Holding

A Bar Council, by virtue of its statutory obligations under the Advocates Act, 1961, has a primary purpose of advancing an object of general public utility and therefore its income from securities is exempt under section 11 of the Income Tax Act, 1961.

Summary

The Bar Council of Maharashtra, a body corporate under the Advocates Act, 1961, derived income from interest on securities and enrolment fees for the assessment years 1962-63 to 1964-65. The Revenue assessed this income, but the Council claimed exemption under section 10(23A) for enrolment fees and under section 11 for interest, arguing that it was a charitable institution. The Tribunal and the Bombay High Court held that the Council’s primary purpose, as defined by its statutory functions, was to advance an object of general public utility, making the income eligible for exemption under section 11. The Revenue appealed, contending that the exemption under section 10(23A) barred a claim under section 11 and that the Council’s purpose was merely to benefit its members. The Supreme Court rejected the Revenue’s first contention, noting that the two provisions are not mutually exclusive, and affirmed that the Council’s functions—admission of advocates, regulation, legal aid, law reform, and public education—constitute a dominant public‑utility purpose, thereby qualifying for exemption under section 11. The appeals were dismissed.

Issues considered

Whether a Bar Council constituted under the Advocates Act, 1961, qualifies as a body intended to advance an object of general public utility within the meaning of section 2(15) of the Income Tax Act, 1961 for the purpose of exemption under section 11.
Whether exemption claimed under section 10(23A) precludes a claim for exemption under section 11 for the same income.

Legislation cited

Advocates Act, 1961s. 3, s. 4, s. 6
Income Tax Act, 1961s. 10(23A), s. 11, s. 2(15)

Subjects

Income TaxSection 11 exemptionCharitable purposeGeneral public utilityBar CouncilAdvocates ActTax assessmentLegal profession regulation

Judgment

A
542

C. I. T. BOMBAY
v.
BAR COUNCIL OF MAHARASHTRA
B BAR COUNCIL OF INDIA
BAR COUNCIL OF GUJARAT

April 22, 1981

[V. D. TULZAPURKAR AND E.S. VENKATARAMIAH, JJ.]
c Income Tax Act, 1961, section 2(15) and 11-Whether the Bar Councils consti-
tuted under the Advocates Act, 1961, are bodies intended to advance any object of
general public utility falling within section 2( 15) for purposes of section 11 of the
Act.

The income derived by the Bar Council of Maharashtra from securities (inte-
D rest) and other income by way of enrolment fees during the accounting periods
relevant to the assessment years 1962-63, 1963-64, 1964-65 was subjected to tax by
the Income Tax Officer. Since the Central Government had accorded approval
to the assessee for the purpose of section 10(23A) during the jpendency of the
appeal before the Tribunal by a notification dated August 5, 1966 with effect from
December 28, 1961, the Tribunal held that the assessee Council was entitled
to exemption under section 10(23A) in respect of its income by way of enrolment
E fees. The Tribunal remanded the case oack to the Appellate Assistant Commis-
sioner and directed him to dispose of the case by examining the question as to
the purpose for which the securities were held by the assessee Council. It obser-
ved that if the said securities were held for educational purpose or for any other
charitable purpose then the exemption under section 11 would be admissible to
the extent available under the law. The High Court, on a reference made at the
instance of the assessee-Council, answered the question : ''Whether on the facts
and in the circumstances of the case, the assessee--Council could be taken to be
F a body intended to advance any object of general public utility falling within
section 2(15) for purposes of section 11 of the Act ?" in favour of the assessee
and hence the appeals by Revenue after obtaining special leave from the Court.

