Delhi Stock Exchange Association Ltd v. Commissioner Of Income Tax, Delhi

798 SUPREME COURT REPORTS (1961] In our opinion the High Court was in error and the question referred should have been decided in favour Ch inta111a•U [. ][Mahar~jsa ]aran of . the appellant. . We therefore allow the . appeal, set Nath Sah Deo aside the judgment and order of the High Court and v. answer the question in favour of the appellant who The Commissio"'' will have his costs in this Courc and the High Court. of lncome-taK. Bihar 6- Orissa Appeal allowed. T<apur ]. .. Vovetnber 30. DELHI STOCK EXCHANGE ASSOCIATJON LTD. COMMISSIONER OF INCOME TAX, DELHI (J. L. KAPUR, M. HIDAYATULLAH and J.C. SHAH, JJ.) Income-tax-Assessment-Company running a Stock Exchange and dealing in shares-Admissionfees of Members and Authorised Assistants-If taxable income. The object with which the appellant company was formed was to promote ~nd regulate the business in shares, stocks and securities etc., and to establish and conduct a Stock Exchange in order to facilitate the transaction of such business. Its capi-tal was divided into shares on which dividend could be earned. It provided a building wherein business was to be transacted under its supervision and control. It made rules for the con-duct of business of sale and purchase of shares in the Exchange premises. During the assessment year in question the com-pany's receipts consisted of certain amounts received as admis-sion fee from Members and Authorised Assistants and the ques-tion stated to the High Court for its opinion was whether these fees in the hands of the appellant were taxable income. The High Court answered the question in the affirmative. It held that the appellant was not a mutual society, that dividends could be earned on its share capital, that any person could be-come a share-holder but every share-holder was not a member unless he paid the admission fee and the real object of the com-pany was to carry on business of exchange of stocks and earn profits. The case of the appellant, inter alia, was that as the amount received as membership fee was shown as capital in the books of the company and there was no periodicity, it should be treated as capital receipt exempt from assessment. 2 S.C.R. SUPREME COURT REPORTS Held, that the High Court was right in its decision and the appeals must be dismissed. It was wholly immaterial how the appellant treated the amounts in question. It is the nature of the receipt and not how the assessee treated it that must determine its taxability. Since the fee received on account of Authorised Assisstants fall within the decision of this Court in Commissioner of Income-tax v. Calcutta Stock Exchange Association Ltd., (1959) 36 I.T.R. 222, it must be held to be taxable income. , The question as to whether the Members' admission fee was taxable income was to be determined by the nature of the business of the company, its profits and the distribution thereof as disclosed by· its Memorandum and Articles of Association and the rules made for the conduct of business. They showed that the income of the company was distributable amongst its share-holders as in any other joint stock company, and the body of trading members who paid the entrance fees and share-holders were not identical. The element of mutuality was, therefore, lacking. Liverpool Corn Trade Associatian v. Monks, (1926) 2 K. B. uo,. applied. Commissioner of Income-tax, Bombay City v. Royal Western India Turf Club Ltd., [19541 S.C.R. 289 and Styles v. New York Life Insurance Co., (1889) 2 T.C. 460, referred to. ClvIL APPELLATE JURISDICTION: Civil Appeals Nos. 187 and 190 of 1960. Appeals from the judgment dated 22nd January, 1957, of the Punjab High Court (Circuit Bench), Delhi, in Civil Reference No. 6 of 1953. Veda Vyasa, S. K. Kapur and K. K. Jain, for the appellant. R. Ganapathi Iyer and• D. Gupta, for the respon- dent. 1960. November 30. The Judgment of the Court was delivered by KAPUR, J.-These appeals are brought by the asses- dent. 978 SUPREME COtJR'l' REPORTS [1962] MALIK RAM v. v. Apdl I4. STATE OF RAJASTHAN (P. B. GAJENDRAGADKAR, A. K. SARKAR, K. N. W ANCHOO, K. C. DAS GUPTA and N. RAJAGOPALA AYYANGAR, JJ.) Motor Vehicles-Objection to scheme-Power of Officer appoint-ed to hear such objection-Recording of evidence-Cancellation of , scheme-Motor Vehicles Act, I939 (4 of r939), s. 68-D(2)--Rajas-than State Road Transport Services (Development) Rules, r960, r. 7(6). Bys. 68-D(2) of the Motor Vehicles Act, 1939, "The State Government may, after considering the objections and after giving an opportunity to the objector or his representatives and the representatives of the State Transport Undertaking to be heard in the matter, if they so desire, approve or modify the scheme". The appellant's objections to the draft scheme in question were heard by the Legal Remembrancer, appointed by the State Government to hear such objections, under r. 7(6) of the Rajasthan State Transport Services (Development) Rules, 1960, framed under s. 68-I of the Act. The appellan1 applied to the said Officer for permission to give evidence in order that he could show that the entire scheme ought to be rejected. His applications were rejected by the Officer holding that the Rules did not provide for recording of evidence and that according to a decision of the Rajasthan High Court, dated November 9, 1960, s. 68-D(2) of the Act did not empower him to cancel the draft scheme in its entirety. He, therefore, heard the arguments addressed on behalf of the appellant and approved the scheme. After moving unsuccessfully the Rajasthan High Court, the appellant appealed to this Court by special leave, Held, that the Officer was in error on both the points. Sec-tion 68-D(2) of the Act clearly implies that the authority which has to approve or modify the scheme, has also the power, if it thinks proper, to disapprove the scheme altogether. The words "may approve" in the section, properly construed, must also include "may not approve". The use of the word "shall" in r. 7(6) of the Rules instead of the word nmay'', which is otherwise similar in its terms to s. 68-D(2) of the Act, can make no difference. In hearing objections under s. 68-D(z) of the Act, the State Government or its Officers act as a quasi-judicial tribunal and regard being to the nature of the objections and the purpose of the hearing thereunder, there can be no doubt that production of evidence, both oral and documentary, is clearly contemplat-ed by the section. 1 S.C.R. SUPREME COURT REPORTS Gullapalli Nageswara Rao v. Andhra Pradesh State Road Transport Corporation, [1959] Supp. l S.C.R. 319. referred to. z96r But that does not mean that the parties can produce any Malik Ram amount of evidence merely to prolong the proceeding. It is for --. the State Government or the Officer to decide whether the evi- Stale of Ra1asthan dence sought to be adduced is necessary and relevant to the enquiry and, if so, they will have all the powers that a court has of controlling the giving and recording _of such evidence. Where a draft scheme is disapproved under s. 68-D(z) anC! thus stands rejected, any fresh scheme that may have to be framed, must be framed according to the procedure prescribed by Ch. IV A of the Act. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 135 of 1961. Appeal by special leave from the judgment and order dated January 3, 1961, of the Rajasthan High Court, Jodhpur, in Civil Writ Petition No. 1 of 1961. M. K. Nambiar, R. K. Garg, D. P. Singh, M. K. Ramamurthi and S. O. Agarwala, for the appellant-petitiouer. H. N. Sanyal, Additional Solicitor-General of India, G. 0. Kasliwal, Advocate-General of Rajasthan, Khan Singh and D. Gupta, for the respondents. 1961. April 14. The Judgment of the Court was delivered by