S. RANGANATHAN ( 1 ) THIS is a referee under Section 256 (1) of the Income Tax Act, 1961. It relates to the assessment year 1963-64, the relevant previous vear being the calendar year which ended on 31-10-1962. ( 2 ) THE applicant assessee, M/s. Truck Operators Union, is registered as a trade Union under the Indian Trade Union Act, 1926. It is a trade Union of employers being goods transport operators either in the capacity of owners or partners, directors and managing directors of firms or companies carrying on transport business. The objects of the Union are set out in clause 2 of its constitution and are as follows: (I) To organise the transporters (goods) and to promote goodwill, harmonious relations amongst tnem to educate them to be useful members of the Society. (II) To assist them and regularise their business of goods transport and bring about uniformity in their dealings. (III) To handle and undertake on behalf of members the booking and delivery of. goods for their matual benefits. (VI) To secure amicable settlement of disputes of members referred to the Union, (V) To raise funds for the betterment of the needy and deserving members and for the education and upliftment of their children. (VI) To help the transporters in their trade by meking representations to the Transport Authorities. Provincial and Central Governments and undertake all possible steps to redress their grievances. Rule 16 of the constitution may also be here referred to which reads as follows : "the Executive Committee shall call a meeting of the General Body for dissolution of the Union and if such action is approved by two third majority of the members present the Union shall be dissolved. The remaining funds after defreying all due expenditure and liabilities, shall be distributed and in the case of loss, the amount of loss is be realised from all members of the Union. The General Body shall firstly appoint a Committee of members to either distribute or to realise the loss from members before the dissolution takes place. "for the assessment year 1963-64, the assessee claimed before the Income Tax Officer that it was a mutual body and, therefore, its income was not chargeable to Income Tax. The Income Tax Officer, however, negatived this claim of the assessees and assessed it on a total income of Rs. 28,462. "for the assessment year 1963-64, the assessee claimed before the Income Tax Officer that it was a mutual body and, therefore, its income was not chargeable to Income Tax. The Income Tax Officer, however, negatived this claim of the assessees and assessed it on a total income of Rs. 28,462. ( 3 ) THE assessee preferred an appeal to the Appellate Assistant Commissioner but at the stage of the appeal its claim was that its objections were entirely charitable and, therefore, it was entitled to exemption under Section II of the Act. This claim was based on the decision of the Supreme Court in the case of Commissioner of Income Tax v. Andhra Chamber of Commerce, 1965-55 I. T. R. 722 (1 ). This claim was accepted by the Appellate Assistant Commissioner who held that the assessee was entitled to exemption as a charitable trust and allowed the assessee s appeal. ( 4 ) THE department, filed an appeal to the Income Tax Appellate Tribunal. At this stage the assessee relied upon both its earlier contentions for obtaining relief but unfortunately both the contentions were rejected by the Tribunal. In regard to the assessee s claim to be treated as mutual concern, the Tribunal observed : "in our view the assessee could not be treated as a mutual concern. This is because there is no complete identity between the contributors and participants. The members who have not earned freight through the union and have, terefore, not paid commission to the union will nonethelless be entitled a share in the surplus in the event of the dissolution of the union. Moreover, the outsiders also contributed to the funds of the union by paying a percentage against goods arranged to be carried by a member transport carrier through the union. We do not find any warrant for the claim of the learned representative for the assessee that the amount received by the Union from customers, was received as a trust money for the benefit of the members. The Union was entitled to charge commission from the customers and the amount was to be accounted for and was duly accounted by the union in its profit and loss account. The Union was entitled to charge commission from the customers and the amount was to be accounted for and was duly accounted by the union in its profit and loss account. In the account for the year in a question there was no entry to show that the amount received by way of commission from customers was either paid back to the transport carriers or was held on trust in the account. "so far as the claim that the income of the assessee was derived from the property held under trust for charitable purpose was concerned, the Tribunal held, relying on the decision of the Mysore High Court in the case of Commissioner of Income Tax,. Mysore v. Sole Trustee, Loka Shikshana Trust (1970 77 I. T. R. 61) (2) that since the obiect of the trust provided for carrying on the business undertaking, it involved the carrying on of an activity for profit and, therefore, ceased to be a charitable purpose under the Act. The Tribunal, therefore, reversed the order of the Appellate Assistant Commissioner and restored the order of the Income Tax Officer) ( 5 ) THE assessee filed a miscellaneous application before the Tribunal sometime after its claim was rejected. In this application inter-alia the assessee contended that observations of the learned Tribunal that the outsiders also contributed to the funds of the Union by paying a percentage against goods arranged to be carried by a member transport carrier through the Union were absolutely erroneous in point of fact and that there was no evidence, data or material on the record to prove these assertions of the Departmental representative. The Tribunal dismissed this application. It pointed out that it had given its finding on the basis of