Dismissing the appeals, the Court

HELD : 1. Having regard to the Preamble of the Advocates Act, 1961 and
G the nature of the various obligatory functions including the one under clause (d)
enjoined upon every State Bar Council under section 6(1) of the Advocates Act, it
is elear that the primary or dominant purpose of an institution like the assessee-
Council is the advancement of the object of general public utility within the
meaning of section 2(15) of the Income Tax Act, 1961 and as such the income
from securities held by the assessee--Council would be exempt from any tax
H liability under section 11 of the Income Tax Act, 1961. [551 E-G]
C.I.T. V. BAR COUNCIL 543

2. If the primary or dominant purpose of a trust or institution was A
charitable any other object which by itself might not be charitable but
which was merely ancillary or incidental to the primary or dominant purpose
would not prevent the trust or institution from being a valid charity. The
restrictive words "not involving the carrying on any activity for profit" in
section 2(15) of the Income Tax Act, 1961, qualify" object" and not the advance-
ment or accomplishment thereof. In other words, the true meaning of the restric-
tive words is that when the purpose of a trust or institution was the advancement B
of an object of general public utility it was that object of general public utility
and not its accomplishment or carrying out which must not involve the carrying
on of any activity for profit. Here, admittedly, the State Bar Councils are not
indulging in any activity for profit and hence the question of applying the
restrictive words in s.2(15) does not arise. [547 C-F, 548 G-H]

Commissioner of Income Tax, Madras v. Andhra Chamber of Commerce, 55
ITR 722; Additional Commissioner of Income Tax, Gujarat v. Surat Art Silk Cloth
c
Manufacturers Association, 121 ITR 2, reiterated.

CIVIL APPELLATE JURISDICTION : Civil ·Appeal Nos. 2115 to
2117of1980.
D
Appeals by special leave from the judgment and order dated
the 8 the August, 1978 of the Bombay High Court in Income Tax
Reference No. 142 of 1969.

S. C. Manchanda and A. Subhashini for the Appellant.
E
V. N. Ganpule and Mrs. Veena Devi Khanna for the Respon-
dent.

V. N. Ganpule for Intervener No. I.

S. C. Patel for Intervener No. 2.
F
The Judgment of the Court was delivered by

TULZAPURKAR, J. These appeals by special leave raise the
question : "whether on the facts and in the circumstances of the
case the assessee-Council could be taken to be a body intended to
advance any object of general public utility falling within s. 2(15) G
for purposes of s. 11 of the Income Tax Act, 1961 ?"

The facts giving rise to the aforesaid question may briefly be
stated. The respondent assessee-Bar Council of Maharashtra-
is a body corporate established under the Advocate's Act, 1961
(Act 25 of 1961) which came into force on December 28, 1961. H
During the accounting periods relevant to the assessment years
1962-63, 1963-64 and 1964-65 the assessee derived income from
544_ SUPREME COURT REPORTS [1981] 3 s.c.R.

A securities (interest) and other income by way of enrolment fees parti-
culars whereof, are as follows :
-·
Assessment year Interest on securities Other Income

1962-63 Rs. 3,779 Rs. 28,035
B
1963-64 Rs. 8,629 Rs, 3,04,103

1964-65 Rs. 9,356 Rs. 96,322

The Income Tax Officer subjected to tax the income from
both the sources for all the three years. In appeals preferred fo the
Appellate Assistant Commissioner it was contended by ihe assessee
that its other income by enrolment fees was exempt under s. I 0
(23A) and interest on securities was exempt from tax under s. 11 of
the Income Tax Act, 1961. The Appellate Assistant Commissioner
negatived the exemption claimed under s. 10(23A) in the absence.
of the Central Government's notification according appr9val to the
D association and with regard to the claim for exemption in respect of
the interest on securities he held that it was not established that· the
securities were held on trust for any charitable purpose. He took
the view that the main object of the assessee-Council was to benefit
the legal profession (its Members) and, therefore, the object was
not one of general public utility. Accordingly he confirmed the
E assessment orders for the three years.

