JUDGMENT ORDER OF REFERENCE TO FULL BENCH In view of important question of law involved in this reference, and divergent opinions expressed by two Division Benches of this court in (1) A.A.Os. Nos. 216 and 279 of 1970, dated December 13, 1971 [Municipal Corporation of Hyderabad v. Hyderabad Race Club] and (2) CIT v. Hyderabad Race Club [1978] 115 ITR 453, in respect of same assessee, viz., Hyderabad Race Club, we feel it expedient to have matter adjudicated by Full Bench of this Hon'ble Court. Place papers before Hon'ble Chief Justice for necessary orders in this behalf. JUDGMENT OF FULL BENCH judgment of court was delivered by ANJANEYULU J.-These three references arise under I.T. Act, 1961 (" Act ", for short). references are made by Income-tax Appellate Tribunal at instance of Hyderabad Race Club, hereinafter referred: to as " assessee R.C. No. 107 of 1978 relates to incometax assessment years 1971-72, 1972-73 and 1973-74. R.C. No. 187 of 1982 relates to income-tax assessment years 1974-75 and 1975-76 while R.C. 291 of 1982 relates to income-tax assessment year 1976-77. following questions of law are referred to this court under s. 256(1) of Act: R.C. No. 107 of 1978: " 1. Whether income of assessee, society registered under Societies Registration Act, for assessment year 1971-72 is not exempt under section 11 of Income-tax Act, 1961? 2. Whether income of assessee, company registered under Companies Act, 1956, and licensed under section 25 of said Act by Central Government for assessment years 1972-73 and 1973-74 is not exempt under section 11 of Income-tax Act, 1961? " R.C. No. 187 of 1982: " Whether income of assessee, company registered under Companies Act, 1956, and licensed under section 25 of said Act by Central Government for assessment years 1974-75 and 1975-76 is not exempt under section 11 of Income-tax Act, 1961? " R.C. No. 291 of 1982: " Whether income of assessee, company registered under Companies Act, 1956, and licensed under section 25 of said Act by Central Government for assessment year 1976-77 is not exempt under section 11 of Income-tax Act, 1961? " We may notice few facts relevant for purpose of these references. Initially, assessee was society registered under Societies Registration Act in year 1951. On April 15, 1971, society was wound up and its assets and liabilities were taken over as going concern by public company incorporated under Companies Act, 1956, and known as I Hyderabad Race Club Limited. In exercise of powers vested under s. 25 of Companies Act, Central Government licensed registration of assessee as company with limited liability, without addition to its name of word " limited ". For income-tax assessment years 1971-72, 1972-73 and 1973-74, assessee filed its returns of income for corresponding accounting years which ended on March 31, 1971, March 31, 1972, and March 31, 1973. assessee claimed before ITO that income derived by it from various sources is exempt under s. 11 of Act inasmuch as, according to assessee, it is established for charitable purposes within meaning of s. 2(15) of Act. ITO rejected assessee's claim that it is charitable institution and that its income is exempt under s. 11 of Act, basically on ground that assessee, was carrying on business by conducting races which was activity for profit. According to ITO, assessee was not established for any object of general public utility not involving carrying on of activity for profit, and, consequently, assessee's claim for exemption of its income could not be admitted. assessee carried matter in appeal to AAC of Income-tax, who upheld view taken by ITO and confirmed rejection of assessee's claim that it is charitable institution. assessee carried matter in second appeal to Income-tax Appellate Tribunal and reiterated its plea that it is established for charitable purposes within meaning of s. 2(15) of Act, and that its income qualifies for exemption under s. 11 of Act. assessee challenged correctness of view held by lower authorities. matter was argued at considerable length before Tribunal and there was conflict of opinion between judicial member and accountant member. Learned judicial member held that income earned by assessee is not entitled to exemption under s. 11 read with s. 2(15) of Act, upholding view taken by ITO and confirmed by Assistant Commissioner of Income-tax in first appeal. learned accountant member, on other hand, held view that assessee's income for years under consideration is exempt from tax in terms of s. 11 and s. 2(15) of Act and, accordingly, allowed assessee's contention that it is charitable institution. In view of above difference of opinion between learned judicial member and learned accountant member, matter was referred under s. 255(4) of Act by President of Tribunal to Vice-President for consideration, Vice-President agreed with view expressed by learned judicial member and held that assessee is not charitable institution and, consequently, it cannot claim exemption of its income under s. 11 of Act for assessment years 1971-72, 1972-73 and 1973-74. In view of majority opinion, Tribunal eventually dismissed appeals filed by assessee on above point. Thereafter, assessee required Tribunal, by