Commissioner Of Income Tax Jaipur-Ii v. M/S Jaipur Stock Exchange

HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR D.B. Income Tax Appeal No. 365 / 2008 Commissioner Of Income Tax Jaipur-II ----Appellant Versus M/S Jaipur Stock Exchange ----Respondent _______________________________________________ For Appellant(s) : Mr. K. D. Mathur on behalf of Mr. R.B. Mathur For Respondent(s) : Mr. Sanjay Jhanwar _______________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASOrder 10/05/2017 By way of this appeal the appellant haschallenged the judgment and order of the Tribunal, wherebythe Tribunal has dismissed the appeal filed by theDepartment. This court while admitting the appeal on07.11.2008 framed the following substantial question oflaw. “(I) Whether in the facts and circumstances of the casethe ITAT was justified in law had have not actedperversely in holding the assessee-respondent is acharitable institution as contemplated under Section2(15) of the Act and is entitled for exemption underSection 11(2) and 11(1)(i) of the Act? Whether in the facts and circumstances of thecase, the ITAT and CIT (A) has not acted illegally andperversely in granting the benefit of claim ordepreciation to the assessee-respondent when there isno business income?” In view of the decision of this court in D. B. Income Tax Appeal No. 111/2008 (Commissioner of IncomeTax, Jaipur-II, Jaipur Vs. Jaipur Stock Exchange Ltd., Jaipur)decided on 24.02.2015, since exemption is granted, other issue will not survive. In the aforesaid case the judgment of the court reads as under 1. We have heard learned counsels appearing for the parties. 2. In all these Income Tax Appeals under Section 260A of the IncomeTax Act, 1961 (for short, 'the Act') filed by the Commissioner ofIncome Tax, for the assessment years 1995-96 to 2007-08, thesubstantial question of law, on which these appeals have beenadmitted, is as follows:- “Whether in the facts and circumstances of the case, the ITAT was justified in law and have not acted perversely in holding that the assessee respondent is acharitable institution as contemplated u/s.2(15) of theAct and is entitled for exemption u/s.11(2) and 11(1)(a)of the Act?”charitable institution as contemplated u/s.2(15) of theAct and is entitled for exemption u/s.11(2) and 11(1)(a)of the Act?” 3. The assessee-Company is a Stock Exchange, registered as PublicLimited Company under the Companies Act, 1956, and is alleged to bea charitable institution under Section 12A of the Act, within themeaning of the Income Tax Act, 1961. The Jaipur Stock ExchangeLimited is recognized by Stock Exchange Board of India (SEBI) underthe Securities Contracts (Regulation) Act, 1956. 4. The objects set out in the Memorandum of Association, for whichthe Company (Jaipur Stock Exchange Limited) was established, are asfollows:- “A. The main objects of the Exchange to be pursued by theExchange on its incorporation are : 1. To support and protect the character and status of brokers, dealersand jobbers in stocks, shares and like securities and to further theinterests of both brokers and the public dealing in Jaipur andelsewhere in Rajasthan and in India in stocks, shares and likesecurities and to maintain high standards to commercial honour andintegrity to promote honourable practice, to discourage and tosuppress malpractices, to settle disputes amongst brokers, dealers andjobbers to decide all questions of usage, custom or courtesy inconducting the business of brokers, dealers and jobbers and. 2. To facilitate, assist, regulate and control the transaction of businesson the stock exchange and to establish and provide for and manageclearing house for the transactions of the members. B. The objectsincidental or ancillary to the attainment of the main objects are : 2. To facilitate, assist, regulate and control the transaction of businesson the stock exchange and to establish and provide for and manageclearing house for the transactions of the members. B. The objectsincidental or ancillary to the attainment of the main objects are : 1. Subject to the provisions of the Securities Contracts (Regulation)Act, 1956 and the Rules framed thereunder and any Law and Rules forthe time being in force relating thereto, to make Rules & Bye-lawsregulating the mode and conditions in and subject to which thebusiness of the Stock Exchange shall be transacted and conduct of thepersons transacting the same and generally for the good order andgovernment of Members of the Exchange and from time to time toamend or alter such rules and regulations or any of them and to makeany new, amended or additional Rules or Regulations for the purposesaforesaid. 2. To establish just and equitable principles and to settle points or practice and to decide upon any questions of business usage orcourtesy between or among members of the Exchange. 3. To regulate and fix scale of commission and brokerage to becharged by members of the Exchange. 