The matter was carried in further appeal to the Income Tax
Appellate Tribunal and since by that time the Central Government
had accorded approval to the assessee for the purpose of s. 10. (23A)
F by a notification dated August 5, 1966 with effect from December
28, 1961, the Tribunal held that the assessee-Council was entitled
to exemption under s. I 0(23A) in respect of its income by way of
enrolment fees. In regard to the income by way of interest on the.
securities the Tribunal observed that the character of the body
holding the securities was not by itself decisive, that safeguarding.
the rights, privileges and interest of advocates on its roll 9ould not
G
be said to be an object of general public utility, that the real ques-
tion to be considered under s. 11 was whether the securities were
held for any charitable purpose or .not and the tribunal found that
there was no evidence or material on record touching this aspect.
H- It, therefore, remanded the case back to the Appellate Assistant.
Commissioner and directed him to dispose of the case by exam_ining
the question as to the purpose for which the securities were held by
c.I.T. v. BAR COUNCIL (Tulzapurkar, J.) 545

the assessee-Council. It observed that if the said securities were A
held for· educational purpose or for any other charitable
purpose then the exemption under s. 11 would be admissible to the
extent available under the law; At the instance of the assessee-
Council the question set out at the commencement of this judgment
was referred to the High Court for its decision under s. 256( I) of
~9
the Act. The High Court took the view that having regard to the
obligatory functions enjoined upon a State Bar Council under s.6
of the Advocate' s Act the assessee-Council could be regarded as a
body constituted for general public utility and that the entire income
of the body would be exempt from tax under s.11 of the Income·
Tax Act, 1961. In its view the advancement of any object beneficial
to the public or a section of the public as distinct from an individual c
or a group of individuals would· be a charitable purpose as defined
in s.2 (15) of the Income Tax Act and in this view of the matter the
High Court answered the question in the affirmative and against the
Revenue. It is this view of the High Court that is being challenged
by the Revenue before us in these appeals.
D
In support of the appeals counsel for the· Revenue sought to
raise two contentions. First, he urged that the relief claimed under
s.11 was ruled out by reason of relief having been obtained by the
· assessee-Council in respect of its mcome from enrolment fees under
s.10 (23A) of the Act. According to him s.10 (23A), while exemp-
ting from tax any income of an association or institution established E
·in India having as its object the control, supervision, regulation and
encouragement of the profession of law, medicine, accountancy and
any other profession as the Central Government may specify, has
expressly excluded from exemption such association's or institution's
income chargeable under the head "interest on securities" or
"Income from house properties" or "any income received in F
·rendering any specific service", etc., and, therefore, what has been
expressly excluded from exemption under this provision could not
be or was not intended to be exempt under s.11 of the Act. In other
words, the assessee-Council's claim for exemption in respect of
interest on securities under s.11 was ruled out by reason of s.10(23A)
of the Act. Secondly, counsel contended that on merits the High G
Court's view that the assessee-Council was a body constituted for
advancement of an object of general public utility was erroneous
inasmuch as it was a body established principally for the purpose of
safeguarding the rights, privileges and interest of the advocates on
its roll and since such objective merely served to benefit the members H
546 SUPREME COURT REPORTS (1981] 3 S.C.R.

A of the profession it was no charitable purpose as defined by s.2 (15)
for purposes of s.11 qf the Act. In support of this contention
counsel placed reliance on some English decisions.

At the out set it may be stated that we were not inclined to
permit counsel for the Revenue to urge his first contention as in our
B view the Revenue must be deemed to have given up the same. We
may point out that precisely this very contention was raised by the
Revenue before the Tribunal and was negatived by it. The Tribunal
on a detailed analysis of the concerned provisions took the view
that the two provisions were not mutually exclusive but operated
under different circumstances, that s.11 was relatively wider in its
c scope and ambit, that while s.10 (23A) granted absolute exemption
in respect of particular types of income s.11 imposed certain
conditions for the exemption but such exemption was available for
all sources and there was nothing inherently improbable or
inconceivable about the two provisions operating simultaneously and
as such the claim for exemption under s. I I was available to the
D assessee-Council provided it satisfied all the -requirements of that
provision. We may point out that there are other allied provisions
like for instance sub-s. (23C) in s.l 0 which clearly indicate that the
Legislature did not intend to rule out s. I I when exemption was
claimable under such specific provisions of s. I 0. It was after
negativing the contention in this manner that the Tribunal went on
E to consider the claim for exemption made by the assessee-Council
under s.11 but on merits found that there was no material or
evidence on record to show whether or not the securities were held
by the assessee-Council for any of charitable purposes and, therefore,
it remanded the case. The remand order was never challenged by
F
the Revenue by seeking a reference on the ground that a remand
was unnecessary because s.11 was ruled out by reason of exemption
having been obtained by the assessee-Council under s.10 (23A) of
the Act nor was any such contention raised when reference was
sought by the assessee-Council nor when the matter was being argued
. in the High Court. In these circumstances it is clear to us that the
G
Revenue acquiesced in the view taken by the Tribunal that the claim
for exemption under s.1 I of the Act could not be said to be ruled
out by reason of the provisions of s.10 (23A). We, therefore,
proceed to deal with the second contention which was principally
argued before us in these appeals.
H
Under s.11 of the Income Tax Act, 1961, subject to the
conditions therein specified, income derived from property held
C.l.T. v. BAR COUNCIL (Tulzapurkar, J,) 547