filing applications under s. 256(1) of Act, to refer certain questions of law arising from order of Tribunal. That is how Tribunal referred two questions set out in paragraph I for opinion of this court in R.C. No. 107 of 1978. In connection with income-tax assessment years 1974-75, 1975-76 and 1976-77, assessee reiterated its plea for being recognised as charitable institution and for exempting its income under s. 11 of Act. Suffice it to state that assessee's claim was rejected, following view taken by Tribunal in connection with income-tax assessment years 1971-72, 1972-73 and 1973-74. Consequently, assessee's claim for exemption of its income for assessment years, 1974-75, 1975-76 and 1976-77 was also rejected. Thereafter, Tribunal referred, at instance of assessee, questions of law enumerated in paragraph 1 in R.Cs. Nos. 187 of 1982 and 291 of 1982. All three references came up for consideration before Division Bench of this court consisting of Amareswari and Seetharam Reddy JJ. Division Bench felt that in view of important questions of law involved in references and divergent opinions expressed by two Division Benches of this court in (1) AAOs. Nos. 216 and 279 of 1970, dated December 13, 1971 (Municipal Corporation of Hyderabad v. Hyderabad Race Club) and (2) CIT v. Hyderabad Race Club [1978]115 ITR 453, in assessee's own case, matter should be considered by Full Bench. That is how matter is placed before us for consideration of questions of law referred to this court in above three references. Learned counsel for assessee, Sri M. Uttam Reddy, reiterated before us contentions urged by assessee in courts below. It is submitted that society, which was in existence during previous year relevant to assessment year 1971-72, as also company, which had taken over assets and liabilities of erstwhile society, were established for charitable purposes within meaning of s. 2(15) of Act, and, consequently, income derived by assessee qualified for exemption under s. 11 of Act, subject to fulfilment of requirements specified in s. 11(2) of Act. objects for which assessee was established as society under Societies Registration Act were specified in clause 3 of memorandum of association to which our attention has been invited by learned counsel. We may, for purpose of convenience, extract below some of objects specified in memorandum which are relevant for our purpose: " (a) To encourage and promote scientific breeding and training of horses, ponies and mules. (b) To promote, organise and control race meetings at Hyderabad and elsewhere. (c) To carry on business of race club in all its branches, etc. (d) To impart instructions in and to diffuse useful and scientific knowledge of horse breeding; to encourage horse breeding in all its aspects; and to give monetary assistance to bona fide breeders. (e) To devote sums of money from income of club to public charitable purposes and to other worthy causes. " There are various other objects specified in memorandum. Learned counsel submitted that most of other items specified as objects were in reality powers which can be exercised by society and were not in nature of objects for which society was established. Learned counsel submits that basic purpose for which assessee-society was established was specified in clauses (a), (d) and (e) and objects specified in these clauses were, according to learned counsel, charitable in character. object relating to carrying on of business of race club in all its branches specified in clause (c), learned counsel contends, was only power conferred on society in order to promote and advance objects specified in clauses (a), (b) and (e). In other words, according to learned counsel, carrying on business of race club in all its branches is not object at all for which assessee-society was established. It is urged by learned counsel that scientific breeding and training of horses, ponies and mules, specified in clause (a), is object of general public utility and, is consequently charitable purpose within meaning of s. 2(15) of Act. It is also submitted that object of imparting instructions in and to diffuse useful and scientific knowledge of horse breeding, to encourage horse breeding in all its aspects, and to give monetary assistance to bona fide breeders, specified in clause (d), and devoting sums of money from income of club to public charitable purposes and to other worthy causes, specified in clause (e) above-referred, are again objects of general public utility and come within meaning of expression " charitable purposes " under s. 2(15) of Act. power given to assessee-society for carrying on business in racing should be regarded as power conferred on society to achieve above objects and business carried on in racing is merely ancillary to main objects specified in clauses (a), (d) and (e) above-referred. It would be relevant at this stage to refer to memorandum of association of assessee after its incorporation as company. Paragraph III of memorandum of association sets out " objects for which company is established ". following two are stated to be main objects to be pursued by company on its incorporation ": 1. To take over assets and liabilities