The Commissioner of Income-Tax, West
Bengal Vs. The Calcutta Stock Exchange Association Ltd.  INSC 26 (26
SINHA, BHUVNESHWAR P.
CITATION: 1959 AIR 763 1959 SCR Supl. (2) 459
CITATOR INFO :
F 1961 SC1144 (5)
Income Tax-Stock Exchange
Association-Authoriscd Assistants Admission fee and monthly subscriptions in
respect of them paid by members-Fee for Putting the names of companies on
Quotations List-income there from Assess ability to tax-" Performing
specific services ", Meaning of-Indian Income-tax Act, 1922 (XI of 1922),
By sub-s. 6 of s. 10 of the Indian Income-tax
Act, 1922: "A trade, professional or similar association performing
specific services for its members for remuneration definitely related to those
services shall be deemed for the purpose of this section to carry on business
in respect of those services, and the profits and gains there from shall be
liable to tax accordingly." The members of the respondent company, whose
principal object was to facilitate the transaction of business on the Stock
Exchange, were enabled under the by-laws to have a certain number of Authorised
Assistants so that the latter could use the premises of the company and
transact business therein in the names and on behalf of the members who, for
that purpose, were required to pay admission fees and monthly subscriptions in
respect of each of them. The bylaws of the company also provided that no
dealings in respect of the shares of any particular company should be permitted
on the Stock Exchange, unless an application made by a member of the respondent
company and accompanied by a fee of Rs. 1000, for putting the name of that
company on the Quotations List was approved by the prescribed Authority of the
respondent company. During the accounting year in question the company received
from its members admission fees and subscriptions in respect of the Authorized
Assistants and fees for putting the names of companies on the Quotations List.
The question was whether the aforesaid amount was liable to be taxed under s.
10(6) of the Indian Income-tax Act, 1922.
Held, that with reference to a trade,
professional or similar association, the performing of specific services under
s. 10(6) of the Indian Income-tax Act, 1922, mean conferring on its members
some tangible benefit which otherwise would not be available to them as such,
except for payment received by the association in respect of those services.
460 Accordingly, the income received by the
respondent company towards the admission fees and the subscriptions in respect
of the Authorized Assistants, being the price paid for the services of the
respondent company in making suitable arrangements for an absentee member to transact
business on his behalf and in his name by his representative or agent within
the Stock Exchange, as well as the fees received from members for enlisting the
names of companies not already on the Quotations List so as to permit
transactions in respect of the shares of the companies concerned, was
remuneration definitely related to specific services performed by the
respondent for its members within the meaning of s.10(6) of the Indian
Income-tax Act, 1922, and was assessable to income -tax.
Native Share and Stock Brokers' Association
v. The Commissioner of Income-tax, Bombay  14 I.T.R. 628, approved.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 204 of 1958.
Appeal from the judgment and decree dated January 6, 1956, of the Calcutta High Court in Income-tax Reference No. 74 of 1953.
K. N. Rajagopal Sastri, R. H. Dhebar and D.
Gupta, for the appellant.
Radha Binod Pal, Panchanan Pal and D. N.
Mukherjee, for the respondents.
1959. March 26. The Judgment of the Court was
delivered by SINHA, J.-The question for determination in this appeal on a
certificate of fitness granted by the High Court of Calcutta, is whether the
respondent's admitted income tinder certain heads, is chargeable to income-tax
under the provisions of s. 10(6) of the Indian Income-tax Act, 1922 (XI of
1922) (hereinafter referred to as the Act). The Calcutta High Court, by its
judgment dated January 6, 1956, answered the question in the negative,
disagreeing with the determination of the Income-tax Appellate Tribunal by its
order dated April 23, 1949.
The facts of this case, upon which the
decision of the appeal depends, may shortly be stated as follows: The
respondent is a limited liability company incorporated on June 7, 1933, with a
view to taking over the assets and liabilities of an unincorporated association
called " The Calcutta Stock Exchange Association 461 and to carrying on
the affairs of the Stock Exchange which had been founded by that Association.
