Commissioner of Income Tax vs Western India Chamber of Commerce Ltd.

Sujata V. Manohar, J.—Western India Chamber of Commerce Ltd., who are the assessees, are a company incorporated under the Indian Companies Act, 1913. The relevant assessment years in respect of which the present reference has been made are the assessment years 1960-61, 1961-62, 1962-63 and 1963-64. In respect of the first two assessment years a reference has been made to us u/s 66(1) of the Indian income tax Act, 1922, while in respect of the last two assessment years a reference has been made to us u/s 256(1) of the income tax Act, 1961. In respect of these assessment years, the assessees contended before the ITO that the income which they derived from the immovable property owned by them was exempt from income tax because the income was derived from a property which was held by them under a trust or legal obligation for charitable purposes. In the alternative, the assessees submitted that their other activities had resulted in losses during these assessment years. These were business losses and they were entitled to set off these losses against the income which they derived from the immovable property. Both these contentions were rejected by the ITO. He, accordingly, levied tax on the property income earned by the assessees for the above assessment years and ignored the losses suffered by the assessees during these years in respect of their other activities.

Being aggrieved by these orders the assessees went up in appeal to the AAC. In respect of the first two assessment years, namely, 1960-61 and 1961-62, the assessees contended that the ITO had erred in not exempting the appellants'' income from the immovable property from taxation, because according to the assessees this income was derived from the property held under trust and/or under a legal obligation for charitable purposes. In respect of the two subsequent assessment years, namely, 1962-63 and 1 963-64, the assessees appealed against the order only to the extent that it disallowed the assessees'' claim for set-off. Both these objections were upheld by the AAC. He deleted the property income from assessment for the first two assessment years and allowed the set-off of losses against property income in the last two assessment years.

Aggrieved by the orders of the AAC, the revenue filed an appeal before the Tribunal. For the assessment years 1962-63 and 1963-64, the assessees filed cross-objections in which they, inter alia, contended that income for the assessment years 1962-63 and 1963-64 was exempt from taxation as it was derived from the property held for charitable purposes. The Tribunal held that the property income derived by the assessees during all the four assessment years was exempt from taxation since it was derived from the property held for Charitable purposes. The Tribunal further held that the assessee-company was entitled to set off its losses against the income from property. The Tribunal observed that when the VAC in the appeals relating to the first two assessment years had given a finding that the property income was exempt from tax, because it was held under a legal obligation for a charitable purpose, he should have given the same finding in the next two assessment years also, although the assessees had inadvertently not raised this issue in appeal for the last two assessment years. Thereafter, at the instance of the Commissioner, the following questions arising out of the order of the Tribunal have been referred to us for decision. The questions are :

(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the property income of the assessee was exempt from tax under the provisions of the income tax Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to set off its losses, that is, excess of expenditure over income from membership, etc., against its property income ?

For the assessment years 1960-61 and 1961-62, the relevant provisions which are applicable are of the Indian income tax Act, 1922. Section 4(3) of the said Act provides as follows :

Application of Act. -

....

(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them :

(i) Subject to the provisions of clause (c) of sub-section (1) of section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto:...

In this sub-section ''charitable purpose'' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act that part of the income from property held under a trust or other legal obligation for private religious purposes which does not ensure for the benefit of the public.

The income tax Act, 1961, applies to the assessment years 1962-63 and 1963-64. u/s 11(1)(a) of the said Act also income derived from property held under trust for charitable or religious purposes, to the extent to which such income is applied to such purposes in India, is excluded from the total income of the assessee for the purposes of income tax.

Under clause (15) of section 2 of the income tax Act, 1961, "charitable purpose" is defined as follows :

(15) ''charitable purpose'' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit.

Under both the income tax Acts, therefore, if an organisation is obliged to utilize its income from property for the advancement of any object of general public utility, it can claim exemption for such income under the above sections. Under the income tax Act, 1961, however, there is a further restriction. Advancement of any object of general public utility should not involve carrying on of any activity for profit.

The assessees claim to be an organisation whose objects are " charitable " as defined under the Indian income tax Act, 1922, as also under the income tax Act, 1961, because, according to the assessees they are objects of general public utility and do not involve the carrying on of any activity for profit. It is not in dispute that the assessees do not carry on any activity for profit. The only point on which the revenue authorities have joined issue with the assessees is whether the activity carried on by the assessees can be described as an activity for the advancement of any object of general public utility.

The memorandum of association of the assessee-chamber of commerce sets out the various objects for which the chamber is established. The chamber was incorporated many years back prior to 1926. When it was incorporated, it took over the whole of the undertaking of an unregistered association in Bombay known as "The Marwadi Chamber of Commerce". Clause 3 of the memorandum of association specifies the various objects for which the chamber is established. Sub-clause (a) provides for a take-over of the whole of the undertaking of the Marwadi Chamber of Commerce. Sub-clauses (b), (c), (e), (f), (g), (h), (i), (k), (l), (m), (m1), (m2), (m3), (m4), (jj), (kk) and (ll) are required to be set out in extenso. They are as follows:

(b) To promote and protect the interests of merchants carrying on business in Bombay specially in seeds, including linseed, rape seed and sesamum, in wheat and other grains and Hundi Chithi, unless the Board suspends the business in Hundi Chithi, and to regulate their methods of doing business and remove all causes of friction between such merchants inter se and between them and their constituents.