under trust wholly for charitable or religious purposes to the extent A
to which such income is applied to such purposes in India is exempt
from the tax liability under the Act and s.2 (15) gives an inclusive
definition of the expression "charitable purpose" thus :
y
"Charitable purpose" includes relief of the poor, education,
medical relief and the advancement of any other object of iJ
genernl public utility not involving the carrying on any acti-
vity for profit.

It may be noticed that whereas any object of general public
utility was include:! in the definition of "Charitable purpose" in
the 1922 Act, the present definition has inserted the restrictive words
"not involving the carrying on of any activity for profit" which
c
qualify or govern the· last head of charitable purpose. In
Commissioner of lncome Tax, Madras v. Andhra Chamber of
Commerce( 1 )--a case decided by this Court under the 1922 Act where
the restrictive words were absent-this Court laid down that if the
primary or dominant purpose of a trust or institution was charitable,
D
any other object which by itself might not be charitable but which
was merely ancillary or incidental to the· primary or dominant
purpose would not prevent the trust or institution from being a valid
charity. After the addition of the restrictive words in the definition
in the 1961 Act, this Court in Additional Commissioner of Income
Tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association(') E
affirmed that the aforesaid test of primary or dominant purpose of
a trust or institution still holds good, that the restrictive words
qualify "object" and not the advancement or accomplishment thereof
and that the true meaning of the restrictive words was that when
the purpose of a trust or institution was the advancement of an
object of general public utility it was that object of general puplic F
utility and not its accomplishment or carrying out which must not
involve the carrying on of any activity for profit. And applying
these tests trading bodies like Andlw1 Chamber of Commerce and
Surat Art Silk Cloth Manufacturers Association have been held
to be institutions constituted with a view to advance an object of
general public utility because their primary or dominant purpose G
was to promote and protect industry, trade and commerce either
generally or in certain commodities, even though some benefit
through some of their activities did accrue to their members which

(1) 55 ITR 722.
(2) 121 ITR 1.
H
548 SUPREME COURT REPORTS [1981] 3 S.C.R.

A was regarded as incidental and this Court held that the income
derived from diverse sources by these institutions (rental income
from property in the case of Andhm Chamber of Commerce and
income from annual subscriptions collected from its members and
commission of a certain per centage of the value of licences for
import of foreign yarn and quotas for purchase of indigenous yarn
B obtained by the assessee from its members in the case of Surat Art
Silk Cloth Manufacturers Association was exempt from tax liability
under s.11 of the Act. Reliance on English decisions would not be
of much avail because the definition of charitable purposes as given
in our Act since it embraces 'any other object of general public
utility' goes further than the definition of charity to be derived from
c the English cases. Under English Jaw of charity a trust is charitable
only if it is within the spirit and intendment of the Preamble to the
Statute of Elizabeth (43 Eliz. ch. 4) and alJ objects of general
public utility are not necessarily charitable, some may or some may
not be, depending upon whether they falJ within the spirit and
intendment of the Statute of Elizabeth. Under our definition every
D object of general public utility would be charitable subject only to the
condition imposed by the restrictive words inserted in the 1961 Act.
It is because of this basic difference between Indian Law and English
Law of charity that Lord Wright in Aff India Spinners' Assn. v. CJT(1)
utterred a warning against blind adherence to English decisions o.n
the subject thus : "The Indian Act gives a clear and succinct
E definition which must be construed according to its actual language
and meaning. English decisions have no binding authority on its
construction and though they may sometimes afford help or
guidance, cannot relieve the Indian Courts from their responsibility
of applying the language of the Act to the particular circumstances
that emerge under conditions of Indian life."
F
Having regard to the aforesaid manner in which the definition
of "charitable purpose" given in s.2 (15) has been interpreted by
this Court the question that arises for considenation in these appeals
is whether the securities, interest from which is sought to be
G exempted from tax liability, were held by the assessee-Council on
trust wholly for a charitable purpose, namely, for the advancement
of an object of general public utility? Admittedly the assessee-
Council is not indulging in any activity for profit and hence the
aspect of considering the applicability of the restrictive words does
H not arise and the answer to the question must depend upon the

