The main legal point established in the judgment is that the advancement of objects of general public utility should not involve the carrying on of any activity for profit to qualify as a charitable purpose under S.2(15) and S.11. Additionally, the judgment emphasizes the importance of the company's powers and restrictions outlined in its Memorandum and Articles of Association in determining eligibility for exemption under S.11.

1. The Income-tax Appellate Tribunal, Cochin Bench has referred to us the following question in the Income-tax References 35 & 36 of 1974 by a common order dated 5 41974:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the assessee-company was not exempt under S.11 for the assessment years 1969-70 and 1970-71?"

2. The assessee is a limited company incorporated under the Companies Act, 1956. The assessment in respect of which the reference application has arisen is for the period 1969-70 and 1970-71, the relevant accounting years having ended on 3112 1968 and 3112'69. The company had been assessed to income-tax up till 1968-69 and no dispute had arisen in respect of the earlier assessments on the point which is raised in the present reference cases.

3. Clause.3 of the Memorandum of Association of the company refers to various objects of the company. The relevant provisions of Clause.3 are quoted below.

"(c) To conduct Chitties and Kuries of all kinds open only to members as Foreman and or as Subscriber or any other deposit or other schemes beneficial to and open only to the members of the Company.

X X X X X

0) To utilise the whole or any portion of the net profits of the Company for _ any charitable, religious, scientific, educational or public or other similar purposes as the Company shall from time to time deem fit."

4. Sub-clause (c) shows that one of the objects of the company is to conduct chitties and kuries. Sub-clause 0) indicates that the whole or any portion of the net profits of the company may be utilised for any charitable, religious, scientific, educational or public or other similar purposes as the company shall from time to time deem fit.

5. Regulation.101 of the Articles of Association of the company had originally provided as follows:

"The company in general meeting may declare dividends, but no dividends shall exceed the amount recommended by the Directors."

This regulation was in force when the company was assessed to income-tax up till 1968-69. On 27 61968 this regulation was altered by means of a special resolution to read as follows:

"The company shall not pay any dividend or bonus to its members and the entire business undertakings of the company shall be. held by the company under trust for the purposes specified in clause 0) of the objects clause in the Memorandum of Association of the Company."

6.. As a result of this alteration is the Articles of Association, the company claimed that it was not assessable to income-tax for the assessment years 1969-70 and 1970-71 relating to the accounting years ending on 31 121968 and 31-12-1969. The company contended before the Income-tax Officer that the business of the company was held for a charitable purpose and was consequently entitled to the exemption under S.11 of the Income-tax Act, 1961. The claim of the company for exemption was rejected by the Income-tax Officer on the ground that it was carrying on a business which did not come within the definition of 'charitable purpose' under S.2 (15) of the Act and therefore S.11 would be of no avail to the company. The Officer therefore rejected the claim for exemption under S.11 and determined the company's income for the year 1969-70 at Rs. 44, 925/- and for the year 1970-71 at Rs. 22,950/-.

7. However, on appeal to the Appellate Assistant Commissioner, the company's claim for exemption was accepted. He held that the objects of the company were charitable and therefore the business in kuries would not deny the company the exemption under S.11.

8. On an appeal by the department to the Income-tax Appellate Tribunal, Cochin Bench, the Tribunal upheld the order of the Income-tax Officer and found that the company was not entitled to the exemption under S.11. The Tribunal has made a consolidated order in I. T. A. Nos. 293 and 294/ Cochin/ 1971-72, and it is from this order that the Income-tax References have been made to us at the instance of the assessee¬