4. To protect the members of the Exchange amongst persons whosecharacter or circumstances render them unworthy of credit. 5. To erect, construct, extend, and maintain in Jaipur a suitablebuilding to use as a place for the transaction of the business of theExchange or of its members and for such other purposes of theExchange as may be determined upon, and to erect, construct andmaintain such other building or buildings as may be considerednecessary or desirable for the purposes of the Exchange or for the useof the members thereof. 6. To acquire by purchase, taking on lease or otherwise and developlands and buildings and all other property movable and immovablewhich the Exchange may from time to time think proper to acquire forthe purposes of the Exchange. 7. To sell, improve, manage, develop, Exchange, lease or let underlease or sublet, mortgage, dispose of, turn to account or otherwisedeal with all or any part of the property of the Exchange. 8. To construct upon any premises acquired for the purposes of theExchange any buildings for the purpose of the Exchange and to alter,add to or remove any building upon such premises. 9. To borrow or raise any moneys required for the purposes of theExchange upon such terms and in such manner and with or withoutsuch securities, as may be determined, and in particular by the issueof debentures charged upon all or any of the properties of theExchange existing or to be acquired in future. 10. To subscribe for, become a members and cooperate with any otherassociation, whether incorporated or not, whose objects are altogetheror in part similar to those of this Exchange and to procure from andcommunicate to any such association such information as may bethought likely to further the objects of this Exchange or to promotemeasures for the protection of the trade or any interest therein. 11. To invest the money of the Exchange not immediately required, insuch securities as may from time to time be thought fit. 12. To remunerate any person, firm or company for services renderedin placing or assisting to place or guaranteeing the placing of anydebenture or other securities of the Exchange. 13. To establish and support or aid in the establishment and support ofassociations, institutions, funds, trusts, conveniences calculated tobenefit members or employees or ex-employees of the Exchange orex-members of the Exchange and the dependents or connections ofany such persons and to grant pensions and allowances and to makepayments towards insurance and to subscribe or guarantee money forcharitable or benevolent objects or for any exhibition or for any publicgeneral or useful object. 14. To undertake and execute any trusts, the undertaking of whichmay seem to the Exchange desirable. 12. To remunerate any person, firm or company for services renderedin placing or assisting to place or guaranteeing the placing of anydebenture or other securities of the Exchange. 13. To establish and support or aid in the establishment and support ofassociations, institutions, funds, trusts, conveniences calculated tobenefit members or employees or ex-employees of the Exchange orex-members of the Exchange and the dependents or connections ofany such persons and to grant pensions and allowances and to makepayments towards insurance and to subscribe or guarantee money forcharitable or benevolent objects or for any exhibition or for any publicgeneral or useful object. 14. To undertake and execute any trusts, the undertaking of whichmay seem to the Exchange desirable. 15. To underwrite, float or subscribe for conditionally orunconditionally purchases or otherwise acquire and to hold, dispose ofand deal in government securities, stock, shares and securities of anycompany or any body incorporated or unincorporated. 16. To take or otherwise acquire and hold shares in any other companyhaving objects altogether or in part similar to those of the Exchange orcarrying on any business capable of being conducted so as directly orindirectly to benefit the Exchange. 17. To enter into any arrangements with any State Govt. or otherauthorities Supreme, Municipal, Local or otherwise company or body that may seem conducive to the objects of the Exchange or any ofthem and to obtain from any such State Govt. or authority or companyor body any rights, privileges and concessions which the Exchangemay think it desirable to obtain and carry out exercise and companywith such arrangements, rights, privileges and concessions. 18. To enter into partnership or into any agreement for sharing profits,union of interests, cooperation, joint ventures, reciprocal concessionsor otherwise with any person or company carrying on or engaged in orabout to carry on or engage in any business of transaction which theExchange is authorised to carry on or engage in any business ortransaction capable of being conducted so as directly or indirectly tobenefit the Exchange and to lend money to guarantee the contracts ofor otherwise assist any person or company and to take or otherwiseacquire shares and securities of any such company and to sell, hold,reissue with or without guarantee or otherwise deal with the same. 19. To promote any company or companies for the purpose ofacquiring all or any of the properties, rights and liabilities of theExchange or for any other purpose which may seem directly orindirectly calculated to benefit the Exchange. 