Judgment :- N. V. BALASUBRAMANIAN, J. These four tax case references have been made by the Income-tax Appellate Tribunal, Madras, at the instance of the Revenue and the relevant assessment years are 1976-77 to 1979-80. The previous year relevant to the assessment years ended on 30th September of the respective years The question which has been referred for the decision of this court reads as under: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the status of the assessee should be taken as that of 'guarantee company' and that exemption under section 11 of the Income-tax Act should be allowed in respect of the assessee's income from the assessment years 1976-77, 1977-78, 1978-79 and 1979-80?" The assessee filed returns of income for the assessment years 1976-77 and 1977-78 claiming the status of "guarantee company". The Income-tax Officer initially assessed the assessee for both the assessment years and treated the assessee as "company" for the purpose of section 11 of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"). The Income-tax Officer, however, reopened the assessment under section 147(b) of the Act and in the reassessments made for the said assessment years 1976-77 and 1977-78, adopted the status as an "association of persons". Similarly, the assessee filed its returns of income for the assessment years 1978-79 and 1979-80 in the status of a guarantee company, but the Income-tax Officer assessed the assessee in the status of an "association of persons" The assessee carried the matter by way of appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the reopening of the assessment for the assessment year 1976-77 and 1977-78 was not justified as the reopening was done on the basis of change of opinion. The Appellate Assistant Commissioner, however, in the appeals preferred for the assessment years 1978-79 and 1979-80 held that the status of the company should be taken as "guarantee company" and the assessee was entitled to exemption on the facts of the caseThe Revenue carried the matter in appeals before the Income-tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner. The Tribunal, in the appeals preferred for the assessment years 1976-77 and 1977-78, held that the Appellate Assistant Commissioner was not correct in holding that the reopening of the assessment was not justified. The Tribunal, in the appeals preferred for the assessment years 1976-77 and 1977-78, held that the Appellate Assistant Commissioner was not correct in holding that the reopening of the assessment was not justified. Since this part of the order has become final, it is not necessary to elaborate reasons given by the Tribunal for sustaining the reassessment proceedings. The Tribunal went into the merits of the case for all the assessment years. The Tribunal held that the Revenue has accepted for more than two decades the status of the assessee as "guarantee company" and allowed exemption under section 11 of the Act. The Tribunal, therefore, held that in the absence of any change in the circumstances, the assessee should be assessed in the status, "guarantee company". In so far as the question regarding exemption under section 11 of the Act is concerned, the Tribunal held that the prominent object of the assessee was to promote trade and commerce and some of the offending objects on which reliance was placed on behalf of the Revenue were only incidental to the main object of the assessee, and, therefore, the object of the assessee was charitable in nature. The Tribunal held that the factual position remains that the liability of each member was merely Rs. 10 and there is no element of distribution of profit and there are no materials to show that the profits of the assessee-company have been distributed among the members of the company. In this view of the matter, the Tribunal held that the assessee should be treated as a guarantee company and the assessee is entitled to exemption under section 11 of the Act. In this view of the matter, the Tribunal held that the assessee should be treated as a guarantee company and the assessee is entitled to exemption under section 11 of the Act. It is, in this context, the reference has come before us for all the four assessment years regarding the status of the assessee as well as regarding the eligibility of the assessee to claim the exemption under section 11 of the ActThe relevant objects of the assessee as found in clause (3) of the memorandum of association of the assessee, are as under: "(f) To gather information and have correspondence and business relationship with merchants about trade and to inform them by publicity or advertisement (g) to arrange for collection of dues to members according to decision of the association; (h) to have correspondence with members and other associations to protect the interest of members and to improve their interests; (i) to improve legislation about trade and commerce, initiate legislation and approve of the same; (j) To co-operate with such association or bodies having similar objects to improve, gather information from such bodies and to inform them of the improvements in trade and commerce; (k) to spend for temple Kattalais, temple gardens, free libraries and trade expenses; (l) to purchase or take on lease, for the purposes of the objects of the association land and building, construct such buildings and to maintain and repair the same; (m) to sell properties not required by the association and to invest them in known banks, deposit them and to put them in current account; (n) to collect mahimai from members and rents from members for the expenses mentioned above; (o) to meet the expenses of incorporation, printing charges, advertisement, salary for staff, travel expenses and stamps; (p) to associate with other societies or associations not having objects contrary to the objects of this association and to amalgamate and corporate with them; (q) if association's funds permit, to start handicrafts relating to machineries; (r) to establish handicrafts for earning for purposes not having objects contrary to the objects of the