G. Sivarajan, J.
1. These three agricultural income-tax referred cases arise for the assessment years 1977-78, 1978-79 and 1979-80. The common question referred for the above three years is as follows :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the Rubber Board is entitled to the exemption as provided under Section 4(1)(b) of the Kerala Agricultural Income-tax Act, 1950, read with Section 4(6)(a) and 4(6)(c) of that Act ?'
2. The assessee is the Rubber Board, Kottayam, constituted under Section 4 of the Rubber Act, 1947. It is functioning as a statutory body under the administrative control of the Ministry of Commerce, Government of India. The Board is working for the development of rubber and the rubber industry in the country as provided under the provisions of the Rubber Act, 1947 (Act No. XXIV of 1947). Admittedly, the Board is mainly holding research institutions and for the said purpose, rubber estates are maintained. The Board derives income, inter alia, from sale of planting materials and rubber.
3. For the assessment years in question, the assessee claimed exemption in respect of its income from rubber estates under Section 4(1)(b) read with Sections 4(6)(a) and 4(6)(c) of the Kerala Agricultural Income-tax Act, 1950. The assessing authority rejected the said claim on the ground that the assessee has not adduced any evidence in support of the said claim and assessed the same to tax under the Act. The assessee took up the matter in appeal before the Appellate Assistant Commissioner of Agricultural Income-tax and Sales tax, Kottayam. The Appellate Assistant Commissioner noted that Section 2 of the Rubber Act, 1947, declares that it is expedient in the public interest that the Union should take under its control the rubber industry, and that admittedly the income, if any, derived by the Rubber Board is utilised for the development of the rubber industry. The appellate authority further observed that even then it will not fall under Section 4(1)(b) of the Act, which states that any agricultural income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in the State. She further observed that the decision of the Mysore High Court cited by the assessee relates to the Coffee Board and the Mysore Agricultural Income-tax, which cannot be applied in the same sense under the Kerala Agricultural Income-tax Act. She accordingly held that the income derived by the Rubber Board is not exempted under Section 4(1)(b) of the Act.
4. The assessee took up the matter in further appeal before the Kerala Agricultural Income-tax Appellate Tribunal, Addl. Bench, Kottayam. Relying on the provisions of the Rubber Act and the provisions of Section 4(1)(b), Section 4(6)(a) and (c) of the Agricultural Income-tax Act, the assessee contended before the Tribunal that the Rubber Board is doing its activities under a legal obligation for the advancement of rubber industry in public interest. It was also submitted before the Tribunal that the income derived by the Rubber Board is to be credited to the 'general fund', which is actually spent wholly for public purposes as envisaged under Section 4(6)(c) of the Agricultural Income-tax Act. Relying on the decision of the Karnataka High Court in Coffee Board v. Deputy Commissioner of Agrl I.T. : [1964]52ITR126(KAR) , the assessee contended that its entire income is exempted from tax under the Agricultural Income-tax Act by virtue of the provisions of Section 4(1)(b) of the said Act. The Agricultural Income-tax Appellate Tribunal accepted the said plea and accordingly held that the assessee is eligible for exemption as a trust functioning under a legal obligation for advancement of public utility, as provided under Section 4(1)(b) read with Section 4(6)(a) and (c) of the Act. While holding so, the Tribunal rejected the contention made on behalf of the Department that even if the Rubber Board is to be treated as one working under legal obligation as contemplated under Section 4(1)(a) of the Act, still it cannot be treated as a charitable institution working for the advancement/development of public in general, but, it contemplates only advancement in rubber industry in which only a section of the public are interested. This was done relying on the observations of the Karnataka High Court, which is extracted at page 23 of the paper book.
5. Learned counsel appearing for the Department reiterated the contentions which were put forward before the Tribunal and contended that the assessee is not a charitable institution entitled to exemption under Section 4(1)(b) of the Act. It was also contended that the Appellate Tribunal erred in its finding that the assessee exists for the advancement of an object of public utility, in that the Rubber Board exists only for the benefit of a section of the public.