of present club known as the'Hyderabad Race Club.' 2. To carry on business of race club in all its branches and to conduct, hold and promote race meetings and athletic sports, sports, polo, lawn tennis, golf and other matches, horse and other shows and exhibitions and otherwise utilise company's properties and sites and to give and contribute towards prizes, cups, stakes and other rewards. " objects which are incidental or ancillary to attainment of main objects are also specified in memorandum. following object is specified in memorandum of association against serial No. 4 of objects incidental or ancillary to attainment of main objects: " 4. To impart instructions in and to diffuse useful and scientific knowledge of horse breeding and to encourage horse breeding in all its, aspects and to give monetary assistance to bona fide breeders. " It would thus be seen that scientific breeding and training of horses and imparting of instructions relating to horse breeding in all its aspects, is shown as incidental or ancillary object in memorandum of association of assessee-company which was established in April, 1971. Learned counsel submits that in memorandum of association constituting assessee as company in April, 1971, carrying on business of race club in all its branches had to be specified as main object in order to meet branches had to be specified as main object in order to meet requirements of Company law, although in point of fact main object for which assessee-company was established, was what was stated as incidental or ancillary object against sl. No. 4 referred to above. It is pointed out that for purpose of incorporating company, business which company carries on has to be specified as main object and all other objects have to be specified as incidental or ancillary objects, and this classification for limited purpose of Companies Act should not, according to learned counsel, be confused with real object for which assessee-company was established. According to learned counsel, basic or dominant object for which assessee was established, whether as society prior to April, 1971, or as company from April, 1971, was to encourage and promote scientific breeding and training of horses and to impart instructions in and to diffuse useful and scientific knowledge of horse breeding and to encourage horse breeding in all its aspects which, according to learned counsel, are objects of general public utility. other objects specified, whether I in memorandum of association relating to assessee as society or in memorandum of association relating to assessee as company, are all subservient to main object of " scientific horse breeding ". Consequently, doctrine of dominant or primary object should be invoked in present case in order to examine whether dominant or primary object for which assessee is established, is charitable in character. We are unable to agree with learned counsel that dominant or primary object for which assessee is established either as society or as company, is scientific breeding of horses, and not for purpose of carrying on business in conducting races. Referring to memorandum of association of assessee as society under Societies Registration Act, we see no ground to regard object specified; in clause (c) of para 3 as power conferred on society to carry on business to advance and promote so-called main object of scientific breeding and training of horses. In first place, paragraph 3 specifically mentions that carrying on business of race club is object for which society is established. It is not in nature of power conferred on society. It is true that some of objects specified in para. 3 of memorandum of association relate to powers conferred on society and there is, to some extent, mix-up of objects and powers in para. 3. We have, however, no difficulty in regarding carrying on of business by conducting races as being in nature of object rather than power. If any doubt in above regard subsists as regards memorandum of association of society, that is clearly set at rest while setting out objects for which assessee was established as company. As we have already referred to above, memorandum of association of assessee after its incorporation in April, 1971, as company clearly states that main object to be pursued by assessee-company on its incorporation, is to carry on business of race club in all its branches. Even when assessee was society, carrying on business of race club was obviously main object although it Was mixed up with other objects, as there was no statutory requirement that main objects and ancillary objects should be separately specified in case of society. We are unable to appreciate learned counsel's contention that notwithstanding memorandum of association specifying carrying on of business of race club as main object for which assessee-company was incorporated, we should hold that main object for purpose of Companies Act is carrying on of business of race club, and main object for purpose of I.T. Act is scientific breeding of horses. We must reject contention that main objects for which assessee was established should be regarded differently for purpose of Companies Act and