COMMISSIONER OF INCOME-TAX Vs. BAR COUNCIL

JUDGEMENT

(1.) The questions referred by the Income-tax Appellate Tribunal relate to the, liability of the Bar Council of Madras to income-tax. The Income-tax Authorities have imposed a tax on the income of the Council for the years 1939-40 and 1940-41. In the previous years no tax was levied, it being taken that the income of the Council was not taxable under the Act. It may be mentioned that the Bar Councils of Calcutta, Bombay, Allahabad, Lucknow, Patna, Sind and Nagpur have not been required to pay tax on their income. The income of the Council consists of fees paid by persons enrolled as advocates of the High Court, examination fees paid by the apprentices-at-law and interest of investments. The enrolment fees provide the biggest source of income. The income is utilised for meeting the establishment expenses and the payment of fees to lecturers and examiners. The Council is a statutory body whose main functions relate to the enrolment of persons as advocates of the High Court, the rights and duties of advocates and their discipline and professional conduct. Its duties, however, include the giving of facilities for legal education and training and the holding and conduct of examinations.

(2.) Section 3 of the Income-tax Act which is the charging section makes, inter alia, an individual or association of persons liable to pay the tax on income. The Council has been taxed as an individual, and there can be no doubt that it is an individual or association of persons within the meaning of the section. Therefore its income is taxable unless exemption is to be obtained under the provisions of Section 4 (3). Clause (1) of Sub-section (3) exempts income derived from property held under trust or other legal obligation wholly for religious or charitable purposes and, in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto. The last clause of this sub-section defines what is meant by the words "charitable purpose" and the definition includes education.

(3.) When the Income-tax Officer proposed to assess the Council to income-tax, it claimed total exemption by reason of Clause (1) of the sub-section and the case has proceeded throughout on that basis. The Council appealed from the Income-tax Officer's order to the Appellate Assistant Commissioner and from the latter's order, which confirmed the Income-tax Officer's order, to the Income-tax Appellate Tribunal, which agreed with the income-tax authorities that this clause did not exempt the income of the Council.