The principal object of the Respondent Company is to facilitate the transaction
of business on the Calcutta Stock Exchange. In view of that objective, the
Company had to make rules and by-laws, regulating the mode and the conditions
in, and subject to, which the business of the Stock Exchange had to be
transacted. The Company is composed of " members " who may be either
individuals or firms, who, except in the case of parties who had been members
of the unincorporated Association have to be elected as such, and upon such
elections, have to acquire a share of the Company and pay an entrance fee. The
members have to pay a monthly subscription according to the by-laws of the
Company. Under the by-laws of the Respondent Company, members with a certain
standing, are allowed to have "Authorized Assistants ", upto a maximum
of six in number. Such Authorized Assistants are permitted the use of the
premises of the Association and to transact business therein in the names and
on behalf of the members employing them. The members have to pay an admission
fee for such Authorized Assistants according to the following scale :
(a) for the first two Assistants Rs.1,000 (b)
for the third Assistant Rs.2,000 (c) for the fourth Assistant Rs.3,000 (d) for
the fifth Assistant Rs.4,000 (e) for the sixth Assistant Rs.5,000 (f) for
replacement Rs.1,000 The last item of replacement fee of Rs. 1,000/is meant to
cover the fee for substituting one Assistant by another.
Before these by-laws were amended with effect
from July 10, 1944, a member could have more than six such Assistants, but the
number was limited to six by the new amendment which also provided that "
Members who have more than six Assistants, at present, shall not be allowed any
replacement unless the number of Assistants in their firms has come down to six
(maximum fixed)." Rule (5), as amended, is in these terms:462 "Every
candidate applying for admission as Assistant to a member must serve at least
for one year as a probationer in the firm of that member. A probationer must
apply to the Committee (through the member in whose office he will serve as
probationer) in such form as may be prescribed by the Committee by paying Rs.
100/as probationer fee which will not be refunded in any circumstances ".
It would, thus, appear that the rules
relating to the admission of members' Assistants, confer the benefit upon those
members only-either individuals or firms-who are qualified according to the
by-laws to have such Assistants, and who have paid admission fees and pay a
monthly subscription in respect of each of them, besides their own dues, to the
Company. The number of such Assistants has been sought by the by-laws to be
limited upto a maximum of six, by imposing a progressively enhanced admission
fee, apparently, with a view to discouraging the employment of a large crowd of
such " Authorized Assistants". The by-laws also provide that "an
authorized assistant shall not enter into any contracts on his own behalf and
all contracts made by him shall be made in the name of the member employing him
and such member shall be absolutely responsible for the due fulfillment of all
such contracts and for all transactions entered into by the authorized
assistant on his behalf" It is also contemplated by the by-laws that
tickets have to be issued to the Authorized Assistants, besides the members'
tickets. The bylaws also contemplate that a member shall give to the prescribed
Authority of the Company an immediate notice in writing, of the termination of
the employment by him of any Authorized Assistant, and on such termination, the
right of the Assistant to use the rooms of the Association, shall cease, and he
shall not be at liberty to transact business in the name and on behalf of his
The by-laws also make provision for the
supervision of the work of the Authorized Assistants to see that they function
within the limits of their powers, and do not transact 463 business on behalf
of persons or firms other than those employing them.
During the accounting year 1944-45 assessment
year 1945-46), the Respondent Company received from its members the sum of Rs.
60,750/as entrance fees, and the sum of Rs. 15,687/as subscription in' respect
of the Authorized Assistants.
The Company also received during the
aforesaid year, a sum of Rs. 16,000/as fees for putting the names of companies
on the Quotations List. Unless a particular company's name is placed on the
Quotations List, no dealings in respect of the shares of that company are
permitted on the Stock Exchange. An application has to be made by a member to
place on the Quotations List any company not already included in that List, and
on approval by the prescribed Authority of the Company, the name of the company
thus proposed, is included in the List upon payment of a certain fee. The
companies themselves cannot apply to the Association for such enlistment. The
application has to be made by a member, and has to be accompanied by a fee of
Rs. 1,000/-, and it is only after the necessary scrutiny and investigation into
the affairs of the proposed company have been made, that the enlistment applied
for is granted. That is another source of income to the Respondent Company. It
is no more necessary to refer to another item of income, which was admitted,
during the course of the assessment proceedings in their appellate stage, to be
liable to the payment of tax. We are, thus, concerned in the present
controversy with the aforesaid sums of Rs. 60,750/-, Rs. 15,687/and Rs.