20. To sell or dispose of subject to the provisions of Companies Act,1956, the undertaking of the Exchange or part thereof for suchconsideration as the Exchange may think fit and in particular forshares, debentures or securities of any other company having objectsaltogether or in part similar to those of the Exchange. 21. To carry on business as financiers, promoters, concessionaires,managers, secretaries, treasurers, agents or managing agents and anyother business which may be conveniently carried on with the above. 22. To encourage the settlement of disputes by arbitration, to act as orto nominate arbitrators or umpires on such terms and in such cases asmay seem expedient and to provide for arbitration of all disputes inrespect of all transactions relating to or arising out of or pertaining totransactions in securities and including arbitration of disputes betweenmembers and persons who are not members and to provide arbitrationTribunals, Boards, Courts and subject to the provisions of theSecurities Contracts (Regulation) Act, 1956 and the Rules framedthereunder to make Rules, Bye-laws and Regulations in relation to allsuch arbitration proceedings and to regulate the procedure with regardto the same and for enforcement of awards. 23. 22. To encourage the settlement of disputes by arbitration, to act as orto nominate arbitrators or umpires on such terms and in such cases asmay seem expedient and to provide for arbitration of all disputes inrespect of all transactions relating to or arising out of or pertaining totransactions in securities and including arbitration of disputes betweenmembers and persons who are not members and to provide arbitrationTribunals, Boards, Courts and subject to the provisions of theSecurities Contracts (Regulation) Act, 1956 and the Rules framedthereunder to make Rules, Bye-laws and Regulations in relation to allsuch arbitration proceedings and to regulate the procedure with regardto the same and for enforcement of awards. 23. To make, draw, accept, endorse cheques, bills of exchange, promissorynotes and other mercantile or commercial instruments. 24. To promote the consideration and discussion of all questionsaffecting the business of the Exchange or of its members and alliedbusinesses and generally to watch over and protect the interests ofbrokers, jobbers and investors in stocks, shares and like securities. 25. To give the government authorities, legislators and public bodiesand other facilities of conferring with and ascertaining the views of theExchange as regards matters directly or indirectly affecting theinterests of brokers, dealers, jobbers and investors in stocks, sharesand like securities. 26. To petition, if necessary, to the legislatures or promote deputationin relation to general and particular measures affecting the business ofthe Exchange, its members or investors in stocks, shares and likesecurities and to procure changes in law or in practice regarding thesame. 27. To promote or oppose legislative and other measures affecting thecommercial, industrial and investing interests. 28. To collect, acquire, preserve, disseminate and circulate statisticsand other information relating to stocks, shares and like securities andto maintain a library. 29. To print, publish and circulate such papers, periodicals, books and daily and other periodical quotations, lists and circulars as may seemconducive to furtherance of any of these objects of the Exchange.30.To communicate with Chambers of Commerce and other mercantilebodies throughout the world and consult and promote measures forthe protection and advancement of the objects of the Exchange. 31. To improve and elevate the technical and business knowledge ofpersons engaged in or about to be engaged in trade, banking,commerce or company administration or dealing in stocks, shares andlike securities or in connection therewith and with a view thereto toprovide for delivery of lectures and holding of classes and to test byexamination or otherwise the competence of such persons and toaward certificates and diplomas and to institute and establishscholarships, grants and other benefactions. 32. To receive moneys, securities and valuables of all kinds on depositor for safe custody with or without remuneration therefor and on suchterms and conditions as the Exchange may deem fit; PROVIDED THATin case of deposits from the public, it shall be in accordance withSection 58 A of the Companies Act, 1956 & Rules thereunder and asper the directions of the Reserve Bank of India from time to time;PROVIDED further that the Exchange, however, shall not carry on anybanking or insurance business. 