G.T. Nanavati, J.
1. In this reference made under section 256(2) of the Income-tax Act, 1961, the following two questions have been referred to this court :
'(1) Whether the finding of the Appellate Assistant Commissioner as confirmed by the Appellate Tribunal that the assessee is not a separate taxable entity and hence was not liable to pay income-tax under the provisions of the Income-tax Act, 1961, is correct in law and sustainable from the material on record
(2) Whether, on the facts and in the circumstances of the case, the assessee is not liable to pay tax under any of the provisions of the Income-tax Act, 1961 ?'
2. Believing that the Gujarat Pradesh Congress Samiti is an independent taxable entity, the Income-tax Officer served a notice under section 148 of the Act for the assessment years 1960-61, 1961-62 and 1962-63. The contention raised on behalf of the GPCC was that it was not a separate taxable entity having income of its own which can be brought to charge under the provisions of Act. Its case was that it was a unit of the Indian National Congress. The Income-tax Officer, however, did not accept this contention and treated the GPCC as an independent taxable entity and proceeded to tax it as an association of persons. The assessee filed appeals before the Appellate Assistant Commissioner who accepted the contention of the assessee and annulled the assessments for the said three years. The Department preferred three appeals to the Tribunal but they were dismissed. As attempt to get a reference made to this court in respect of these assessment years also failed. Similarly, for the assessment year 1964-65, the Income-tax Officer issued a notice under section 148 of the Act requiring the assessee to file a return of its income as it had not filed it under section 139. The assessee objected on the same grounds but the Income-tax Officer did not accept the contentions of the assessee and treating it as a body of individuals framed the assessment under section 143(3) of the Act on a total income of Rs. 89,890. The appeal filed by the assessee was allowed by the Appellate Assistant Commissioner. The appeal filed by the Revenue to the Tribunal was dismissed. An attempt to get a reference made to this court failed. But then, the Revenue moved this court under section 256(2) and in compliance with the direction given by this court, the Tribunal has referred the abovestated questions to this court.
3. Learned counsel for the Revenue submitted that the income and expenditure as well as the surplus of the assessee are nor reflected in the accounts of the Indian National Congress. The assessee has a separate constitution of its own and that it has full control of finance and management within the area of its jurisdiction. He also submitted that no material was produced by the assessee to show that the property did not stand in its name but had stood in the name of the Indian National Congress. Thus, it was the assessee which was the owner of the income received by it and was thus a separate taxable entity.
4. In order to appreciate these contentions raised on behalf of the Revenue, it is necessary to refer to the constitution of the Indian National Congress and the Gujarat Pradesh Congress Samiti. A perusal of both the constitution clearly indicates that the Indian National Congress is an organisation or a political party and the assessee is one of the committees through which the Indian National Congress acts in Gujarat. Article II of the constitution of the Indian National Congress indicates which are the constituents of that organisation. They are known as (i) The All India Congress Committee; (ii) The Working Committee; (iii) Pradesh Congress Committee; (iv) District/City Congress Committee and (v) Committees subordinate to the District Congress Committee like block or constituency Congress committees and other subordinate committees to be determined by the Pradesh Congress Committee concerned. In article III, Gujarat is described as one of the territorial divisions. Article IV which provides for membership is as under :
'a(i) any person of the age of 18 or over, who accepts article I, shall, on making a written declaration in Form A and on payment of biennial subscription of Rs. 1.00 only, become a primary member of Congress provided that he is not a member of any other political party, communal or other which has a separate membership, constitution and programme.'
Clause (d) of article IV provides as under :
'The biennial subscription paid by primary and active members shall be distributed in the following proportions between the various Congress committees : AICC 10 per cent.PCC 25 per cent.DCC 25 per cent.Subordinate CCs. 40 per cent.Note : 40 per cent. share of primary and active membership subscription to be proportionately distributed amongst various subordinate Congress committees below the DCC shall be determined by the Pradesh Congress Committee concerned.'
5. Article X provides for the term of the Pradesh Congress Committee. A person who becomes a member of the Pradesh Committee has to pay an annual fee of Rs. 25 to the PCC of which Rs. 15 is to be remitted to the AICC as delegate fees and has to collect Rs. 100 for Congress funds biennially within three months of the election to the PCC and deposit it with the PCC and obtain a receipt therefore. Every PCC is subject to the general supervision and control of the AICC. Though the PCC has been given authority to frame its own constitution, it is further provided that it shall not be inconsistent with the constitution of the Indian National Congress. Moreover, it is further provided that the constitution so framed shall come into operation only with the previous sanction of the working committee. Every PCC is required to submit to the working committee an annual report of the work done by the Congress organisation in the Pradesh including audited balance-sheets. Clause E of article X given power to the working committee to suspend the existing PCC in certain circumstances. Persons who are elected to the PCC become delegates of the Indian National Congress. Article XVIII which provides for the term of the working committee further provides that the working committee shall have power to superintend, direct and control all Pradesh Congress Committees and to take such disciplinary action as it may think fit against that committee. The form which is provided for becoming a member also makes it clear that a person who applies to become a member becomes a member of the Indian National Congress.
6. If we peruse the constitution of the Gujarat Pradesh Congress Committee, it shows that it has been framed in terms of article X-C of the Indian National Congress. The said constitution was approved by the working committee of the Congress on November 30, 1970, and the provisions in the said constitution are consistent with the provisions of the constitution of the Indian National Congress. This constitution also makes it clear that a person who applies to become a member becomes a member of the Indian National Congress. Though the GPCC is entitled to retain a substantial part of the subscription amount, it has to spend it for the purpose or the object of the Indian National Congress and subject to its supervision and control. Thus, the functioning of the GPCS in only as one of the committees of the Indian National Congress and not as a separate independent entity. The GPCC obviously is not a political party having any independent object. It does not have any independent object as it is only a part of the Indian National Congress. A comparison of these two constitutions leaves no doubt regarding the assessee being one of the constituents and committees of the Indian National Congress. It does not have any existence apart from the existence of the Indian National Congress. No such existence is contemplated by its constitution. Even as regards the income received by it, it does not become the owner of the same even though it has a right to retain a substantial part of it for the purpose of spending the same for the objectives of the Indian National Congress. Under these circumstances, it becomes difficult to appreciate how the GPCC can be said to be an independent taxable entity. In our opinion, the Tribunal was right in holding that the GPCC is not a separate taxable entity and in dismissing the appeal filed by the Revenue.
7. We, therefore, answer the questions referred to us in the affirmative, that is, against the Revenue and in favour of the assessee. Reference is disposed of accordingly. No order as to cost.