(1) 12 t.T.R. 482 (PC).
C.I.T. v. BAR COUNCIL (Tulzapurkar, J.) 549

nature or character of the functions and activities which the assessee- A
Council can undertake under the Advocates Act, 1961 for it is clear
y that it cannot go beyond what is prescribed by that Act.
'
The Preamble of the Advocates Act, 1961 shows that it was
enacted with a view to amend and consolidate the law relating to
legal practitioners and to provide for the constitution of Bar Councils B
and an All India Bar. Under s.3 of the Act Bar Councils are
constituted for various States and the assessee-Council happens to be
a State Bar Council for Maharashtra. Section 4 provides that every
Bar Council shall be a body corporate having perpetual succession
and a common seal, with power to acquire and hold property both
movable and immovabie and to contract, and may by the name by
which it is known sue or be sued. Section 6 is the material provision c
which sets out both obligatory as well as optional functions of every
State Bar Council and so far as is material runs thus :

"6. (I) The functions of a State Bar Council shall be-

(a) to admit persons as advocates on its roll; D
(b) to prepare and maintain such roll;

(c) to entertain and determine cases of miscon-
duct against advocates on its roll;

(d) to safeguard the rights, privileges and inte- E
rests of .advocates on its roll;

(e) to promote and support law reform;
(ee) to conduct seminars and organise talks on
legal topics by eminent jurists and publish
journals and papers of legal interest; F
(eee) to organise legal aid to the poor in the pres-
cribed manner;

(f) to manage and invest the funds of the G
Bar Council;

(g) to provide for the election of its members;

(h) to perform all other functions conferred on
it by or under this Act; H
550 SUPREME COURT REPORTS (1981] 3 S.C.R.

A (i) to do all other things necessary for dischar-
ging the aforesaid functions.

(2) A State Bar Council may constitute one or more
funds in the prescribed manner for the purpose of-

B (a) giving financial assistance to organise welfare
schemes for the indigent, disabled or other advo-
cates;

(b) g1vmg legal aid or advice in accordance with
the ·rules made in this behalf."
c Sections 9, 9A and 10 of the Act provide for the constitution of
various committees for the purposes mentioned therein. Section
15 confers power on the Bar Council to make rules to carry out the
purposes of this Chapter. The rest of the provisions of the Act are
not material for the purpose of the issue under consideration.
D Counsel for the Revenue contended that the primary object or
purpose with which the Bar Council of a State is constituted is to
benefit the members of the legal profession inasmuch as under s.6 (I)
(d) it is an obligatory function of the State Bar Council to safeguard
the rights privileges and interests of the advocates on its roll and
that other functions like promotion of law reform, conducting law
seminars etc. are incidental objects and the benefit to the public is
remote or indirect or incidental and, therefore, the assessee-Council
could not be regarded as a body intended to advance the object of
general public utility. It is impossible to accept this contention.
It is clear that sub-s. ( 1) lays down the obligatory functions while
sub'.s. (2) indicates what are the optional or discretionary functions
F
that could be undertaken by the State Bar Council and from amongst
the obligatory functions it will be wrong to pick out one and say it
is the primary or dominant object or purpose. All the clauses of
sub-s. (I) will have to be considered in light of the main objective
sought to be achieved as indicated in the Preamble. The functions
mentioned in els. (a) and (b) of sub-s. (l), namely, to admit persons
G as advocates on its roll and to prepare and maintain such roll, are
clearly regulatory in character intended to ensure that persons with
requisite qualifications who are fit and otherwise proper to be
advocates are available for being engaged by the litigating public;
the function pnscribed in cl. (c) has been enjoined upon avowedly
H with the objective of protecting the litigating public from unscrupu-
lous professionals by taking them to task for any misconduct on
C.J.T. v. BAR COUNCIL (Tulzapurkar, J) 551

