D.b. Income Tax Appeal v. Jaipur Stock Exchange Ltd., Jaipur

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANAT JAIPUR BENCH, JAIPUR :: JUDGMENT :: D.B. INCOME TAX APPEAL NO.111/2008Commissioner of Income Tax, Jaipur-II, JaipurVs.Jaipur Stock Exchange Ltd., Jaipur D.B. INCOME TAX APPEAL NO.82/2008 Commissioner of Income Tax, Jaipur-II, JaipurVs.Jaipur Stock Exchange Ltd., JaipurD.B. INCOME TAX APPEAL NO.112/2008Commissioner of Income Tax, Jaipur-II, JaipurVs.Jaipur Stock Exchange Ltd., Jaipur D.B. INCOME TAX APPEAL NO.113/2008Commissioner of Income Tax, Jaipur-II, JaipurVs.Jaipur Stock Exchange Ltd., Jaipur D.B. INCOME TAX APPEAL NO.340/2008 Commissioner of Income Tax, Jaipur-II, JaipurVs.Jaipur Stock Exchange Ltd., Jaipur D.B. INCOME TAX APPEAL NO.128/2011Commissioner of Income Tax, Jaipur-II, JaipurVs.Jaipur Stock Exchange Ltd., Jaipur D.B. INCOME TAX APPEAL NO.169/2011 Commissioner of Income Tax, Jaipur-II, JaipurVs.Jaipur Stock Exchange Ltd., Jaipur Reportable 2 D.B. INCOME TAX APPEAL NO.242/2011 Commissioner of Income Tax, Jaipur-II, JaipurVs. Jaipur Stock Exchange Ltd., Jaipur 24.2.2015 HON'BLE THE ACTING CHIEF JUSTICE MR. SUNIL AMBWANIHON'BLE MR. JUSTICE PRAKASH GUPTA Mr.R.B.Mathur with Mr.Nikhil Simlote & Mr.Archit Bohra for the appellant-Revenue.Mr.Sanjay Jhanwar with Mr.Atul Saxena for the respondent.******** 1.We have heard learned counsels appearing for the parties. 2.In all these Income Tax Appeals under Section 260A of theIncome Tax Act, 1961 (for short, 'the Act') filed by the Commissionerof Income 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 ITATwas justified in law and have not acted perversely in holdingthat the assessee respondent is a charitable institution ascontemplated u/s.2(15) of the Act and is entitled for exemptionu/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 as follows:- “A. The main objects of the Exchange to be pursued by theExchange on its incorporation are :Exchange on its incorporation are : 1. To support and protect the character and status of brokers, dealers and jobbers in stocks, shares and like securities and tofurther the interests of both brokers and the public dealing inJaipur and elsewhere in Rajasthan and in India in stocks, sharesand like securities and to maintain high standards tocommercial honour and integrity to promote honourablepractice, to discourage and to suppress malpractices, to settledisputes amongst brokers, dealers and jobbers to decide allquestions of usage, custom or courtesy in conducting thebusiness of brokers, dealers and jobbers and.further the interests of both brokers and the public dealing inJaipur and elsewhere in Rajasthan and in India in stocks, sharesand like securities and to maintain high standards tocommercial honour and integrity to promote honourablepractice, to discourage and to suppress malpractices, to settledisputes amongst brokers, dealers and jobbers to decide allquestions of usage, custom or courtesy in conducting thebusiness of brokers, dealers and jobbers and. 2. To facilitate, assist, regulate and control the transaction ofbusiness on the stock exchange and to establish and provide forand manage clearing house for the transactions of themembers.business on the stock exchange and to establish and provide forand manage clearing house for the transactions of themembers. 2. To facilitate, assist, regulate and control the transaction ofbusiness on the stock exchange and to establish and provide forand manage clearing house for the transactions of themembers.business on the stock exchange and to establish and provide forand manage clearing house for the transactions of themembers. B. The objects incidental or ancillary to the attainment of themain objects are :main objects are : 1. Subject to the provisions of the Securities Contracts(Regulation) Act, 1956 and the Rules framed thereunder andany Law and Rules for the time being in force relating thereto,to make Rules & Bye-laws regulating the mode and conditionsin and subject to which the business of the Stock Exchangeshall be transacted and conduct of the persons transacting thesame and generally for the good order and government ofMembers of the Exchange and from time to time to amend oralter such rules and regulations or any of them and to makeany new, amended or additional Rules or Regulations for thepurposes aforesaid.(Regulation) Act, 1956 and the Rules framed thereunder andany Law and Rules for the time being in force relating thereto,to make Rules & Bye-laws regulating the mode and conditionsin and subject to which the business of the Stock Exchangeshall be transacted and conduct of the persons transacting thesame and generally for the good order and government ofMembers of the Exchange and from time to time to amend oralter such rules and regulations or any of them and to makeany new, amended or additional Rules or Regulations for thepurposes aforesaid. 