6. Learned counsel appearing on behalf of the assessee, on the other hand, contended that going by the provisions of the Rubber Act, 1947, the provisions of which have been set out in detail in the order of the Tribunal it is clear that the Rubber Board is doing its activities under a legal obligation for the advancement of rubber industry in public interest. He also submitted that the decision of the Karnataka High Court in Coffee Board v. Deputy Commr. Agrl I T. : [1964]52ITR126(KAR) , had considered the provisions of the Mysore Agricultural Income-tax Act, 1957, which are more or less similar to the provisions of the Kerala Agricultural Income-tax Act in material particulars, in the context of an assessment on the Coffee Board, which is constituted under the Coffee Act and held that the Coffee Board which derives agricultural income from properties held by the research wing of the Coffee Board is exempted as a charitable institution and that the ratio of the said decision squarely applies to the facts of this case also. He accordingly submitted that the Income-tax Appellate Tribunal has rightly held that the Rubber Board is entitled to the exemption pleaded.
7. Before we proceed to consider the question, it is necessary to refer to the provisions of the Agricultural Income-tax Act, 1950, as also the provisions of the Rubber Act, 1947. Section 4(1)(b) of the Kerala Agricultural Income-tax Act, 1950, reads as follows ;
'4(1)(b). Any agricultural income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in the State; and, where any such income is accumulated or set apart for application to such purposes in the State, to the extent to which the income so accumulated or set apart is not in excess of twenty five per cent, of the agricultural income from such property. '
8. Section 4(6), Sub-clause (a), thereof, defines 'trust' thus. --' 'Trust' includes any other legal obligation'. Section 4(6)(c) defines 'charitable purposes' as follows.--' 'Charitable purposes' includes relief of the poor, education, medical relief and the advancement of any other object of public utility.'
9. The first question to be considered is as to whether the Rubber Board constituted under Section 4 of the Rubber Act, 1947, is a 'trust' wholly for charitable purposes coming under Section 4(1)(b) of the Act. By virtue of the provisions of Section 4(6)(a), a 'legal obligation' is also included within the definition of 'trust' and by virtue of the provisions of Section 4(6)(c) of the Act, an assessee which exists for the advancement of an object of public utility, can be said to exist for charitable purposes. In view of the provisions quoted above, it is clear that if the assessee satisfies that by virtue of the provisions of the Rubber Act, it can be considered to be a 'legal obligation' which exists for the advancement of an object of public utility, then the first limb of the provision of Section 4(1)(b) is satisfied thereby entitling it to the benefit of exemption from payment of tax in respect of the agricultural income earned by it.
10. Before proceeding to refer to the provisions of the Rubber Act, it is also necessary to understand what is meant by an object of 'public utility'.
11. The question as to whether the Andhra Chamber of Commerce, a company registered under Section 26 of the Indian Companies Act, 1913, formed with the primary object to promote and protect trade, commerce and industries, to aid, stimulate and promote the development of trade, commerce and industries and to watch over and protect the general commercial interest of India or any part thereof was entitled to exemption from payment of tax under Section 4(3)(i) of the Indian Income-tax Act, 1922, in respect of its income derived by it from letting out a portion of the building owned by it, came up for consideration before the Supreme Court in CIT v. Andhra Chamber of Commerce [1966] 55 ITR 722. The Supreme Court held that the income of the chamber of commerce from its building was exempt from tax under Section 4(3)(i) of the Income-tax Act, as the building was held under a legal obligation wholly for charitable purposes. In that context, the Supreme Court observed that the advancement or promotion of trade, commerce and industry leading to economic prosperity enures for the benefit of the entire community ; that prosperity would be shared also by those who engaged in trade, commerce and industry, but on that account the purpose is not rendered any the less an object of general public utility and that the promotion and protection of trade, commerce and industry cannot be equated with promotion and protection of activities and interest merely of persons engaged in trade, commerce and industry. It was also observed that the Legislature had used language of great amplitude.
12. In the context of the expression 'public' used in the said sub-section, the Supreme Court further observed that the expression 'object of general public utility' is not restricted to objects beneficial to the whole of mankind ; that an object beneficial to a section of the public is an object of general public utility ; that to serve as a charitable purpose, it is not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or province ; that it is sufficient if the intention is to benefit a section of the public as distinguished from specified individuals ; that the section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature and that where there is no common quality uniting the potential beneficiaries into a class, it may not be regarded as valid. These principles have been reiterated by the Supreme Court in Ahmedabad Rana Caste Association v. CIT : [1971]82ITR704(SC) , and subsequent decision in Add. CIT v. Surat Art Silk Cloth Manufacturers Association : [1980]121ITR1(SC) , etc.