association." Before considering the question as to eligibility of the assessee to claim exemption under section 11 of the Act, it is necessary to find out the status of the assessee. It is found that the assessee was registered under the provisions of the Indian Companies Act, 1913, and for the past nearly two decades, the Revenue has adopted the status of the assessee as that of a guarantee company. It is found that during the relevant assessment years, the number of members was 156. The definition of "company" as found in section 3(1)(i) of the Companies Act, 1956, reads as under; "(i) 'company' means a company formed and registered under this Act or an existing company as defined in clause (ii)." Admittedly, the assessee is an existing company as it was formed and registered under the provisions of the Indian Companies Act, 1913. The assessee-company being a guarantee company, had no share capital. Clause (5) of the memorandum of association states that the liability of members would be limited to the guarantee of the company's returns by themselves and to the extent of Rs. 10 to each member. It is not a company as contemplated under section 25 of the Companies Act as it is not registered either under the relevant provisions of the Indian Companies Act, 1913, or the Companies Act, 1956 and in CIT v. Andhra Chamber of Commerce the dominant or the primary purpose of the assessee is the promotion of trade and it is an object of public utility not involving the carrying on of any activity to earn profit. The objects which were relied upon on behalf of the Revenue, viz., clauses (q) and (r) are only incidental and subsidiary objects to the primary purpose which are charitable in nature. The subsidiary objects would not render the main object of the assessee non-charitable, and the objects of the assessee are still charitable in nature. The following passages in Surat Art Silk Cloth Manufacturers Association's case 1980 AIR(SC) 387, 1980 (121) ITR 1, 1980 (2) SCC 31 , 1980 (2) SCR 77 , 1979 (13) CTR 378, 1979 (2) TAXMAN 501, 1980 TaxLR 230, 1980 SCC(Tax) 170, 1979 (13) CTR(SC) 378 (SC) are relevant and would be applicable to the facts of the case. "The test which has, therefore, to be applied is whether the object which is said to be non-charitable is a main or primary object of the trust or institution or it is ancillary or incidental to the dominant or primary object which is charitable. "The test which has, therefore, to be applied is whether the object which is said to be non-charitable is a main or primary object of the trust or institution or it is ancillary or incidental to the dominant or primary object which is charitable. It was on an application of this test that in CIT v. Andhra Chamber of Commerce 1965 AIR(SC) 1281, 1965 (55) ITR 722, 1965 (1) SCR 565 (SC), the Andhra Chamber of Commerce was held to be a valid charity entitled to exemption from tax. The court held that the dominant or primary object of the Andhra Chamber of Commerce was to promote and protect trade, commerce and industry and to aid, stimulate and promote the development of trade, commerce and industry and to watch over and protect the general commercial interests of India or any part thereof and this was clearly an object of general public utility and though one of the objects included the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture, which, standing by itself, may be liable to be condemned as non-charitable, it was merely incidental to the dominant or primary object and did not prevent the Andhra Chamber of Commerce from being a valid charity. The court pointed out that if 'the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g., promotion of or opposition to legislation concerning that purpose, was contemplated'. The court also held that the Andhra Chamber of Commerce did not cease to be charitable merely because the members of the chamber were incidentally benefited in carrying out its main charitable purpose. The court relied very strongly on the decisions in IRC v. Yorkshire Agricultural Society 1928 (1) KB 611; 13 TC 58 (CA) and Institution of Civil Engineers v. IRC [1931] 16 TC 158 (CA), for reaching the conclusion that merely because some benefits incidentally arose to the members of the society or institution in the course of carrying out its main charitable purpose, it would not by itself prevent the association or institution from being a charity." * In our view, there is a mixing up of the objects of the assessee-company with the powers of the assessee-company in various clauses in the memorandum of association. There are certain clauses which only empower the assessee-company to embark upon certain activities and they cannot be regarded as objects of the assessee-company. In our view, the clauses (q) and (r), even if they are considered to be the objects of the association, they are only subsidiary objects and would not militate against the main objects of the assessee, namely, to promote the trade and commerce and would not render the assessee a non-charitable institution. We are also of the view that the clauses (q) and (r) of the memorandum of association can be regarded as only powers conferred on the assessee to embark upon such activities and, therefore, we are of the view that the objects of the assessee are charitable in nature and the assessee is entitled to exemption, provided other conditions are satisfied The next contention that was advanced on behalf of the Revenue is that even assuming that all the objects of the assessee are charitable in nature, the claim for exemption by the assessee under section 11 of the Act must fail as there are no clauses in the memorandum of association compelling the assessee to utilise the income only for such purposes. According to learned counsel for the Revenue, the assessee being a guarantee company, is free to utilise the income by distributing the profits to its members by way of dividend and the fact that the assessee-company did not distribute the profits by way of dividend to its members would not show that there is no element of distribution