33. To make advances on the security of any bonds, shares or real orpersonal property of any kind and on such terms as the Exchange maydeem fit. 34. To undertake or to act as Clearing House for delivery and paymentof shares, stocks, debentures, government securities and otherwiseboth for members as well as for the investing public and do all actseither banking or financial which may be required to be done inconnection with the clearing house and to perform and carry out thevarious kinds of business incidental to and connected therewith. 33. To make advances on the security of any bonds, shares or real orpersonal property of any kind and on such terms as the Exchange maydeem fit. 34. To undertake or to act as Clearing House for delivery and paymentof shares, stocks, debentures, government securities and otherwiseboth for members as well as for the investing public and do all actseither banking or financial which may be required to be done inconnection with the clearing house and to perform and carry out thevarious kinds of business incidental to and connected therewith. 35. To do all or any of the above things in any part of the world and asprincipals, agents contractors, trustees or otherwise and by or throughtrustees, agents or otherwise and either alone or in conjunction withother. 36. To take over all the assets and liabilities of Jaipur Stock Exchangeand pass necessary resolutions, to approve all the actions of and toadopt all arrangements made by the coordination committee prior toofficial formation of the Exchange and to enter into necessaryagreements, accordingly with the parties concerned for the purposesof carrying on business of the Exchange. 37. To apply for and obtain from the Government of India, recognitionof the Exchange as a recognised Stock Exchange for the purpose ofregulating and controlling the business of purchase, sale, dealings andtransactions in securities within the meaning of the SecuritiesContracts (Regulation) Act, 1956. 38. To use the safe deposit vaults for purposes of storage gratuitouslyor otherwise letting on hire and otherwise disposing of safes, strong-rooms and other receptacles for money, securities and documents ofall kinds. 39. To make payments or disbursements out of the funds or othermovable property of the Exchange for any of the purposes specified inthe Rules, Bye-Laws and Regulations of the Exchange. 40. To facilitate the transaction of business of the Exchange byestablishing, providing for and maintaining Clearing House for themembers. 41. To apply any surplus funds available with the Exchange inpromoting its objects and not to distribute the same as dividend or inany other form to the members. 42. To do all such other things as are incidental or conducive to theattainment of the above objects. C. Other objects are : Nil. AND IT IS HEREBY DECLARED that the objects set forth in anysub clause of thisclause shall not, except where the context expressly so requires be inany way limited or restricted by reference to or inference from theterms of any other subclause or by the name of the Exchange. None ofthe subclauses of this clause nor the objects herein nor the powersthereby conferred shall be deemed subsidiary or auxiliary merely tothe objects mentioned in the first sub-clause of this clause but that theExchange shall have full power to exercise all or any of the powerconferred by any part of this clause in any part of the worldnotwithstanding that the business, undertaking, property or actsproposed to be transacted, acquired, dealt with or performed do notfall within the objects of the first sub-clause of this clause. AND IT ISHEREBY FURTHER DECLARED that the income and property of theExchange, wheresoever derived from, shall be applied solely towardsthe promotion of the objects set forth herein above, and no portionthereof shall be paid off by way of dividend, bonus or profits to any ofthe members. IV. The Liability of the Members is limited. V. Everymember of the Exchange undertakes to contribute to the assets of theExchange in the event of its being would up while he is a member, orwithin one year after he ceases to be a member, for payment of thedebts and liabilities of the Exchange contracted before he ceased to bea member, and costs, charges and expenses of winding up and for theadjustment of the rights of the contributories among themselves, suchamount as may be required, not exceeding Rs.2,500/- (Rupees Twothousand Five hundred) Only.” 5. The Jaipur Stock Exchange-the assessee claimed exemption underSection 11(2) and Section 11(1)(a) of the Act, and had declared thetaxable income in all the assessment years as 'Nil'. It was submittedthat the primary object of the assessee, as per Memorandum ofAssociation, quoted as above, is to regulate and control the transactionof business on the stock exchange, and to establish and provide for,and manage clearing house for the transactions by the members. Theassessee is not empowered to do business in stocks, shares