16,000/-which were held by the Income-tax Officer, by his order dated March 27,
1946, to be liable to income-tax. The Income-tax Officer rejected the
contention raised on behalf of the assessee Company that the Authorized
Assistants aforesaid were themselves members of the Company, and that
therefore, the moneys received from them were exempt from taxation. He also
held that though the Respondent Company was a mutual Association, each one of
the three items of income, referred to above, was remuneration definitely
related 464 to specific services performed, and was thus, chargeable to tax
within the meaning of s. 10(6) of the Act. On appeal, the Appellate Assistant
Commissioner, by his order dated June 30, 1947, considered the points at great
length, and came to the conclusion that the authorized Assistants were not
members or substitute members. He held that the Authorized Assistants were no more
than representatives of the members who employ them, and they transact business
on their behalf, and that the Association had framed rules and by-laws,
regulating the admission, supervision and discontinuance of such Authorized
Assistants. For coming to this conclusion, he relied upon the decision of the
Bombay High Court in the case of Native Share and Stock Brokers' Association v.
The Commissioner of Income-tax(1). The case was then taken up in appeal to the
Income-tax Appellate Tribunal, which dismissed the appeal. The Tribunal agreed
with the finding of the taxing authorities that the Authorized Assistants were
not members of the Company within the meaning of the Articles of Association of
the Company, and that their position was analogous to that of the "
authorised clerks in Native Share and Stock Brokers' Association at Bombay
". In the course of its order, the Tribunal observed as follows:" The
provision made in the regulations of the company, by which a member can take
advantage of sending his authorised assistants to the company for transacting
the business in the member name is nothing but giving extra facilities to the
members. By controlling the institution of authorised assistants the company
renders specific services to the members and in particular to the member whose
assistants work for him. The amounts received by the company from these sources
are clearly covered by the provisions of section 10(6) ".
At the instance of the assessee, the Tribunal
stated a case and referred the following questions of law to the High Court for
its decision under s. 66(1) of the Act:" (1) Whether on the facts of this
case the Incometax Appellate Tribunal was right in holding that, (1)  14
465 Authorised Assistants were not members of
the company and as such the amounts of Rs. 15,687/and 60,750/received from them
as subscriptions and entrance fees respectively should be included in the
(2) Were these amounts received for specific
services performed by the Association or its members within the meaning of
sub-section (6) of section 10 of the Indian Income-tax Act ? (3)Whether the
sums of Rs. 16,000/and Rs. 600/-were remuneration definitely related to
specific services performed by the Association for its members within the
meaning of subsection (6) of section 10 ".
The reference was heard by a Division Bench
consisting of Sir Trevor Harries, C. J., and Banerjee, J., of the Calcutta High
Court. Before that Bench, certain concessions were made. It was conceded by Dr.
Pal, who also appeared before that Bench, that the Authorised Assistants were
not members of the Company. It was also agreed at the bar, on behalf of both
the parties, that the two sums of Rs. 60,750 and 15,687 were not received from
the Authorized Assistants, as suggested in the question formulated, and that it
was common ground that they were received from members of the Association in
respect of their Authorized Assistants.