the statement made by the Departmental representative at the time of the hearing which had not been challenged by any supporting evidence at the time of hearing. On the other band, when the customers paid certain amounts to the Union fur arranging carriage through its members, clearly there was contribution from outsiders. There was, therefore, no mistake in regard to this finding in the order of the Tribunal and the miscellaneous application was rejected. ( 6 ) AGGRIEVED by the order of the Tribunal accepting the Departmental appeal, the assessee sought a reference to this Court and the following two questions have been referred to us : 1. There was, therefore, no mistake in regard to this finding in the order of the Tribunal and the miscellaneous application was rejected. ( 6 ) AGGRIEVED by the order of the Tribunal accepting the Departmental appeal, the assessee sought a reference to this Court and the following two questions have been referred to us : 1. Whether on the facts and in the circumstances of the case, the assessee union was a mutual concern whose income was exempt from tax? 2. If answer to question No. I is in the negative, whether on the facts and in the circumstances of the case the income of the assessee was exempt under Section II of the Income-tax Act by reason of its income being derived from property held under trust wholly for charitable purposes? ( 7 ) WE are unable to accept the contention that the assessee is a mutual concern and so its income should be exempt from tax. The Tribunal has pointed out that the essential condition lor considering -an assessee to be a mutual concern, namely, that there should be an identity between the contributors and the participants has not been fulfilled in the present case. Shri Ahuja, learned counsel for the assessee, contended that this finding of the Tribunal is based on a mistaken impression that outsiders were also making contributions to the funds of the assessee which was erroneous in point of fact. But the difficulty in accepting the contention of Mr. Ahuja is that this is a finding of fact arrived at by the Tribunal and the assessee has not taken appropriate steps to raise this question before us by way of reference. On the other hand, the assessee sought to challenge the correctness of the above finding of fact by means of an application apparently under Section 254 and has failed therein. If the assessee was aggrieved by the Tribunal s ftnding of fact in this regard it should have sought for a reference to this Court on that question either from the original appellate order itself or from the order passed by the Tribunal dismissing the miscellaneous application. It is now well settled that in a reference it is not open to the assessee to seek to challenge a statement of fact unless a question to that effect has been specifically asked for or referred. It is now well settled that in a reference it is not open to the assessee to seek to challenge a statement of fact unless a question to that effect has been specifically asked for or referred. In the result we uphold the finding of the Tribunal that this was a concern where there was no identity between the participants and the contributors to the common funds. The Tribunal, therefore, was right in holding that it was not a mutual concern, and so the income was not exempt from tax. The first question is, therefore, answered in the negative and against the assessee. ( 8 ) IN regard to the claim under Section II of the Act, Shri Ahuja challenges the finding of the Tribunal that the objects of the present Union involved an activity for profit. He contended that the observations of the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. Commissioner of Income Tax, Mysore. 1975-101 I. T. R. 234 (3), have been disappeared by a larger Bench of the Supreme Court in the recent decision in the case of Addl. Comnussioner of Income-tax v. Surat Art Silk Cloth Manufacturers Association (1980-121 I. T. R. page l) (4 ). He contended that the facts of the present case and particularly the objects of the present Trade Union are on all fours with those considered by the Supreme Court in the Surat Art Silk cloth Manufacturers Association s case. He, therefore, urged that the Tribunal s finding that the assessee was not entitled to exemption under Section II is erroneous and should not be accepted. ( 9 ) IN the present case we find that it is not necessary to go into this aspect of the matter because the question can be answered against the assessee on other grounds on a simple construction of the constitution of the assessee which is placed on record. We have referred to the fact that under Rule 16 of the Constitution the funds of the Trade Union remaining with it after defraying all its dues and liabilities can be distributed among the members at the time when the association is dissolved. In other words, the rules and regulations of the assessee envisage a distribution of all surplus funds remaining with the assessee in due course among its members. In other words, the rules and regulations of the assessee envisage a distribution of all surplus funds remaining with the assessee in due course among its members. It is true that the distribution can take place only at the time of a dissolutioir but there is nothing preventing the assessee from accumulating the funds and also distributing the entire amount among the members and dissolution, after all, is also a matter which will be decided upon by the members of the association themselves. To put it differently, the rules and regulations of the Trade Union do not impose a legal obligation on the assessee or its members to hold the income of the assessee only for charitable purposes and thus the element of private gain has not been excluded. It will not, therefore, be eligible for exemption under Section 11. This conclusion of ours derives support from the decision of the Supreme Court in Commissioner of Income-tax v. Indian Sugar Mills Association (1974-97 I. T. R. 486 (5) (S. C. ). In that case the respondent association was registered as a trade union under the