2. To establish just and equitable principles and to settle pointsor practice and to decide upon any questions of business usageor courtesy between or among members of the Exchange.or practice and to decide upon any questions of business usageor courtesy between or among members of the Exchange. 3. To regulate and fix scale of commission and brokerage to be charged by members of the Exchange. 4. To protect the members of the Exchange amongst personswhose character or circumstances render them unworthy ofcredit. 5. To erect, construct, extend, and maintain in Jaipur a suitablebuilding to use as a place for the transaction of the business ofthe Exchange or of its members and for such other purposes ofthe Exchange as may be determined upon, and to erect,construct and maintain such other building or buildings as maybe considered necessary or desirable for the purposes of theExchange or for the use of the members thereof. 6. To acquire by purchase, taking on lease or otherwise anddevelop lands and buildings and all other property movable andimmovable which the Exchange may from time to time thinkproper to acquire for the purposes of the Exchange. 7. To sell, improve, manage, develop, Exchange, lease or letunder lease or sublet, mortgage, dispose of, turn to account orotherwise deal with all or any part of the property of theExchange. 8. To construct upon any premises acquired for the purposes ofthe Exchange any buildings for the purpose of the Exchangeand to alter, add to or remove any building upon such premises.9. To borrow or raise any moneys required for the purposes ofthe Exchange upon such terms and in such manner and with orwithout such securities, as may be determined, and in particularby the issue of debentures charged upon all or any of theproperties of the Exchange existing or to be acquired in future. 10. To subscribe for, become a members and cooperate withany other association, whether incorporated or not, whoseobjects are altogether or in part similar to those of thisExchange and to procure from and communicate to any suchassociation such information as may be thought likely to furtherthe objects of this Exchange or to promote measures for theprotection of the trade or any interest therein. 11. To invest the money of the Exchange not immediatelyrequired, in such securities as may from time to time be thought fit. 10. To subscribe for, become a members and cooperate withany other association, whether incorporated or not, whoseobjects are altogether or in part similar to those of thisExchange and to procure from and communicate to any suchassociation such information as may be thought likely to furtherthe objects of this Exchange or to promote measures for theprotection of the trade or any interest therein. 11. To invest the money of the Exchange not immediatelyrequired, in such securities as may from time to time be thought fit. 12. To remunerate any person, firm or company for servicesrendered in placing or assisting to place or guaranteeing theplacing of any debenture or other securities of the Exchange. 13. To establish and support or aid in the establishment andsupport of associations, institutions, funds, trusts, conveniencescalculated to benefit members or employees or ex-employees ofthe Exchange or ex-members of the Exchange and thedependents or connections of any such persons and to grantpensions and allowances and to make payments towardsinsurance and to subscribe or guarantee money for charitable orbenevolent objects or for any exhibition or for any publicgeneral or useful object. 14. To undertake and execute any trusts, the undertaking ofwhich may seem to the Exchange desirable. 15. To underwrite, float or subscribe for conditionally orunconditionally purchases or otherwise acquire and to hold,dispose of and deal in government securities, stock, shares andsecurities of any company or any body incorporated orunincorporated. 16. To take or otherwise acquire and hold shares in any othercompany having objects altogether or in part similar to those ofthe Exchange or carrying on any business capable of beingconducted so as directly or indirectly to benefit the Exchange. 17. To enter into any arrangements with any State Govt. orother authorities Supreme, Municipal, Local or otherwisecompany or body that may seem conducive to the objects ofthe Exchange or any of them and to obtain from any such StateGovt. or authority or company or body any rights, privilegesand concessions which the Exchange may think it desirable toobtain and carry out exercise and company with sucharrangements, rights, privileges and concessions. 