etc. Themain objects of the assesseeCompany were therefore, charitable innature, as defined in Section 2 (15) of the Act. Section 2(15) of theIncome Tax Act, defines “charitable purpose”, as follows:- “2(15). “charitable purpose” includes relief of the poor,education, medical relief, preservation of environment(including watersheds, forests and wildlife) and preservation ofmonuments or places or objects of artistic or historic interest,and the advancement of any other object of general publicutility: Provided that the advancement of any other object ofgeneral public utility shall not be a charitable purpose, if itinvolves the carrying on of any activity in the nature of trade,commerce or business, or any activity of rendering any servicein relation to any trade, commerce or business, for a cess or feeor any other consideration, irrespective of the nature of use orapplication, or retention, of the income from such activity. Provided further that the first proviso shall not apply if theaggregate value of the receipts from the activities referred totherein is twenty-five pakh rupees or less in the previous year.” 6. It was contended that the objects of the stock exchange are ofgeneral public utility. The stock exchange is not carrying out anybusiness, nor is earning profits, for distribution to its members. 7. The Assessing Officer was not satisfied with the explanation, andheld that the assessee's ancillary objects show that it is involved incarrying on the business. The clauses in the Memorandum and Articlesof Association, may not permit the applicant to distribute income, butthat, all the clauses and objects taken together are general, andpermit the usage of income for non-charitable purposes. Clause B(13)of the Memorandum of Association, provides for establishing andsupport, or aid in the establishment and support of associations,institutions, funds, trusts and conveniences calculated to benefit members or employees. 8. In appeal, the CIT (A) allowed the exemption under Section 11,reversing the order of the Assessing Officer, following the order of theIncome Tax Appellate Tribunal, in the case of the assessee, in whichsuch exemption was allowed for the assessment year 2000-01. 9. The Income Tax Appellate Tribunal, relying on the judgments in CITVs. Maharana of Mewar Charitable Foundation, 164 ITR 439, CIT Vs.Shri Plot Swetamber Murti Pujak Jain Mandal, 211 ITR 293 (Guj.), andin the case of Gonvindu Naicker Estate Vs. ACIT & Anr., 248 ITR 368(Mad.), allowed the exemption under Section 11 of the Act. members or employees. 8. In appeal, the CIT (A) allowed the exemption under Section 11,reversing the order of the Assessing Officer, following the order of theIncome Tax Appellate Tribunal, in the case of the assessee, in whichsuch exemption was allowed for the assessment year 2000-01. 9. The Income Tax Appellate Tribunal, relying on the judgments in CITVs. Maharana of Mewar Charitable Foundation, 164 ITR 439, CIT Vs.Shri Plot Swetamber Murti Pujak Jain Mandal, 211 ITR 293 (Guj.), andin the case of Gonvindu Naicker Estate Vs. ACIT & Anr., 248 ITR 368(Mad.), allowed the exemption under Section 11 of the Act. 10. Learned counsel appearing for the Income Tax Departmentsubmits that a close perusal of the objects, as set out in theMemorandum and Articles of Associations of the Jaipur Stock ExchangeLimited, would show that the assessee is not engaged, nor is carryingout any activity, as provided under Section 2(15), for relief of the poor,education, medical relief, and the advancement of any other object ofgeneral public utility. Section 11 provides that the income fromproperty held for charitable or religious purposes, shall not be includedin the total income of the assessee. Section 12 gives the benefit ofexemption to the income of trusts and institutions. Section 12 providesfor conditions for registration of trusts etc. The assessee, on the basisof the comparative reading of Sections, does not fall under any of thecategory of charitable institutions, and is as such not entitled to claimexemption under Section 11(2) and Section 11(1)(a) of the Act. 11. It is submitted that the members of the assessee-Company aredealing in stocks, shares, and like securities, which shows the intentionof the assessee to earn profit. The members have not associated forcommon charitable purpose, but for trading and profit. TheassesseeCompany provides for trading facilities to individual members,and charges fees in the form of admission of dealing in stocks andshares. The trading in stocks is conducted by members as well as theauthorized agents, for earning profits, and thus, the meaning of“charitable purpose”, cannot be extended to the assessee, to make thepurpose of exemption irrelevant. The exemption clause must bestrictly construed, and that, unless and until the assessee specificallyfalls under that category, the benefit of exemption cannot beextended. Learned counsel appearing for the Department has relied onthe judgments