I.T. Act. provision contained in memorandum of association is unequivocal and does not warrant any such classification as urged by learned counsel. We have, therefore, no difficulty in coming to conclusion that main object for which assessee was established, whether as society or as company, was to carry on business of race club and all other objects are either incidental or ancillary to above main object. Thus, even invoking doctrine of dominant or primary object, we must hold that assessee was established with dominant or primary object of carrying on business of race club by conducting races which, on own admission of learned counsel, is not charitable in character. This itself is sufficient to demolish assessee's claim that it must be regarded as having been established for charitable purposes by invoking doctrine of dominant or primary object. We may, for sake of completeness, examine contention of learned counsel that scientific breeding and training of horses and imparting instructions in and to diffuse useful and scientific knowledge of horse breeding, are objects of general public utility within meaning of s. 2(15) of Act. It is contended by learned counsel that scientific breeding of horses is object connected with animal husbandry and scientific breeding of horses is closely associated with welfare of animals and should, therefore, be regarded as object of general public utility for purpose of s. 2(15) of Act. In support of this proposition, learned counsel relied on judgment of Gujarat High Court in CIT v. Swastik Textile Trading Company Pvt. Ltd. [1978] 113 ITR 852. Learned counsel for assessee has taken us through above judgment of Gujarat High Court. We find it entirely different on facts. That is case where assessee donated certain sums in favour of charitable trust and claimed deduction under s. 80G of Act in respect of said donations. tax authorities held that relevant object in cl. 4(g) of trust deed of establishing, maintaining, running and helping " gaushalas, panjarapoles " and other similar institutions for animals, was religious object and was, therefore, non-charitable in character. It, therefore, fell for consideration whether establishing, maintaining, running and helping gaushalas, panjarapoles and other similar institutions for animals, could be regarded as charitable object. Examining above aspect, court observed that (p. 857): "...the object beneficial to mankind or humanity is interpreted in wide manner so as to embrace within its scope those acts of charity, which advance general public morality, alleviating suffering of weak, infirm animals or preventing cruelty to animals, encouraging compassionate feeling and tender treatment by protecting such domestic animals, by service of such animals or looking after and promoting well-being of these domestic animals, including such bovine animals which are mainstay of our agricultural community. Such objects are looked upon as proper objects of public charity in this country. " court referred to various authorities in support of basic proposition that any trust created or institution established which tends to promote public morality by checking innate tendency to cruelty towards animals, should be regarded as charitable in character. following observations of Lord justice Swinfen Eady in In re Wedgwood: Allen v. Wedgwood [1915] 1 Ch 113, 122, are instructive: " gift for benefit and protection of animals tends to promote and encourage kindness towards them, to discourage cruelty, and to ameliorate condition of brute creation, and thus to stimulate humane and generous sentiments in man towards lower animals, and by these means promote feelings of humanity and morality generally, repress brutality, and thus elevate human race. " following observations of Chagla J. in Vallabhdas Karsondas Natha v. CIT [1947] 15 ITR 32 (Bom), are significant (at p. 49): " It is perfectly true that basis of holding trust for benefit of animals as good charitable trust is that it falls within fourth category of Lord Macnaghten's famous definition in Pemsel's case [1891] AC 531 (HL), namely, that it is trust beneficial to community. Whatever view may be in England as to protection of animals and as to feeding of animals, we must consider what views are in our own country and it is patent that Indians as race are extremely kindly disposed towards animals which have been object of charity at hands of many munificent donors. " Gujarat High Court referred to decision of Bombay High Court in Pradhan v. Bombay State Federation of Gaushalas and Panjarapoles [1957] 59 Bom LR 890 (Bom), wherein Chagla C.J. in terms held that object of society which was formed to admit into its membership institutions like gaushalas and panjarapoles, that is to say, for taking all possible means for complete protection of cows and bovine cattle from premature death, neglect and deterioration and to save bovine cattle by improving their breed and raising their economic standard, was for charitable purpose under head of " Any other object of general public utility ". It was pointed out that gaushala was public charitable institution working for protection and preservation of cows and calves and bovine cattle