18. To enter into partnership or into any agreement for sharingprofits, union of interests, cooperation, joint ventures,reciprocal concessions or otherwise with any person or companycarrying on or engaged in or about to carry on or engage in any business of transaction which the Exchange is authorised tocarry on or engage in any business or transaction capable ofbeing conducted so as directly or indirectly to benefit theExchange and to lend money to guarantee the contracts of orotherwise assist any person or company and to take orotherwise acquire shares and securities of any such companyand to sell, hold, reissue with or without guarantee or otherwisedeal 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 or indirectly 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 forsuch consideration as the Exchange may think fit and inparticular for shares, debentures or securities of any othercompany having objects altogether or in part similar to those ofthe Exchange. 21. To carry on business as financiers, promoters,concessionaires, managers, secretaries, treasurers, agents ormanaging agents and any other business which may beconveniently carried on with the above. 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 or indirectly 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 forsuch consideration as the Exchange may think fit and inparticular for shares, debentures or securities of any othercompany having objects altogether or in part similar to those ofthe Exchange. 21. To carry on business as financiers, promoters,concessionaires, managers, secretaries, treasurers, agents ormanaging agents and any other business which may beconveniently carried on with the above. 22. To encourage the settlement of disputes by arbitration, toact as or to nominate arbitrators or umpires on such terms andin such cases as may seem expedient and to provide forarbitration of all disputes in respect of all transactions relatingto or arising out of or pertaining to transactions in securitiesand including arbitration of disputes between members andpersons who are not members and to provide arbitrationTribunals, Boards, Courts and subject to the provisions of theSecurities Contracts (Regulation) Act, 1956 and the Rulesframed thereunder to make Rules, Bye-laws and Regulations inrelation to all such arbitration proceedings and to regulate theprocedure with regard to the same and for enforcement ofawards. 23. To make, draw, accept, endorse cheques, bills of exchange, promissory notes and other mercantile or commercialinstruments. 24. To promote the consideration and discussion of all questionsaffecting the business of the Exchange or of its members andallied businesses and generally to watch over and protect theinterests of brokers, jobbers and investors in stocks, shares andlike securities. 25. To give the government authorities, legislators and publicbodies and other facilities of conferring with and ascertainingthe views of the Exchange as regards matters directly orindirectly affecting the interests of brokers, dealers, jobbers andinvestors in stocks, shares and like securities. 26. To petition, if necessary, to the legislatures or promotedeputation in relation to general and particular measuresaffecting the business of the Exchange, its members orinvestors in stocks, shares and like securities and to procurechanges in law or in practice regarding the same. 27. To promote or oppose legislative and other measuresaffecting the commercial, industrial and investing interests. 28. To collect, acquire, preserve, disseminate and circulatestatistics and other information relating to stocks, shares andlike securities and to maintain a library. 29. To print, publish and circulate such papers, periodicals,books and daily and other periodical quotations, lists andcirculars as may seem conducive to furtherance of any of theseobjects of the Exchange. 30.To communicate with Chambers of Commerce and other mercantile bodies throughout the world and consult andpromote measures for the protection and advancement of theobjects of the Exchange. 31. To improve and elevate the technical and businessknowledge of persons engaged in or about to be engaged intrade, banking, commerce or company administration or dealingin stocks, shares and like securities or in connection therewithand with a view thereto to provide for delivery of lectures andholding of classes and to test by examination or otherwise the competence of such persons and to award certificates anddiplomas and to institute and establish scholarships, grants andother benefactions. 