Stock exchanges serve a general public utility and have a charitable purpose, and are therefore entitled to exemption from income tax under Section 4 (3) (i) of the Indian Income-tax Act.

P. JAGANMOHAN REDDY, J.

( 1 ) THE question that has been referred to us by the Income-tax Appellate Tribunal is as follows:-"whether on the facts and in the circumstances of the case, the assessee company was entitled to exemption of the sum of Rs. 8,937 under Sec. 4 (3) (i)of the Indian Income-tax Act. "the assessee is a stock exchange company, limited by a guarantee and registered under S. 26 of the Hyderabad Companies Act (Act 4 of 1320f.), which corresponds to S. 26 of the Indian Companies Act, (Act 7 of 1913 ).

( 2 ) THE assessment year with reference to which this question has been postulated is 1961-62 for which the accounting year is the financial year ending 31-3-1961. The company has been assessed to income-tax from 1952-53 onwards. In all the years upto 1960-61, it filed returns of income showing therein the income from interest on securities and it was accordingly assessed. In connection with its assessments for the years 1953-54,1954-55,1955-56 and 1956-57, it made a claim that its income was exempt under the provisions of S. 4 (3) (i)of the Act, which claim was not accepted by the Income-tax Officer or the Appellate Assistant Commissioner or the Tribunal in appeals. Thereafter until the assessment year 1960-61, the income continued to be returned and assessed. For the accounting year ended 31-3-1961 relevant for the assessment year 1961-62, the companys income and expenditure account showed a net income of Rs. 6,764. In response to a notice under Sec. 22 (2), the company filed a return declaring an income of Rs. 8,896 made up of two items, namely, Rs. 6,092. 78 being interest on securities and Rs. 2,803. 51 being dividends from other sources.

( 3 ) DURING the course of the assessment proceedings, a claim was again put forward by the company that the income shown in the return was exempt under the provisions of Sec. 4 (3) (i)of the Act, and was, therefore, not liable to tax. It relied on a decision of the Madras High Court in the case of Andhra Chamber of Commerce v. Commissioner of Income-tax, 1961-42 ITR 503 (Mad ). But the Income-tax Officer rejected this claim had been disallowed in the earlier years, and this was approved by the Appellate Assistant Commissioner as well as the Tribunal.

( 4 ) ON appeal, the Appellate Assistant Commissioner agreed with the assessee that the decision of the Madras High Court referred to above is on all fours with the facts of the case before him and held that in respect of its income, the Exchange must beheld to be under a legal obligation to spend it wholly or accumulate for an object of general public utility and since it is held for charitable purposes it is exempt under Sec. 4 (3) (i)of the Act.

( 5 ) IN appeal, the Tribunal examined the provisions of Section 4 (3) (i)as also the definition of "charitable purpose" as given in the Explanation at the end of the section, and held that in order to qualify for exemption, the assessee should satisfy the following conditions:-" (I) The property should be held under trust or other obligation; (ii) It should be held for charitable purposes i. e. , for advancement of any object or general public utility; and (iii) The income should be applied or accumulated for application to such charitable purposes. "it was found that condition (i) was satisfied and that condition (iii) would also be satisfied if it satisfied the condition regarding "charitable purposes", i. e. , whether it was established for the advancement of any object of general public utility. After examining the objects of the Andhra Chamber of Commerce as mentioned in the decision of the Madras High Court referred to earlier and the objects of the assessee company as mentioned in clause III (i) of Memorandum of Association , it came to the conclusion that the main objects of the Chamber of Commerce and of the assessee company were different, This is what the Tribunal has stated:"whereas in the case of the Chamber of Commerce the aim was to promote and protect trade, commerce

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