Therefore, the High Court took the view that
the questions framed by the Tribunal did not arise, and that the Tribunal bad
proceeded on a wrong basis of facts. The High Court, therefore, re-cast the
questions in these terms:" Whether in the facts and circumstances of this
case the Income-tax Appellate Tribunal was right in holding that (a)the amounts
of Rs. 15,687/and Rs. 60,750/-received from the members of the Association as
subscriptions and entrance fees in respect of Authorized Assistants, and (b)
the amounts of Rs. 16,000/and Rs. 600/received as fees for enlisting names of
newly floated companies and for recognition of changes in the styles of firms
respectively should be included in the assess. able income of the assessees 59
466 The Tribunal was asked to re-state a case upon the questions as re-cast,
Accordingly, the Tribunal drew up a fresh
statement of the case and re-submitted it to the High Court. On this restatement
of the case, the matter was heard by a Bench consisting of Chakravarti, C. J.,
and Sarkar, J. The High Court considered the terms of s. 10(6) of the Act, and
came to the conclusion that the case had not been brought within those terms.
The High Court, in the course of its opinion, observed that though the assessee
is undoubtedly a trade association, it did not perform any specific services
for its members for remuneration. It then examined in detail the decision of
the Bombay High Court in the case of Native Share and Stock Brokers'
Association v. The Commissioner of Income-tax (1), relied upon by the
Department, and observed that the differences pointed out between the case in
hand and the case decided by the Bombay High Court, were " not vital,
though they are not immaterial ", but it was not prepared to take the same
view of the facts of this case as had been taken by the Bombay High Court in
the case referred to above, or by the Travancore-Cochin High Court in the case
of Commissioner of Income-tax v. Chamber of Commerce, Alleppey (2). The High
Court, accepted the argument of Dr. Pal, which is also addressed to us, that
the words " performing specific services for " were far stronger and
more definite than the words " render service to ", and that those
words meant the actual doing of definite acts in the nature of services. The
Court further observed that those words meant " execute certain definite
tasks in the interests and for the benefit of the latter (that is to say, the
members) under an arrangement of a direct character ".
It further observed that the words " for
remuneration" and " definitely related to those services " meant
that " certain specific tasks must be performed or functions of a specific
character must be discharged for payment and such payment is to be made to the
association as wages for its labour in respect of those tasks or functions
". In this connection, (1)  14 I.T.R. 628.
(2)  27 I.T.R. 535.
467 it may be added that the High Court also
made the following observations bearing on the construction of the crucial
words of s. 10(6):" When section 10(6) speaks of a trade, professional or
other similar association performing specific services for its members for
remuneration, it contemplates, I think, services in regard to matters outside
the mutual dealings for which the Association was formed and for the
transaction of which it exists as a mutual association. If performance of
functions even in regard to matters within the objects of the association as a
mutual association be performance of specific service within the meaning of the
sub-section, discharge of no function can be outside it and everything done
would be specific service performed. That, I do not think, is what the
sub-section means and intends ". It is manifest that unless the assessee
is brought within the terms of subs. (6) of s. 10, the three items of income
coming into the hands of the Association, would not be chargeable to income tax.
That subsection is in these terms:" (6) A trade, professional or similar
association performing specific services for its members for remuneration
definitely related to those services shall be deemed for the purpose of this
section to carry on business in respect of those services' and the profits and
gains there from shall be liable to tax accordingly ". It has to be
observed at the outset that the performing of the services of the description
mentioned in that sub-section, may not, but for the words of that section, have
amounted to carrying on business in respect of those services. The use of the
word " deemed " shows that the legislature was deliberately using the
fiction of treating something as business which otherwise it may not have been.
It is also noteworthy that the sub-section is couched in rather emphatic terms.