30.To communicate with Chambers of Commerce and other mercantile bodies throughout the world and consult andpromote measures for the protection and advancement of theobjects of the Exchange. 31. To improve and elevate the technical and businessknowledge of persons engaged in or about to be engaged intrade, banking, commerce or company administration or dealingin stocks, shares and like securities or in connection therewithand with a view thereto to provide for delivery of lectures andholding of classes and to test by examination or otherwise the competence of such persons and to award certificates anddiplomas and to institute and establish scholarships, grants andother benefactions. 32. To receive moneys, securities and valuables of all kinds ondeposit or for safe custody with or without remunerationtherefor and on such terms and conditions as the Exchangemay deem fit; PROVIDED THAT in case of deposits from thepublic, it shall be in accordance with Section 58 A of theCompanies Act, 1956 & Rules thereunder and as per thedirections of the Reserve Bank of India from time to time;PROVIDED further that the Exchange, however, shall not carry on any banking or insurance business. 33. To make advances on the security of any bonds, shares orreal or personal property of any kind and on such terms as theExchange may deem fit. 34. To undertake or to act as Clearing House for delivery andpayment of shares, stocks, debentures, government securitiesand otherwise both for members as well as for the investingpublic and do all acts either banking or financial which may berequired to be done in connection with the clearing house andto perform and carry out the various kinds of businessincidental to and connected therewith. 35. To do all or any of the above things in any part of the worldand as principals, agents contractors, trustees or otherwise andby or through trustees, agents or otherwise and either alone orin conjunction with other. 36. To take over all the assets and liabilities of Jaipur StockExchange and pass necessary resolutions, to approve all theactions of and to adopt all arrangements made by the co-ordination committee prior to official formation of the Exchangeand to enter into necessary agreements, accordingly with theparties concerned for the purposes of carrying on business ofthe Exchange. 37. To apply for and obtain from the Government of India,recognition of the Exchange as a recognised Stock Exchange forthe purpose of regulating and controlling the business of purchase, sale, dealings and transactions in securities within themeaning of the Securities Contracts (Regulation) Act, 1956.38. To use the safe deposit vaults for purposes of storagegratuitously or otherwise letting on hire and otherwise disposingof safes, strong-rooms and other receptacles for money,securities and documents of all kinds. 39. To make payments or disbursements out of the funds orother movable property of the Exchange for any of the purposesspecified in the Rules, Bye-Laws and Regulations of theExchange. 40. To facilitate the transaction of business of the Exchange byestablishing, providing for and maintaining Clearing House forthe members. 41. To apply any surplus funds available with the Exchange inpromoting its objects and not to distribute the same as dividendor in any other form to the members. 42. To do all such other things as are incidental or conducive tothe attainment of the above objects. C. Other objects are : Nil. 39. To make payments or disbursements out of the funds orother movable property of the Exchange for any of the purposesspecified in the Rules, Bye-Laws and Regulations of theExchange. 40. To facilitate the transaction of business of the Exchange byestablishing, providing for and maintaining Clearing House forthe members. 41. To apply any surplus funds available with the Exchange inpromoting its objects and not to distribute the same as dividendor in any other form to the members. 42. To do all such other things as are incidental or conducive tothe attainment of the above objects. C. Other objects are : Nil. AND IT IS HEREBY DECLARED that the objects set forth in any-sub clause of this clause shall not, except where the contextexpressly so requires be in any way limited or restricted byreference to or inference from the terms of any other sub-clause or by the name of the Exchange. None of the sub-clauses of this clause nor the objects herein nor the powersthereby conferred shall be deemed subsidiary or auxiliarymerely to the objects mentioned in the first sub-clause of this clause but that the Exchange shall have full power to exerciseall or any of the power conferred by any part of this clause inany part of the world notwithstanding that the business,undertaking, property