of profits among the members. According to learned counsel for the Revenue, there must be a specific bar in the memorandum of association to distribute the profits to the members and in the absence of any inbuilt prohibition, the assessee being a company can distribute entire profits among the members. In support of his proposition, learned counsel for the Revenue placed strong reliance on the decision of the Delhi High Court in the case of Delhi Stock Exchange Association Ltd. v. CIT and the decision of the Supreme Court which affirmed the decision of the Delhi High Court, cited supra, in Delhi Stock Exchange Association Ltd. v. CIT and the decision of this court in the case of CIT v. Madras Stock Exchange Ltd. Mr. V. S. Jayakumar, learned counsel for the assessee, on the other hand, submitted that the assessee-company is a company incorporated and limited by guarantees and the decision of the Delhi High Court which was affirmed by the Supreme Court in Delhi Stock Exchange Association Ltd.'s case 1997 (225) ITR 235, 1997 (139) CTR 455, 1997 (91) TAXMAN 273, 1997 (2) TLR 592, 1997 AIR(SC) 2095, 1997 (224) ITR 235, 1997 (4) JT 355 , 1998 (5) Supreme 103 , 1997 (3) Scale 353 , 1997 (11) SCC 583 , 1997 (139) CTR(SC) 455 relates to a case of a company limited by shares. He placed strong reliance on the provisions of section 25 of the Companies Act and submitted that under clause (b) of sub-section (1) of section 25 of the Companies Act, where a company proves to the satisfaction of the Central Government that the company intends to apply its profits in promoting its objects and to prohibit the payment of any dividend to its members, the Central Government is empowered to issue necessary licence. He submitted that the Madras Stock Exchange was permitted under section 26 of the Companies Act, 1913, to omit the word, "limited" from its name by an order of the appropriate Government and, therefore, the observation made by this court on the scope of section 37 of the Companies Act was not necessary to decide the case as section 37 of the Companies Act deals with the case of a company limited by guarantee. He, therefore, submitted that the decision of this court in CIT v. Madras Stock Exchange Ltd. has no application to the facts of the case. He further submitted that there was no element of distribution of profits among the members and there is nothing to show that the profits have been distributed among the members of the assessee-company We have carefully considered the rival submissions of the parties. It is not disputed that the assessee-company did not get the necessary approval from the appropriate Government either under section 26 of the Companies Act, 1913, or under section 25 of the Companies Act, 1956. We have already held that the assessee-company is liable to be treated as a guarantee company. The Appellate Tribunal placed reliance on the fact that the profits of the assessee-company have not been distributed among the members of the company. We have already held that the assessee-company is liable to be treated as a guarantee company. The Appellate Tribunal placed reliance on the fact that the profits of the assessee-company have not been distributed among the members of the company. The mere fact that the profits were not distributed among the members during the relevant years would not be sufficient to claim that the assessee is entitled to the exemption under section 11 of the Act. This court in the case of CIT v. Madras Stock Exchange Ltd. 1976 (105) ITR 546, 1977 CTR(Mad) 1 considered the scope of the provisions of section 37 of the Companies Act which relates to companies limited by guarantee and after noticing the views expressed in Palmer's Company Law held that the fact that the assessee is limited by guarantee does not stand in the way of distribution of its profits among its members. The above view was arrived at on the basis of the interpretation placed by it on the provisions of section 37 of the Companies Act and this court held as under: "What is prohibited is a right of participation in the divisible profits of the company otherwise than as a member. It follows that there is no prohibition against the distribution of profits among the members as such. Table C of Schedule I to the Companies Act contains the articles applicable to such companies limited by guarantee and not having a share capital. The articles in Table C do not contain any provision either enabling or preventing the distribution of dividends. However, there is no legal prohibition against the distribution of dividends in the case of a company limited by guarantee." Therefore, the fact that the assessee-company is a company limited by guarantee does not stand in the way of the company to distribute the profits to its members. In other words, when there are no legal restriction against the distribution of profits to its members, it is open to the company even limited by guarantee also to distribute the profits among its members and the mere fact that the company had not distributed the profits would not prevent the company from distributing the entire profits to its members in future years. Therefore, in each case, it has to be seen whether there are restrictions against the distribution of profits to its members even in the case of a company limited by guarantee. The Appellate Tribunal, unfortunately, has not adverted to this aspect of the case. The Appellate Assistant Commissioner, however, noticed in his order that the memorandum of association of the assessee-company stipulated that no part of the net receipts is distributable to the members, and the receipts are expendable for promotion of trade and other public charitable purposes only. The Appellate Assistant Commissioner also noticed that in the memorandum of association, the assessee-company is not given any power to utilise the surplus in any manner it likes. He also referred to bye-law 69 which states that whatever reserve fund the assessee had, the reserve fund should also be utilised only for the objects of the trustThe Appellate Tribunal has not adverted