and panjarapole was also institution working for protection, welfare and preservation of bovine cattle and other animals. Having regard to above views, Gujarat High Court eventually held that society whose object was to save cows from destruction and of improving standard of cattle in our country was surely working for object of general public utility because cattle are most important for rural economy of India. On above premises, Gujarat High Court held that cl. 4(g) of trust deed for establishing, maintaining, running and helping gaushalas, panjarapoles and other similar institutions for animals, was charitable purposes. following principles emerge from observations enumerated above: " (a) trust for improving standard of cattle in our country is regarded as object of general public utility because cattle is mainstay of our agricultural community and most important for rural economy of India. (b) trust for protection of cows and bovine cattle from premature deaths, neglect and deterioration and destruction and to save bovine cattle by improving their breed and raising their economic standard, was for charitable purpose under head'Any other object of general public utility'. (c) trust created or institution established which tends to promote public morality by checking innate tendency to cruelty towards animals should be regarded as beneficial to community as whole and, therefore, charitable in character. " object of scientific breeding of horses does not come within any of above principles. In first place, horses are no longer used in this country for agricultural purposes and they are much less looked upon as important for rural economy of country. part played by horses in above purposes is very insignificant. It is not denied that so-called object of scientific breeding of horses by assessee is confined only to such category of horses useful for conduct of races. assessee does not undertake scientific breeding of horses not useful for conducting races, say, for example, horses which are used for transport in small villages. Scientific breeding of horses connected with conduct of races hardly confers any benefit on community. It is also not denied that assessee does not undertake preservation and protection of bovine and infirm horses as measure of kindness towards animals and prevention of cruelty towards them. assessee does not even check innate tendency to cruelty in destroying race horses once race horse is found unsuitable by reason of any injury suffered. Surely assessee-club does not promote and encourage kindness towards horses, discourage cruelty and stimulate humane and generous sentiments in man towards infirm horses. There is then no difficulty in understanding real object for which assessee-club is established and that object is for scientific breeding of such horses as are useful for conducting races and that object is to promote its own main object of carrying on business in conducting races. We should not, therefore, confuse high-sounding words " scientific breeding of horses " employed in memorandum of association of assessee either as society or as company, with any purpose beneficial to community; on contrary, it is purpose beneficial to itself in sense that scientific breeding of horses has reference only to main object of conducting races and not to any general laudable object of breeding horses for benefit of community. Learned counsel for assessee relied on decision of Madras High Court in CIT v. Ootacamund Gymkhana Club [1977] 110 ITR 392. facts in that case are totally different from facts of present case and is, therefore, clearly distinguishable. Learned counsel for assessee, Sri Uttam Reddy, urged that there was no dispute before Tribunal that object of scientific breeding of horses, etc., is charitable purpose being object of general public utility. According to learned counsel, only dispute was whether object of general public utility in assessee's case is hit by exclusionary clause " not involving any activity for profit " within meaning of s. 2(15) of Act. Learned counsel pointed out that judicial as well as accountant member of Tribunal and also Vice-President considered question only from above point of view. It is, therefore, suggested that this court ought not to examine question whether scientific breeding of horses, etc., is charitable purpose or not, as it does not arise out of Tribunal's order. learned counsel is perhaps right in pointing out that judicial as well as accountant member of Tribunal, who differed, and also Vice-President, proceeded on assumption that scientific breeding of horses, etc., is object of general public utility and came to conclusion by majority that such object of general public utility is hit by exclusionary clause in s. 2(15) of Act " not involving any activity for profit ". We do not understand relevancy of entering into detailed discussion to find out whether object of general public utility is hit by aforementioned exclusionary clause, without first determining whether there is object of general public utility at all. Unless it is possible first to come to conclusion that dominant or primary object for which assessee is established either as