or acts proposed to be transacted,acquired, dealt with or performed do not fall within the objectsof the first sub-clause of this clause. AND IT IS HEREBY FURTHER DECLARED that the income andproperty of the Exchange, wheresoever derived from, shall beapplied solely towards the promotion of the objects set forth herein above, and no portion thereof shall be paid off by way ofdividend, bonus or profits to any of the members.IV. The Liability of the Members is limited. V. Every member of the Exchange undertakes to contribute tothe assets of the Exchange in the event of its being would upwhile he is a member, or within one year after he ceases to bea member, for payment of the debts and liabilities of theExchange contracted before he ceased to be a member, andcosts, charges and expenses of winding up and for theadjustment of the rights of the contributories amongthemselves, such amount as may be required, not exceeding Rs.2,500/- (Rupees Two thousand Five hundred) Only.” 5.The Jaipur Stock Exchange-the assessee claimed exemptionunder Section 11(2) and Section 11(1)(a) of the Act, and had declaredthe taxable income in all the assessment years as 'Nil'. It wassubmitted that the primary object of the assessee, as perMemorandum of Association, quoted as above, is to regulate andcontrol the transaction of business on the stock exchange, and toestablish and provide for, and manage clearing house for thetransactions by the members. The assessee is not empowered to dobusiness in stocks, shares etc. The main objects of the assessee-Company were therefore, charitable in nature, as defined in Section 2(15) of the Act. Section 2(15) of the Income 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: “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 of generalpublic utility shall not be a charitable purpose, if it involves thecarrying on of any activity in the nature of trade, commerce orbusiness, or any activity of rendering any service in relation toany trade, commerce or business, for a cess or fee or anyother 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 previousyear.” 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 benefitmembers 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 inCIT Vs. Maharana of Mewar Charitable Foundation, 164 ITR 439, CIT Vs. Shri Plot Swetamber Murti Pujak Jain Mandal, 211ITR 293 (Guj.), and in the case of Gonvindu Naicker Estate Vs.ACIT & Anr., 248 ITR 368 (Mad.), allowed the exemption underSection 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 thepoor, education, medical relief, and the advancement of any otherobject of general public utility. Section 11 provides that the incomefrom property held for charitable or religious purposes, shall not beincluded in the total income of the assessee. Section 12 gives thebenefit of exemption to the income of trusts and institutions. Section12 provides for conditions for registration of trusts etc. The assessee,on the basis of the comparative reading of Sections, does not fallunder any of the category of charitable institutions, and is as such notentitled to claim exemption 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. The assessee-Company provides for trading facilities to individual members, andcharges fees in the form of admission of dealing in stocks and shares.The trading in stocks is conducted by members as well as theauthorized agents, for earning profits, and thus, the meaning of 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. The assessee-Company provides for trading facilities to individual members, andcharges fees in the form of admission of dealing in stocks and shares.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 be strictlyconstrued, and that, unless and until the assessee specifically fallsunder that category, the benefit of exemption cannot be extended.Learned counsel appearing for the Department has relied on thejudgments 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 Mill Owners' Association, (1977) 106 ITR 725(Guj.),Additional Commissioner of Income Tax, Gujarat Vs.Surat Art Silk Cloth Manufacturers Association, (1980) 121 ITR1 (SC) and Delhi Stock Exchange Association Ltd. Vs.Commissioner of Income Tax, New Delhi, (1997) 225 ITR 235(SC), in support of his submissions. He submits that in Delhi StockExchange Limited (supra), the Supreme Court, after considering theobjects of the Delhi Stock Exchange Limited and the purpose of givingexemption under Section 11, held in paragraph 7, as follows:- “7. What is, therefore, required is that there must be anobligation created to spend the money exclusively andessentially on charity. In the present case, as found by the HighCourt, at the relevant