of the Supreme Court in Yogiraj Charity Trust Vs.Commissioner of Income Tax, New Delhi, (1976) 103 ITR 777 (SC),Additional Commissioner of Income Tax, Gujarat Vs. Ahmedabad MillOwners' Association, (1977) 106 ITR 725 (Guj.), AdditionalCommissioner of Income Tax, Gujarat Vs. Surat Art Silk ClothManufacturers Association, (1980) 121 ITR 1 (SC) and Delhi StockExchange Association Ltd. Vs. Commissioner of Income Tax, NewDelhi, (1997) 225 ITR 235 (SC), in support of his submissions. Hesubmits that in Delhi Stock Exchange Limited (supra), the SupremeCourt, after considering the objects of the Delhi Stock ExchangeLimited and the purpose of giving exemption under Section 11, held inparagraph 7, as follows:- “7. What is, therefore, required is that there must be an obligationcreated to spend the money exclusively and essentially on charity. Inthe present case, as found by the High Court, at the relevant periodthere was no obligation that the income from properties by theassessee was to be exclusively used for charitable purposes. It waspermissible for the assessee to distribute the whole or part of suchincome by way of dividends amongst its shareholders. Such aprohibition was imposed only in December 1973 by the amendment ofArticle 103(xiv) of the Articles of Association of the assessee. In otherwords, prior to the said amendment introduced in December 1973, theassessee was under no legal obligation prohibiting it from distributingthe income derived by it by way of dividends amongst itsshareholders. On that view of the matter, it must be held that the HighCourt was right in holding that the assessee could not claim exemption under Section 11 read with Section 2(15) of the Act.” 12. It is submitted that in the case of the Trusts, for finding outwhether a Trust is entitled to claim exemption, on the dominantpurpose of the Trust. If the dominant purpose was for religious andcharitable purposes, even if the money was spent for non-charitablepurpose, and whether it was open to the Trustees to utilize income forany of the objects of the Trust, in exclusion to other objects, the Trustproperty by itself cannot be said to be utilized for religious andcharitable purposes, under Section 4(3)(1) of the Income Tax Act,1922. 13. Learned counsel appearing for the assessee submits that unlikethe Memorandum of Association of Delhi Stock Exchange Limited, inwhich there was a provision for distribution of profits, and it was foundthat there was no bar for distribution of profits, prior to theamendment of Articles of Association in December 1973, the DelhiStock Exchange Limited was not under any legal obligation, prohibitingit from distributing the income derived by it, by way of dividends,amongst its shareholders, and in that context, the Supreme Court hasheld in the matter of Delhi Stock Exchange Association Ltd. Vs.Commissioner of Income Tax, New Delhi (supra) for the periodrelevant for assessment, prior to December 1973, that the Delhi StockExchange Limited, was not entitled to exemption under Section 11 ofthe Act. The Delhi Stock Exchange Limited subsequently, deleted theArticle 103(xiv) in December 1973. In the period of assessment, afterthe amendment in Memorandum of Association in December 1973, theDelhi High Court in Commissioner of Income Tax Vs. Delhi StockExchange Association Ltd., (2001) 119 Taxman 91 (Delhi), held thatthe Delhi Stock Exchange Limited was entitled to exemption underSection 11 of the Act. 14. It is submitted by learned counsel appearing for the assessee thatin almost all the cases of stock exchanges, considering the objects ofassessment in the Memorandum and Articles of Associations of thestock exchanges, as well as in the analogous cases of Bar Councils andChambers of Commerce, the Supreme Court and the High Courts haveconsistently held that where the objects of the Association are forgeneral public utility, namely, to regulate the activities of the business,or profession, with no profit earning motive, nor there are anyprovisions for distribution of profits amongst the members, the activityis a charitable activity, which qualifies for exemption under Section 11of the Act. 14. It is submitted by learned counsel appearing for the assessee thatin almost all the cases of stock exchanges, considering the objects ofassessment in the Memorandum and Articles of Associations of thestock exchanges, as well as in the analogous cases of Bar Councils andChambers of Commerce, the Supreme Court and the High Courts haveconsistently held that where the objects of the Association are forgeneral public utility, namely, to regulate the activities of the business,or profession, with no profit earning motive, nor there are anyprovisions for distribution of profits amongst the members, the activityis a charitable activity, which qualifies for exemption under Section 11of the Act. 15. In Hyderabad Stock Exchange Limited Vs. Commissioner of IncomeTax, (1967) 66 ITR 195 (AP), the High Court of Andhra Pradesh heldthat the