13. Now, it is necessary to consider the provisions of the Rubber Act to see whether the Rubber Board is a legal obligation which exists for the advancement of an object of public utility. The long title of the Act states that it is an Act to provide for the development under the control of the Union of the rubber industry. The preamble to the Act says that it is expedient to provide for the development under the control of the Union of the rubber industry and Section 2 of the Act declares that it is expedient in the public interest that the Union should take under its control the rubber industry.
14. The 'Rubber Board' is constituted by the Central Government by notification in the Official Gazette as provided under Section 4 of the Act having perpetual succession and a common seal with power to acquire and hold property both movable and immovable.
15. The Board is constituted with a Chairman appointed by the Central Government and 23 members representing rubber-producing interests, small growers, manufacturers and labour, members of Parliament, Executive Director, Ex-officio and the Rubber Production Commissioner (Ex-officio). Section 6A of the Act provides for appointment of an Executive Director to exercise the powers and perform such duties under the direction of the Board. It also provides for appointment of a Rubber Production Commissioner and a Secretary to the Board.
16. The Board is provided with two funds, namely, the general fund and the pool fund, under Sections 9A and 9B of the Act. These provisions relating to the general and pool funds are as follows :
' 9A. General fund.-(1) To the general fund shall be credited -
(a) all sums forming the funds of the Board immediately before the commencement of the Rubber (Production and Marketing) Amendment Act, 1954 ;
(b) all amounts paid to the Board by the Central Government under Sub-section (7) of Section 12.
(2) The general fund shall be applied -
(a) to meet the expenses of the Board ;
(b) to meet the costs of the measures referred to in Section 8 ;
(c) to meet the expenditure incurred in the performance of its functions under this Act or under the Rules made thereunder ; and
(d) for making such grants to rubber estates or for meeting the cost of such other assistance to rubber estates as the Board may think necessary for the development of such estates ;
9B. Pool fund. - (1) To the pool fund shall be credited -
(a) all sums realized by sales of rubber imported or purchased under Section 8A ;
(b) any other sum which the Board may, with the previous approval of the Central Government, transfer from the general fund to the pool fund.
(2) The pool fund shall be applied only to the rehabilitation of small growers in such manner as may be prescribed.'
17. Section 12 gives power to the Board to levy rubber cess, duty of excise, etc. Section 12(7) dealing with the duty of excise collection reads as follows :
'The proceeds of the duty of excise collected under this section reduced by the cost of collection as determined by the Central Government shall first be credited to the Consolidated Fund of India, and then be paid by the Central Government to the Board for being utilised for the purposes of this Act, if Parliament by appropriation made by law in this behalf so provides.'
18. Section 22 provides for control of the Board by the Central Government and this reads as follows :
'All acts of the Board shall be subject to the control of the Central Government which may cancel, suspend or modify as it thinks fit any action taken by the Board.'
19. So also, Section 24 deals with liability to keep accounts of the Board and Section 25 provides for power of Central Government to make rules regarding the working of the Rubber Board.
20. As could be seen from the provisions of the Act, which have been discussed above, the Act is enacted for the development of the rubber industry under the control of the Union and that control of the rubber industry was taken over by the Union in the public interest. The Rubber Board is constituted with the above objects under Section 4 of the Act. Its functions as provided under Section 8 of the Act are to promote by such measures as it thinks fit the development of the rubber industry, undertaking, assisting or encouraging scientific, technological and economic research ; training students in improved methods of planting, cultivation, manuring and spraying; supply of technical advice to rubber-growers ; carrying out any other duties which may be vested in the Board under rules made under this Act. The Rubber Board is also duty bound to give advice to the Central Government on all matters relating to the development of the rubber industry with regard to participation in any international conference or scheme relating to rubber, to submit reports to the Central Government regarding its activities and the working of this Act and also to furnish such other reports relating to the rubber industry as may be required by the Central Government.