period there was no obligation that theincome from properties by the assessee was to be exclusivelyused for charitable purposes. It was permissible for theassessee to distribute the whole or part of such income by wayof dividends amongst its shareholders. Such a prohibition wasimposed only in December 1973 by the amendment of Article103(xiv) of the Articles of Association of the assessee. In otherwords, prior to the said amendment introduced in December1973, the assessee was under no legal obligation prohibiting itfrom distributing the income derived by it by way of dividendsobligation created to spend the money exclusively andessentially on charity. In the present case, as found by the HighCourt, at the relevant period there was no obligation that theincome from properties by the assessee was to be exclusivelyused for charitable purposes. It was permissible for theassessee to distribute the whole or part of such income by wayof dividends amongst its shareholders. Such a prohibition wasimposed only in December 1973 by the amendment of Article103(xiv) of the Articles of Association of the assessee. In otherwords, prior to the said amendment introduced in December1973, the assessee was under no legal obligation prohibiting itfrom distributing the income derived by it by way of dividends amongst its shareholders. On that view of the matter, it mustbe held that the High Court was right in holding that theassessee could not claim exemption under Section 11 read withSection 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. amongst its shareholders. On that view of the matter, it mustbe held that the High Court was right in holding that theassessee could not claim exemption under Section 11 read withSection 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 has held 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, the Delhi High Court inCommissioner of Income Tax Vs. Delhi StockExchange Association Ltd., (2001) 119 Taxman 91 (Delhi),heldthat the Delhi Stock Exchange Limited was entitled to exemption underSection 11 of the Act. 14.It is submitted by learned counsel appearing for the assesseethat in almost all the cases of stock exchanges, considering the objectsof assessment 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. Commissionerof Income Tax, (1967) 66 ITR 195 (AP), the High Court of AndhraPradesh held that the object of the stock exchange is not only tofurther the interests of both the brokers and dealers, but also of thepublic interested in securities, to assist, regulate and control the tradeor business 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 is a charitable purpose. The Andhra Pradesh High Court relied on CITVs. Andhra Chamber of Commerce, (1965) 55 ITR 722 (SC),inarriving at a conclusion that Hyderabad Stock Exchange is entitled forexemption under Section 11 of the Act. a charitable purpose. The Andhra Pradesh High Court relied on CITVs. Andhra Chamber of Commerce, (1965) 55 ITR 722 (SC),inarriving at a conclusion that Hyderabad Stock Exchange is entitled forexemption under Section 11 of the Act. 16.A similar view was taken inCommissioner of Income Tax Vs.Bangalore Stock Exchange Ltd., (1978) 115 ITR 493 (Kar.). TheHigh Court of Karnataka, after examining the Memorandum ofAssociation, and considering the principal objects of the BangaloreStock Exchange Limited, held that the objects of the stock exchangeare of general public utility. There being no element of profit in theadmission fees, membership fees and listing fees, the exemption isavailable, in respect of income thereof. The mere possibility of anactivity, which is not 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 Section 2(15) of the Act, was explained. It was held that theclause is a restrictive clause. The exemption must depend upon thenature and character of the activities, which the Council can undertakeunder the relevant provisions of the Advocates Act, 1961, under whichit is constituted. The dominant purpose being to ensure quality ofservice of competent lawyers to the litigating public, to spread legalliteracy, law reforms etc., and the benefit accruing to lawyer member,being only incidental, the dominant purpose is clearly the advancementof object 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 Exchange Limited 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,and against the Department. 21.All the Income Tax Appeals are accordingly dismissed. 22.A copy of this judgment will be placed in all the connected files. (PRAKASH GUPTA),J. (SUNIL AMBWANI),ACTG.CJ. Skant/-, Proof Reader All the corrections made in the judgment/order have been incorporatedin the judgment/order being emailed. Shashi Kant Gaur,Proof Reader