Trade Unions Act. The, various objects of the association were specified in Rule 3 and were similar to those in the present case. Rule 4 (a) provided that the income and property of the assessee should be applied solely towards the promotion of the objects of the association and no portion thereof should be paid or transferred directly or indirectly by way of dividend, bonuses or otherwise to its members. Rule 64 provided that subject to rules framed by the general meeting for declaration of dividends and distribution of profit, the profit shall be applied in such manner as the committee may in their discretion think fit provided that no distribution of profits amongst members will be made unless sanctioned by a resolution at a general meeting of the association held for the purpose. The claim for exemption of the Indian Sugar Mills Association to tax under Section 4 (3) (i) of the Income-tax Act, 1922 was upheld by the Calcutta High Court (vide :. Indian Sugar Mills Association v. Commissioner of Income-tax, 1970-77 I. T. R. (90) (6) but was rejected by the Supreme Court in the decision above referred to. The claim for exemption of the Indian Sugar Mills Association to tax under Section 4 (3) (i) of the Income-tax Act, 1922 was upheld by the Calcutta High Court (vide :. Indian Sugar Mills Association v. Commissioner of Income-tax, 1970-77 I. T. R. (90) (6) but was rejected by the Supreme Court in the decision above referred to. The Supreme Court rejected the claim on two primary considerations : (i) that Rule 64, which permitted distribution of profits among the members on a resolution being passed for the purpose, introduced an element of private gain which was inconsistent with the object of general public utility and it could not be said that the association held the income derived from its business of export of sugar wholly for charitablepurposes; and (ii) that all the clauses of the objects of association of the said assessee fall in the category of primary purposes of the association and it was not possible to treat some of them as ancillary or incidental to the -main objects set out in clauses (a) and (b) of Rule 3 as contended by the assessee. It is sufficient for the present case to refer to the first ground on which the claim of the assessee was rejected. ( 10 ) SHRI B. B. Ahuja contended that the decision in the Indian Sugar Mills Association s case will not apply to the present case because the assessee in that case envisaged by its rules and regulations the distribution of profits to members whereas in the present case the assesssee was bound by the statutory requirements of Section 15 of the Trade Unions Act which obliged the assessee to utilise its funds only for the purposes of the association and the profits can be distributed only in the event of winding up. We are, however, of opinion that there is no distinction in principle between the decision of the Supreme Court in the case of the Indian Sugar Mills Association and the present case. In point of fact we find on a reference to the decision of the Calcutta High Court in the case of Indian Sugar Mills Association, where the rules and regulations are set out in extenso that, apart from Rule 4 which prohibited the distribution of profits. In point of fact we find on a reference to the decision of the Calcutta High Court in the case of Indian Sugar Mills Association, where the rules and regulations are set out in extenso that, apart from Rule 4 which prohibited the distribution of profits. Rule 5 contemplated only that, upon a winding up or dissolution of the association, the surplus assets should be dealt with in accordance with the resolution of the association at a general meeting held for the purpose and it is in this context that rule 64 provided for the distribution of the profits and surplus funds amongst the members. In fact, even in that case the argument advanced on behalf of the department was (as is seen from page 100 of 77 I. T. R.) that the assessee was not entitled to be treated as charitable because it was possible tor members of the association upon dissolution to divide the remaining funds amongst themselves. That is the position here also. But this apart we are unable to see any distinction in principle whether the assessee is in a position to distribute its profits immediately from year to year or only at the end of its period of existence. So long as the profits could be divided or distributed among the members at any time, it cannot be said that there is an obligation on the part of the assessee to hold its income for charitable purposes only. It is permissible for the assessee, within the four corners of its rules and regulations, to so arrange its affairs that the profits can be distributed among the members themselves. Where such a possibility exists as it did in the case before the Supreme Court and. as it does in the case before us, it is very difficult to say that the element of a charitable organisation exists. We are. therefore, of opinion that the present case is directly governed by the decision of the Supreme Court in Commissioner of Income Tax v. Indian Sugar Mills Association, 1974-97 I. T. R. 486. as it does in the case before us, it is very difficult to say that the element of a charitable organisation exists. We are. therefore, of opinion that the present case is directly governed by the decision of the Supreme Court in Commissioner of Income Tax v. Indian Sugar Mills Association, 1974-97 I. T. R. 486. ( 11 ) WE may also mention that though the Indian Sugar Mills Association was one of the Intervenors before it in the Surat Art Silk case (supra), the decision in the Indian Sugar Mills Associaition s case was not one of the numerous decisions considered and referred to by the Supreme Court in the Surat An Silk case. It has not been disapproved nor its authority in any way shaken as suggested by Shri Ahuja. ( 12 ) IN the result the second question referred to us is also answered in the negative and in favour of the department. As the assessee has failed, it will pay costs to the respondents : Counsel s fee, Rs. 200.