The main legal point established in the judgment is that a trade association performing specific services for its members for remuneration definitely related to those services shall be deemed to carry on business in respect of those services, and the profits and gains therefrom shall be liable to tax accordingly under Section 10(6) of the Indian Income-tax Act, 1922.

( 1 ) THIS is a reference under Section 66 (1) of the Indian Income-tax Act, 1922. It relates to the assessment years 1948-49 to 1950-51 and 1954-55, 1955-56, 1957-58 to 1959-60. The relevant accounting years are the calendar years 1947 to 1949, 1953 to 1954 and 1956 to 1958, respectively.

( 2 ) THE assessee is a society registered under the Societies Registration Act, 1860. Its membership is restricted under its rules to "all tea companies under Indian management and Indian proprietors owning tea estates". The annual subscription, according to the statement of the case, is payable by members on the basis of the acreage under tea (Rule 21) and any member can secede from the association after giving three calendar months' notice to the secretary (Rule 22 ). The statement of the case says further that this annual subscription has not been taxed.

( 3 ) THE objects of the association described in Rule 3 are as follows : (a) To cultivate and keep up a spirit of fellow-feeling and united action amongst all Indian tea planters wherever working in India ; (b) To take up all matters of common interest connected with the tea industry in which the Indian planters are interested ; (c) To frame model rules and regulations for guidance of its members ; (d) To do all acts and take all measures and steps in connection with the tea industry and in that connection to approach, contact or negotiate with the authorities including the Central Government, the States or any foreign Government; (e) To raise funds to meet the expenses of the association or for purposes connected with the tea industry ; (f) To borrow money for the purposes of the association and also for purposes connected with the tea industry with or without securities ; (g) To start provident fund for its employees and frame rules therefor ; (h) To acquire, purchase, take on hire or lease instruments and machinery or obtain settlement of lands, buildings to construct and erect buildings or any structure or structures for the association or in connection with its activities ; (i) To grant affiliation or to be affiliated to any association, committee or body having the same or similar objects on such terms and conditions as may be decided upon by the executive committee of the association ; (j) To promote, organise, manage or help any educational institution or association or body or person for the advancement of and study or research in connection with the tea industry ; (k ). . . . . . . . (1) To frame service conduct rules for the employees of the association. "

( 4 ) THE association, it is stated, used to render services to its constituent members by way of supply of paddy, rice and food-grains for the consumption of labour and it also used to provide medical facilities for the benefit of its members.

( 5 ) UNDER the Defence of India Rules there was a statutory obligation on the industries to supply paddy, rice, etc. , to the labour employed by them at reasonable rates. Rice, paddy, etc. , could not be procured from the market without the Government's permission. In 1943, the duty of procurement of rice and paddy from the Government on behalf of the association's members as also the supply of such food-grains to the members was thrown upon the association itself. In the statement of the case we are told that with a view to meeting the cost of this additional burden the association levied a fee of one anna per maund of food-grains supplied to its members in lieu of the annual subscription. The cost of food-grains was deposited by the members directly with the Government. And the association did not receive any amount except the fee at the rate of one anna per maund referred to above.

( 6 ) BEFORE the tax authorities it was stated on behalf of the association that it had realised this fee of one anna per maund because it had to employ a few hands to supervise the work which necessitated contact with the Government as well as other parties in connection w