21. There are two funds provided for the Board under Sections 9A and 9B of the Act, namely : (1) the general fund and (2) the pool fund. All sums realised by sales of rubber imported or purchased under Section 8A shall be put in the pool fund and the same shall be utilised only for the rehabilitation of small growers in such manner as may be prescribed. Admittedly, the Board is mainly holding research institutions and rubber estates as part of its obligations under Section 8 of the Act particularly Sub-clauses (a), (b) and (c) of Sub-section (2) thereof.
22. It is clear from the aforesaid provisions of the Rubber Act that the Rubber Board's activities are in the nature of a legal obligation for the advancement of the rubber industry and in public interest. Considered in the light of the principles discussed hereinabove, it is clear that the activities of the Rubber Board constitute advancement of an object of public utility.
23. The Karnataka High Court in Coffee Board v. Deputy Commissioner of Agrl I.T. : [1964]52ITR126(KAR) was concerned with the question as to whether the agricultural income derived by the Coffee Board from the farms maintained by the research department thereof are exempted from liability to assessment of agricultural income-tax under Section 12(f) of the Mysore Agricultural Income-tax Act. There, the assessee, namely, the Coffee Board, constituted under the provisions of the Coffee Act, was maintaining two research stations. In these stations, coffee and other commercial crops are grown. The primary question was whether the income realised by the sale of the crops grown in these research stations is liable to be taxed under the Act. The provisions of Section 12(f) of the Mysore Agricultural Income-tax Act, 1957, read with the Explanation thereto was similar to the provisions of Section 4(1)(b) read with Section 4(6)(a) and (c) of the Kerala Agricultural Income-tax Act, 1950. The said section and the Explanation is extracted below for convenience' sake.
24. Section 12(f) of the Act says that agricultural income-tax shall not be payable on that part of the total agricultural income of a person which is :
'any sum derived from land held under a trust or other legal obligation wholly or partly for public purposes of a charitable or religious nature and actually spent for the said purposes.'
25. There is an Explanation appended to that section and that Explanation reads :
'In this section, charitable purpose includes relief of the poor, education, medical relief and advancement of any other object of general public utility.'
26. After referring to the provisions of the Act quoted above, the Karnataka High Court referred to the provisions of the Coffee Act which contains provisions similar to the provisions of the Rubber Act and thereafter the court observed that it is clear that the Board is holding the two research stations mentioned earlier under a legal obligation for the purpose of advancing an object of general public utility. The income derived from those stations are credited to the 'general fund' which fund is actually spent wholly or partly for the public purposes' as envisaged in Section 12(f) and the assessee is entitled to the exemption asked for. The Karnataka High Court rejected the contentions made on behalf of the Department that the Board has no legal obligation to maintain the research stations and that the research stations merely benefit the coffee planters and none else and hence Section 12(f) is inapplicable and observed as follows (page 130) :
'We feel constrained to say that the Revenue has taken a very narrow view of the matter. Assuming, without deciding, that a section of the public does not come within the scope of the expression 'general public' it is wrong to say that the knowledge gained from these research stations merely benefits the planters. It has a wider impact. The knowledge gathered in these stations is bound to improve the quantity and quality of our coffee crop and thereby give the general public, in the sense in which the Revenue wants us to understand that expression, better and cheaper coffee. It is also likely to improve our foreign trade in coffee and thus add to our earnings from foreign trade. The scheme is intended to benefit the producer, the consumer and the country.'
27. We are of the view that the decision of the Karnataka High Court in Coffee Board v. Deputy Commissioner of Agricultural Income-tax : [1964]52ITR126(KAR) , is on all fours with the facts of this case. We also adopt the reasoning of the Karnataka High Court. We accordingly hold that the assessee is a legal obligation created under the Rubber Act for the advancement of rubber industry and in public interest, which is an object of public utility. The Income-tax Appellate Tribunal, according to us, has considered the matter in the right perspective and arrived at the aforesaid finding. We are in full agreement with the view taken by the Income-tax Appellate Tribunal.
28. For the above reasons, we answer the question referred to us in the affirmative, that is, in favour of the assessee and against the Revenue.
29. A copy of this judgment under the seal of this court and the signature of the Registrar shall be sent to the Agricultural Income-tax and Sales tax Appellate Tribunal, Addl. Bench, Kottayam, for passing consequential orders.