We have, therefore, to examine the terms of the sub-section to see whether the
three sums of money in question, or any of them, are or is within the ambit of
those terms. The words " performing specific services ", in our
opinion, mean, in the context, " conferring particular benefits " on
the members. The word 468 " services " is a term of a very wide
import, but in the context of s. 10 of the Act, its use excludes its theological
or artistic usage. With reference to a trade, professional or similar
association, the performing of specific services must mean conferring on its
members some tangible benefit which otherwise would Dot be available to them as
such, except for payment received by the association in respect of those
services. The word " remuneration ", though it includes " wages
", may mean payment, which, strictly speaking, may not be called wages
". It is a term of much wider import including recompense ", "
reward ", " payment ", etc. It, therefore, appears to us that
the learned Chief Justice was not entirely correct in equating "
remuneration " with " wages ". The sub-section further requires
that the remuneration should be " definitely related " to the
specific services. In other words, it should be shown that those services would
not be available to the members or such of them as wish to avail themselves of
those services, but for specific payments charged by the association as a fee
for performing those services. After these observations bearing on the
interpretation of the crucial words, we shall now examine each of the three
items of income, separately, to determine the question whether they answer, or
any of them answers, the description of " services " contemplated by
Firstly, the sum of Rs. 60,750 has been
realised from such members as applied for and obtained permission of the
Association to have the use of Authorized Assistants within the precincts of
the Stock Exchange. There cannot be the least doubt that unless those members
paid the prescribed entrance fees for one or more Authorized Assistants upto a
maximum of six, they could not have the benefit thus conferred upon such
members. Ordinarily, a member has to transact business in the precincts of the
Association by himself or by his business partner if there is a firm ; but if
that member is a very busy person, and wishes to avail of the services of
Authorized Assistants, he has to pay the prescribed fee. A member of the
Association, with the advantage of mutuality, so long as he transacts 469
business within the precincts of the Association, by himself or by his partner
in the case of a firm, is not required to pay any such entrance fee but only
the fee payable by every member as such. The entrance fee, thus, is clearly
chargeable only from such of the members as avail themselves of the benefit
conferred by the rules of the Association in that behalf. The entrance fee is,
thus, a price paid for the services of the Association in making suitable
arrangements for an absentee member to transact business on his behalf and in
his name by his representative or agent.
The entrance fee in question, therefore,
cannot but be ascribed to the specific services rendered by the Association in
respect of Authorized Assistants who thus become competent to transact business
on behalf of their principal.
Coming next to the sum of Rs. 15,687 which
was realised from the members by way of subscription in respect of their
Authorized Assistants, it is clear that this sum consists of the contributions
severally made by the members periodically, so as to continue to have the
benefit conferred by the Association of having the use of their representative
or agent even during their absence. There cannot be the least doubt that this
is a very substantial benefit to those members who found it worth their while
to engage the services of Authorized Assistants. A member is not obliged, as
indicated above, to have such an Assistant, but the fact that he chooses to
have such an Assistant on payment of the prescribed fee or subscription,
itself, is proof positive that a businessman, who ordinarily thinks in terms of
money, has found it worth-while to have the services of an Assistant by making
an additional payment to the Association by way of recompense for the benefit,
thus conferred upon him.
Lastly, the sum of Rs. 16,000 represents fees
received from members for allowing their application for enlisting the names of
companies not already on the Quotations List, so that the shares and stocks of
these companies, may be placed on the Stock Market. As already indicated, it is
not the company concerned which has directly to pay this fee, but the fee has
to 470 be paid by the member who initiates the proposal and, apparently, finds
it worth his while to pay that prescribed fee to the Association. He would not
make the payment unless he found it worth his while to do so Apparently, such a
member is interested in placing the stocks of that company on the market. It
cannot, therefore, be denied that that sum of money is definitely related to
the specific services performed by the Association, namely, to permit
transactions in respect of the shares of the company concerned, which services
would not otherwise be available to the members as a body or to the individual
member or members interested in that company.
In our opinion, therefore, each one of the
three sources of income to the Association, accrues to it on account of its performing
those specific services in accordance with its rules and by laws. Each one of
the three distinct sources of revenue to the Association, is specifically
attributable to the distinct services performed by the Association for its
members or such of them as avail themselves of those benefits. And each one of
those services is separately charged for, according to the rate or schedule
laid down by the rules and by-laws of the Association. In our opinion,
therefore, the requirements of sub-s. (6) of s. 10, have been fulfilled in the
But we have yet to deal with the last
argument accepted by the High Court, with reference to the terms of sub-s. (6)
of s. 10, namely, that the services contemplated therein, have reference to
" matters outside the mutual dealings for which the Association was formed
". In the first place, there is no warrant for limiting the application of
the words used by the legislature, in the way suggested. Secondly, the
mutuality of the Association extends only to such benefits as accrue to every
member on the payment made by him to the Association, but even if additional
items of payment have to be made for additional services to be performed by the
Association only for such of the members as avail themselves of those benefits,
it cannot be said that the mutuality extends to those additional benefits also.