society or as company is object of general public utility, no purpose is served by examining law on point whether such object involved any activity for profit. We do not accept learned counsel's contention that this basic and larger issue does not arise out of Tribunal's order, because unless that basic question is considered and conclusion arrived at, any discussion of law governing matter will be purposeless. It was for this reason that we did not accede to submission of learned counsel, Sri Uttam Reddy, that we should examine decision of Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers [1980] 121 ITR I (SC). principles enunciated in that decision would be helpful only if we come to conclusion that dominant or primary object for which assessee is established is object of general public utility. If at threshold, we are confronted with difficulty of accepting assessee's contention that dominant or primary object for which assessee is established is object of general public utility, nothing further survives for consideration and doctrine of dominant or primary object does not fall to be invoked at all. We have, for reasons aforesaid, no hesitation in rejecting assessee's two-fold contention that (a) its main object is scientific breeding of horses and imparting instructions in and to diffuse useful and scientific knowledge of horse breeding, etc., and (b) that said object is object of general public utility and is consequently charitable purpose within meaning of s. 2(15) of Act. On contrary, we hold that main object of meaning of s. 2(15) of Act. On contrary, we hold that main object of assessee, whether as society or as company, is to conduct races which admittedly is not charitable purpose and that, in any event, scientific breeding of horses, etc., is not object of general public utility and cannot, consequently, be regarded as charitable purpose within meaning of s. 2(15) of Act. This leaves us to examine only one decision which was pressed upon us by learned counsel with sufficient justification and that is decision of Division Bench of this court in Municipal Corporation of Hyderabad v. Hyderabad Race Club (AAOs Nos. 216 and 279 of 1970, dated December 13, 1971). Learned counsel heavily relied on above decision as it was rendered in assessee's own case, where it was accepted that assessee, when it was constituted as society under Societies Registration Act, was charitable institution. We have stated earlier that in subsequent judgment concerning wealth-tax matters of assessee, another Division Bench of this court in CWT v. Hyderabad Race Club [1978] 115 ITR 453 (AP), held that assessee is not charitable institution. It is because of this apparent conflict between two Division Benches of this court that matter has been referred to Full Bench. We are inclined to hold that decision of Division Bench in CWT v. Hyderabad Race Club [1978] 115 ITR 453 (AP), is correct. We are unable to agree with decision in Municipal Corporation of Hyderabad v. Hyderabad Race Club (AAOs Nos. 216 and 279 of 1970, dated December 13, 1971), with great respect to learned judges who decided that case. We may point out that conclusion that assessee is charitable institution was reached in AAOs Nos. 216 and 279 of 1970, dated December 13, 1971, from negative fact, namely, that members of assesseesociety were not entitled for personal or pecuniary benefit or advantage. question whether scientific breeding of horses, etc., is object of general public utility was not examined from positive angle. mere fact that members of assessee-society are, not entitled for any personal or pecuniary benefit or advantage, does not automatically render assessee-society charitable institution. Unless positive requirements of law are satisfied, assessee cannot be regarded as charitable institution. We have already indicated above our reasons for coming to conclusion that objects for which assessee is established, either as society or as company, do not spell out any charitable purpose. questions formulated for opinion of this court ill three references above referred to seem to suggest that registration of assessee as society under Societies Registration Act and licence, granted to assessee as company under s. 25 of Companies Act would prima facie clothe assessee with character of charitable institution. Learned counsel for assessee fairly accepted during course of hearing that neither of above events is conclusive and question whether assessee is established for charitable purpose or not must be examined independently with reference to provisions of Act. registration of assessee as society under Societies Registration Act and licence granted to assessee under s. 25 of Companies Act are only relevant factors in reaching appropriate conclusion. In result, we answer two questions referred to us in R.C. No. 107 of 1978 in affirmative, that is, in favour of Revenue and against assessee. We also answer questions referred to us in R.Cs. Nos. 187 of 1982 and 291 of 1982 in affirmative, that is, in favour of Revenue and against assessee. In facts and circumstances of case, we direct parties to bear their own costs. *** HYDERABAD RACE CLUB v. COMMISSIONER OF INCOME TAX