TO HAVE THE BENEFIT OF REGISTRATION U/ S 12A OF THE ACT AND IT HAS SO RIGHTLY BEEN HELD BY LD. DIT (EXEMPTION). WE CO NFIRM HIS ORDER AND THE APPEAL FILED BY THE ASSESSEEE IS DISMISSED. 10. IN THE RESULT THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY 2010. SD/- SD/- (I.P. BANSAL) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 5TH FEBRUARY 2010. FIT FOR PUBLICATION SD/- SD/- JM AM 13 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.