It is, in our opinion, 471 equally wrong to suggest that the services in
question should have been outside the objects of the Association. If the
Association renders services to such of its members as avail themselves of such
services as are not within the scope of the business activities of the
Association, those benefits, if any, would not be' conferred by the Association
as such, because the Association has to function within the scope of its
objects of incorporation.
Hence, on a true construction of the
provisions of the subsection in question, we have come to the conclusion that
the facts and circumstances of the present case, bring the three items of
income of the Association within the taxing statute. In our opinion, the
decision of the Bench of the Bombay High Court, consisting of Stone, C. J., and
Kania, J., (as he then was), in the case of Native Share and Stock Brokers'
Association v. Commissioner of Income-tax is correct, and the facts of that
case run very parallel to those of the case in band, though there may be minor
differences in the rules and by-laws of the Association then before the Bombay
High Court. In that case, as in the present one, the rules of the Stock
Brokers' Association (the Bombay Stock Exchange) contemplated a definite scheme
for allowing members to employ authorized clerks and for the admission,
conduct, control and supervision of those clerks, for the benefit primarily of
the members who employed them.
It was held by the High Court that the income
received by the Association by way of fees in respect of those authorized
clerks, was within the taxing statute and liable to income-tax. After examining
in detail the provisions of the rules and the by-laws of the Association,
Stone, C. J., made the following observations which are equally applicable to
the rules and by-laws of the Association in the present case :" In my
judgment these rules lay down a definite scheme and provide an organised
arrangement, controlled and supervised by the Association for the benefit of
its members. In my opinion the carrying (1)  14 I.T.R. 628.
472 of their scheme into effect is performing
services for its members by the Association. No doubt the benefit of the scheme
would redound to the benefit of all members since all would have the advantage
of disciplined supervision exercised over the authorised clerks and remisiers
of the others. I do not think that because the payment for the carrying of the
scheme is provided for only by members who avail themselves of the use of the
authorised clerks it makes any difference." Kania, J., (as he then was),
in a separate but concurring judgment, made the following very pertinent
observations:" A perusal of the rules referred to in the judgment of the
learned Chief Justice shows that the institution of authorised clerks exists
for the benefits only of those who pay remuneration of Rs. 100 instead of going
to the market and carrying on their business themselves. Individual members are
permitted to work through an agent. For that the charge is made. The rules
provide for the application and grant for such permission, registration of the
authorised clerks on the individuals being recognised as clerks of particular
members, supervision over the work of such clerks and particularly to prevent
them from registering contracts either in their own name or in the name of
and a general supervision over their good
behaviour is contemplated............".
A question was raised as to whether these are
specific services to be performed for particular members or whether the rules
amount to performance of duties towards members in general. It is true that
several of the services to be rendered may be helpful to the other members for
their business. Taken as a whole I consider that as a performance of services
by the Association for, the benefit of members who pay the remuneration."
We have made these copious quotations from the judgment of the Bombay High Court,
because, in our 473 opinion, they truly apply the provisions of sub-s. (6) of
s. 10 to associations like the one before us.
The other case to which our attention was
drawn, is Commissioner of Income-tax v. Chamber of Commerce, Alleppey (1). The
facts of that case are not similar to those of the case before us, but the
ratio decidendi of that case are relevant. That case referred to the Alleppey
Chamber of Commerce. The Chamber inaugurated a produce section with the object
of promoting the interests of merchants in general, and of those engaged in the
produce trade, in particular, of acting as arbitrators and collecting and
publishing information relating to the produce trade.
Members were admitted to the produce section
on payment of admission fees, monthly fees and contributions at certain
prescribed rates. The question which was referred to the High Court, was
whether the receipts by way of fees and contributions, could be chargeable
under s. 10(6) of the Act, and it was answered in the affirmative.