their part; it is also one of the obligatory functions of a State Bar A
Council to promote and support measures for law reform as also to
conduct law seminars and organise talks on legal topics by eminent
jurists, obviously wifh a view to educate the general public, the
function prescribed by cl. (eee) is obviously charitable in nature, the
same being to organise legal aid to the poor. Amongst these various
obligatory functions one under cl. (d) is to safeguard the rights, B
privileges and interests of the advocates on its roll and it is difficult
to regard it as a primary or dominant function or purpose for which
the body is constituted. Even this function apart from securing
speedy discharge of obligations by· the litigants to the lawyers ensu'res
maintenance of high professional standards and independence of the .
Bar which are necessary in. the performance of their duties to the c
society. In other words, the domimant purpose of a State Bar
Council as reflected by the various obligatory functions is to ensure
quality service of competent lawyers. to the litigating public, to
spread legal literacy, promote Jaw reforms and provide legal
assistance to the poor while the benefit ·accruing to the lawyer-
members is incidental. It is true that sub-s. (2) provides that a D
State Bar Council may constitute one or more funds for the purpose
of giving financial assistance to organise welfare schemes for the
indigent, disabled or other advocates; but it is an optional or
discretionary function to be undertaken by the Council. Apart from
that, admittedly the assessee-Council has not so far constituted any
such fund for the purpose specified in the instant case. As and E
when such a fund is constituted a question may arise for considera-
tion and the C.rnrt m1y have to decide whether the function so
undertaken by a State Bar Council has become the dominant purpose
for which that Council is operating. Having regard to the Preamble
of the Act and the nature of the various obligatory functions
including the one under cl. (d} enjoined upon every State Bar F
Council under s.6 (l) of the Act, it is clear that the primary or
dominant purpose of an institution like the assessee-Council is the
advancement of the object of general public utility within the
meaning of s.2 (15) of the Act, and as such the income from securi-
ties held by the assessee-Council would be exempt from any tax
liability under s.11 of the Act. G

Having come to the aforesaid conclusion on applying the
lang~age of our Act to the nature of functions undertaken by a
State Bar Council under the Advocates Act 1961 it is truly unneces-
sary to deal with the English decisions cited during the course of H
552 SUPREME COURT REPORTS (1981] 3 S.C.R.

A arguments. However, we might indicate that in two cases (Royal
College of Surgeons case(1) and the General Medical Council's) case(2)
on an analysis of the functions undertaken by the two concerned
institutions under the Statutes and Charter$ governing them the
Court came to the conclusion that the institutions were not con-
stituted for charitable purpose but they were more of professional
B institutions, the approach being to find out whether the objects
satisfied the limited concept of charity within the spirit and intend-
ment of the Statute of Elizabeth. In the other two cases (The
Yorkshire Agricultural Society's case( 3) and The Institute of Civil
Engineers' case( 4 ) the Court took the view that both the institutions
were constituted for charitable purposes entitled the exemption
under s.37 (I) (b) of the Income Tax Act, 1918, and the benefits
c accruning to the members were regarded as incidental.

In the result we are of the opinion that the High Court was
right in answering the question in the affirmative and in favour of
the assessee. The appeals are accordingly dismissed with no order
as to costs.
D

S.R. Appeals dismissed.

(I) 3 T.C. 173.
(2) 13 T.C. 819.
(3) 13 T.C. 58.
(4) I 6 T.C. 158.