to any of the restrictions found in the memorandum of association or the restrictions found in the bye-laws of the assessee-company. It solely relied upon the fact that the surplus income of the assessee was not utilised for any purpose other than the objects of the assessee. As held by the Delhi High Court in Delhi Stock Exchange Association Ltd.'s case 1980 (126) ITR 532, 1980 (4) TAXMAN 180 even assuming that all the objects of the assessee are charitable in nature, the claim for exemption would fail when there is no legal obligation compelling the assessee to utilise the income only for such purposes. The Delhi High Court, in that context, held as under: "These provisions are very widely worded and, considering these also in the light of the important fact that the company is at complete liberty to distribute its profits by way of dividends, we have no doubt in our minds that the company was at complete liberty to deal with its profits in any manner it liked. It was not under any compulsion in law to hold the profits or to utilise them wholly or even in part only for religious or charitable purposes. It would have been perfectly legitimate for the company to have distributed its entire profits among its members and to have set apart or utilised no part of it for charitable purposes. It was not under any compulsion in law to hold the profits or to utilise them wholly or even in part only for religious or charitable purposes. It would have been perfectly legitimate for the company to have distributed its entire profits among its members and to have set apart or utilised no part of it for charitable purposes. The mere fact that the company did not in fact distribute any dividends will not be of any help to the assessee as the requirement for the purposes of the exemption is, not the factual position, but whether in law the company is under any obligation to devote its profits only to religious or charitable purposes. That test unfortunately fails in the present case. In the above context, it may be pointed out that the Hyderabad Stock Exchange Ltd. 1967 (66) ITR 195 (AP) was a company registered as a charitable company under the Companies Act and hence prohibited from distributing dividends. The Madras Stock Exchange Ltd.'s case 1976 (105) ITR 546, 1977 CTR(Mad) 1 (Mad) was a company limited by guarantee. The observations of the court at page 565-66 indicate that where there is no prohibition against distribution of dividends, the exemption under section 11 would not be available and the court proceeded to discuss the question regarding the assessability of income from some of the activities only on the 'hypothesis of there being scope for exemption under section 11(1)(b)'. We are, therefore, of the view that the present assessee being at complete liberty to distribute its profits by way of dividend and in other ways referred to above to the members and others it cannot qualify for exemption under section 11." The above view of the Delhi High Court was affirmed by the Supreme Court and the Supreme Court also emphasised that there must be an obligation created to spend the money exclusively and essentially on charities, and where there is no obligation that the income derived from the company was to be exclusively used for charitable purposes, the claim for exemption under section 11 would fail as it would be perfectly legitimate and open to the assessee to spend or distribute the whole or part of the income to its members. The mere fact that the assessee-company has not distributed its surplus profits among its members as dividend will not hold good. The mere fact that the assessee-company has not distributed its surplus profits among its members as dividend will not hold good. Whether there was a legal obligation imposed to distribute its profits on the charitable purposes has to be seen from the relevant clauses of the memorandum of association and not from the practice adopted as it is always permissible for the assessee to deviate from such practice and only if there are prohibitions or inherent restrictions against the distribution of profits among its members, the assessee's claim for exemption can succeed. We have already seen that the Appellate Assistant Commissioner has referred to a clause in the memorandum of association as well as clause 69 of the bye-laws of the assessee-company. Since the Tribunal has not gone into the question whether there was a legal obligation imposed upon the assessee-company to utilise or apply its income only for the charitable objects, we are of the view that the Tribunal should consider the question whether there was a legal obligation imposed by the memorandum of association or the relevant bye-laws to distribute the profits for its charitable purposes. Though we answer the question of law on the facts found by the Tribunal in favour of the Revenue, the Tribunal, however, is directed to consider the question whether the assessee is entitled to exemption under section 11 of the Act in the light of the observations made by us aboveThe question of law referred to us consists of two parts and they are not interconnected with each other and, therefore, we reframe the question as under: "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the status of the assessee should be taken as that of guarantee company? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the exemption under section 11 of the Income-tax Act should be allowed in respect of the assessee's income for the assessment years 1976-77, 1977-78, 1978-79 and 1979-80?" In so far as the first question of law as reframed by us is concerned, we answer the question of law in the affirmative and against the Revenue. In so far as the second question of law as reframed by us is concerned, though we answer the question of law in the negative and in favour of the Revenue, the Appellate Tribunal should go into the question afresh whether there is a legal obligation against distribution of profits amongst the members of the assessee. However, in the circumstances of the case, there will be no order as to costs.