object of the stock exchange is not only to further theinterests of both the brokers and dealers, but also of the publicinterested in securities, to assist, regulate and control the trade orbusiness in securities, to maintain high standards of commercialhonour and integrity, to promote and inculcate honourable practicesand just and equitable principles of trade and business, to discourageand to suppress malpractices, to settle disputes and to decide allquestions of usage, custom or courtesy in the conduct of trade andbusiness. The profits earned by the exchange are not to be distributedbetween the members, but to be utilized to serve public utility, and isa charitable purpose. The Andhra Pradesh High Court relied on CIT Vs.Andhra Chamber of Commerce, (1965) 55 ITR 722 (SC), in arriving ata conclusion that Hyderabad Stock Exchange is entitled for exemptionunder Section 11 of the Act. 16. A similar view was taken in Commissioner of Income Tax Vs.Bangalore Stock Exchange Ltd., (1978) 115 ITR 493 (Kar.). The HighCourt of Karnataka, after examining the Memorandum of Association,and considering the principal objects of the Bangalore Stock ExchangeLimited, held that the objects of the stock exchange are of generalpublic utility. There being no element of profit in the admission fees,membership fees and listing fees, the exemption is available, in respect of income thereof. The mere possibility of an activity, which isnot charitable, will not deny exemption. 17. In Commissioner of Income Tax Vs. Bar Council of Maharashtra,(1981) 130 ITR 28 (SC), the “charitable purpose” defined in Section2(15) of the Act, was explained. It was held that the clause is arestrictive clause. The exemption must depend upon the nature andcharacter of the activities, which the Council can undertake under therelevant provisions of the Advocates Act, 1961, under which it isconstituted. The dominant purpose being to ensure quality of serviceof competent lawyers to the litigating public, to spread legal literacy,law reforms etc., and the benefit accruing to lawyer member, beingonly incidental, the dominant purpose is clearly the advancement ofobject of general public utility within the meaning of Section 2(15),and thus, the exemption under Section 11 is allowable. 17. In Commissioner of Income Tax Vs. Bar Council of Maharashtra,(1981) 130 ITR 28 (SC), the “charitable purpose” defined in Section2(15) of the Act, was explained. It was held that the clause is arestrictive clause. The exemption must depend upon the nature andcharacter of the activities, which the Council can undertake under therelevant provisions of the Advocates Act, 1961, under which it isconstituted. The dominant purpose being to ensure quality of serviceof competent lawyers to the litigating public, to spread legal literacy,law reforms etc., and the benefit accruing to lawyer member, beingonly incidental, the dominant purpose is clearly the advancement ofobject of general public utility within the meaning of Section 2(15),and thus, the exemption under Section 11 is allowable. 18. We have gone through the objects of the Jaipur Stock ExchangeLimited in the Memorandum of Association. The Jaipur Stock ExchangeLimited is a Company, registered by the Income Tax Department asCharitable Trust under Section 12A of the Income Tax Act. The objectof the stock exchange is not only to further the interests both of thebrokers and dealers, but also the public interested in securities, toassist, regulate and control the trade or business in securities, tomaintain high standards of commercial honour and integrity, topromote and inculcate honourable practices, and just and equitableprinciples of trade and business, to discourage and to suppressmalpractices, to settle disputes, and to decide all questions of usage,custom or courtesy in the conduct of trade and business. TheMemorandum of Association does not permit the profits to bedistributed between the members. The profits are provided to beutilized for services of the public utility, would thus clearly fall and willqualify for exemption within the meaning of “charitable purpose”, asdefined in Section 2(15) of the Act. 19. In our view, the question is covered by the judgment of Hon'bleSupreme Court in Delhi Stock Exchange Association Ltd. Vs.Commissioner of Income Tax, New Delhi (supra), and further, in thejudgments of the Supreme Court in CIT Vs. Andhra Chamber ofCommerce (supra), Commissioner of Income Tax Vs. Bar Council ofMaharashtra (supra); the judgment of Delhi High Court inCommissioner of Income Tax Vs. Delhi Stock Exchange AssociationLtd. (supra), Andhra Pradesh High Court in Hyderabad Stock ExchangeLimited Vs. Commissioner of Income Tax (supra), and of the KarnatakaHigh Court in Commissioner of Income Tax Vs. Bangalore StockExchange Ltd. (supra).20. The question of law is thus, decided in favour of the assessee, andagainst the Department.” In view of the above, the appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Gourav/57