Though cases in England, by way of precedent
for the decision of the case in hand, have not been cited at the Bar,
apparently because the scheme of the Income-tax law in England is different and
the words of the statute are not in parti material yet there are some cases
which throw some light on the controversy before us. For example, the case of
The Carlisle and Silloth Golf Club v. Smith (Surveyor of Taxes) (2 ) related to
a golf club which was not incorporated. It was admittedly a bonafide members'
club, but under one of the terms of its lease, it had to admit non-members to
play on its course on payment of " green fees " at certain prescribed
rates. Those fees were paid by non -members. Receipts from those fees were
entered in the general accounts of the Club, thus, showing an annual excess of
receipts over expenditure of the Club as a whole. It was held by Hamilton, J.,
(as he then was), that the Club carried on a concern or business in respect of
which it received remuneration which was assessable to 'income-tax.
He pointed out that the (1)  27 I.T.R.
(2) (1912) 6 Tax Cas. 48.
60 474 receipts from non-members went to
augment the funds of the Club, and the revenue thus received was applied for
the purposes of the Club-towards its general expenditure. The case was taken up
to the Court of Appeal, and the decision of that Court is reported in the same
Volume at p. 198. The Court of appeal affirmed the decision and dismissed the
The Judgment of the King's Bench Division in
The Liverpool Corn Trade Association, Limited v. Monks (H. M. Inspector of
Taxes) (1) was based on facts which are similar to the facts of the present
case. In that case, the Liverpool Corn Trade Association, Limited, was an
incorporated body under the Companies Act, with the object, inter alia, of
protecting the interests of the corn trade, and of providing a clearing house,
a market, an exchange, and arbitration and other facilities to the trade.
Membership of the Association was confined to persons engaged in the corn trade.
Each member was required to have one share in the company, and had to pay an
entrance fee and an annual subscription. Non-members could also become
subscribers. Payments were made to the Association by members and others for
services rendered through the clearing house, etc. The assessee was taxed on
the excess of its receipts over expenditure. On appeal to the Special
Commissioners, they upheld the assessment. One of the points raised before the
Special Commissioners, was that transactions with its members were mutual ones,
and that any surplus arising from such transactions, was not a profit
assessable to -income-tax. On appeal, the High Court agreed with the
determination of the Special Commissioners, and held that any profit arising
from the Association's transactions with members, was assessable to income tax
as part of the profits of its business, and that the entrance fees and
subscriptions received from members must be included in the computation of such
It was suggested that the service in this
case, if any, was extremely trivial and the remuneration which was large was
for that reason not definitely related to the (1) (1926) Tax Cas. 442.
475 service. It was held by Upjohn, J., in
Bradbury (H. M. Inspector of Taxes) v. Arnold (1) that the extent of the
services was of no materiality. There, the question was being dealt with under
Case VI of Schedule D of the Income tax Act, 1918. The learned Judge observed :
" There is no doubt that a contract for
services may, and clearly does, form a matter for assessment under Case VI of
Schedule D, and not the less so that the services to be rendered are trivial or
that they are to be rendered once and for all so that the remuneration may be
regarded as a casual profit arising, out of a single and isolated
The same view was expressed by Harman, J., in
Housden (Inspector of Taxes) v. Marshall (2). In that case, a well known jockey
'contracted with a newspaper company to make available to its nominee “reminiscences
of his life and experiences on the turf for the purpose of writing a series of
four articles ", and to provide photographs, press cuttings, etc. He was
paid pound 750. The question was whether this amounted to sale of property, or
was a payment for services rendered. It was held that it was the latter, and
that it did not matter if the service rendered was trivial.
In view of what we have said above as to the
nature of the service which the Association performed in respect of the
Assistants, the payment of the fee was definitely related to that service. It
is, therefore, plain that the case fell within s. 10(6) of the Act. It must,
therefore, be held that the question referred to the High Court should have
been answered in the affirmative, and that the High Court was in error in
giving its opinion to the contrary.
The appeal must, accordingly, be allowed with
costs here and below.
(1)  37 Tax Cas. 665, 669.
(2)  3 All E.R. 639.