JUDGMENT

BHAGWATI, J. (for himself and on behalf of N.L. Untwalia and V.D. Tulzapurkar, JJ.) (Majority view):- These tax references have been made by the Tribunal directly to this Court under S. 257 of the Income-tax Act, 1961 (hereinafter referred to as the Act), since there is a conflict of opinion amongst different High Courts as to the interpretation of the words "not involving the carrying on of any activity for profit" occurring at the end of the definition of charitable purpose in cl. (15) of Sec. 2. Originally these references came up for hearing before a Bench of three Judges but having regard to the great importance of the question involved and the serious repercussions, which an adverse decision might have on a large number of public trust in the country, the Bench thought it desirable to refer the cases to a larger Bench and that is how these references have now come before us.

2. Though the references are six in number, they relate to the same assessee and raise the same question, only the assessment years being different. The assessee is the Surat Art Silk Cloth Manufactures Association, a company incorporated under the Indian Companies Act, 1913. The original Memorandum of Association set out the objects for which the assessee was incorporated, but we are not concerned with it since vital amendments were made in the Memorandum with effect from 14th July, 1961 at the time when the assessee was permitted under Section 25 of the Companies Act, 1956 to omit the word "limited" from its name by order of the Central Government and it is the amended Memorandum which governed the assessee during the relevant assessment years. The amended object, so far as material, were as follows:

(a) To promote commerce and trade in Art Silk Yarn, Raw Silk, Cotton Yarn, Art Silk Cloth, Silk Cloth and Cotton Cloth.

(b) To carry on all and any of the business of Art Silk Yarn, Raw Silk Cotton Yarn as well as Art Silk Cloth, Silk Cloth and Cotton Cloth belonging to and on behalf of the members.

(c) To obtain import Licences for import of Art Silk Yarn, Raw Silk, Cotton Yarn and other Raw Materials as well as accessories required by the members for the manufacture of Art Silk. Silk and Cotton Fabrics.

(d) To obtain Export Licences and export cloth manufactured by the members.

(e) To buy and sell and deal in all kinds of cloth and other goods and fabrics belonging to and on behalf of the members.

(f) to (m) x x x x

(n) To do all other lawful things as are incidental or conducive to the attainment of the above objects.

Clause 5 of the Memorandum provided in sub-clause (1) that the income and property of the assessee wheresoever derived shall be applied solely for the promotion of its objects as set forth in the Memorandum and sub-clause (2) directed that no portion of the income or property shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit, to persons, who at any time are or have been members of the assessee or to anyone or more of them or to any person claiming through any one or more of them. What should happen to the assets in case of winding up or dissolution of the assessee, was set out in clause 10 of the Memorandum and it provided that the property remaining after satisfaction of all the debts and liabilities shall not be distributed amongst the members of the assessee but shall be given or transferred to such other company having the same objects as the assessee, to be determined by the members of the assessee at or before the time of the dissolution or in default, by the High Court of Judicature that has or may acquire jurisdiction in the matter. The income and property of the assessee were thus liable to be applied solely and exclusively for the promotion of the objects set out in the Memorandum and no part of such income or property could be distributed amongst the members in any form or under any guise orutilised for their benefit either during the operational existence of the as