(c) To further the cause of unity and friendliness amongst and to preserve and improve the interests of merchants dealing in the aforesaid commodities in India and preferably as well as particularly in the Bombay Presidency.

(e) To collect and disseminate statistical and other information, to make efforts for the spread of commercial and economic knowledge.

(f) To prescribe the principles of framing contracts in the aforesaid commodities with a view to eliminate temptation or the possibility of speculative manipulation.

(g) To frame regulations and bye-laws for the conduct of sales and purchases of seeds including linseed, rape seed, sesamum and all other kinds of seeds and wheat and other grains and hundis between merchants dealing in the same, and to adjust all differences and obstacles in the way of smooth dealings between them.

(h) In case of mutual disputes arising between merchants in the aforesaid business to act as mediators or arbitrators between the members of the Chamber and their constituents in all sales and purchases and in all matters of differences or disputes arising between the members of the Chamber and between such members and their constituents.

(i) To represent and express opinion on questions and dealings arising out of the transactions of the aforesaid commodities, and the promotion or opposition of any legislative or other measure affecting Indian trade and business and specially the business in all the above commodities.

(k) To consider question or objections raised in respect of any custom or tradition in the business of the aforesaid commodities, and to provide a decision for being followed as a precedent in future.

(l) To promote and cultivate friendly feelings amongst the members and to advance the interests of the members of the Chamber with a view to promote the welfare of the trade and the members of the Chamber.

(m) To communicate with Chambers of Commerce and other mercantile and public bodies throughout the world; if necessary to concert proper measures for the protection of the trade and business in the aforesaid commodities.

(m1) To secure, wherever possible, organised and/or concerted action on all subjects involving the interests of members including ''regulating conditions of employment of industrial labour'' in various industries represented by the members of the Chamber.

(m2) To nominate delegates and advisers, etc., to represent the employers of India at the annual International Labour Conference of the League of Nations.

(m3) To take up, consider and formulate ideas on the subjects which are on the agenda of each International Labour Conference.

(m4) To take all steps which may be necessary for promoting, supporting or opposing recommendations of the International Labour Conference.

(jj) To establish, regulate and maintain a clearing house for the purpose of regulating the dealings and transactions of the members of the Chamber in seeds including linseed, rape seed, poppy seed, sesamum, wheat and other grains and gold and silver.

(kk) To print, publish, undertake, manage and carry on any newspapers, journals, magazines, periodicals, pamphlets or other literary works in connection with or in furtherance of the objects of the Chamber.

(ll) To do all such other things as are directly or indirectly incidental or conducive to the attainment of the above objects.

Articles 26(a) and 26(b) of the articles of association of the Chamber provide as follows:

26(a) The Board shall create a Fund to be called ''Commercial and Technical Education Fund'' and shall in its discretion set aside and transfer to the credit of such Fund the whole or any part of the amount for the time being standing to the credit at the foot of the Hospital Fund, the Refugee Relief Fund and/or the Charity Fund. The Board shall also add to such Fund any contribution or contributions made towards this Fund either by members or non-members of the Chamber. The Board may further in its discretion after the end of every year set aside and transfer to the credit of such Fund any sum out of the surplus appearing in the income and expenditure account, and whenever there shall be sufficient amount in the above Fund, and when the Board thinks proper, the Board shall get such Fund registered under the provisions of the Public Charitable Trusts Act.

26(b) The Board may utilize the whole or any part of the amount standing to the credit of the Commercial and Technical Education Fund for the spread of commercial and economic knowledge through the medium of Rashtra Bhasha. To achieve the object, the Board may employ the available Fund or a part thereof-

(1) to advance and promote commercial and technical education, and to found establishments and institutions for such purposes, and to provide maintenance funds for them;

(2) to establish, maintain, conduct and manage a suitable library in the name of the Chamber;

(3) to run a printing press, to print and publish books, magazines, newspapers and periodicals in the national language;

(4) to found scholarships and prizes in order to encourage Hindi authors and poets to create literary works of a very high order;

(5) to get standard and other well-known commercial, technical and scientific books in foreign languages translated into the National language; and

(6) generally to do all that may be necessary in the interests of the realisation of the above objects.

Article 92 provides as follows :

The property, capital and income of the Chamber whensoever derived shall be applied solely towards the promotion of the objects of the Chamber, and no portion shall be paid by way of bonus or otherwise to the Members except in the case of the winding up of the Chamber.

In view of these objects of the Western India Chamber of Commerce Ltd., Bombay, we have to consider whether the chamber can be considered as carrying on any activity which can be described as an activity for the advancement of objects of general public utility. From the objects clause of the memorandum of association read as a whole, the association does not appear to have been formed purely to benefit its own members. Under clause 3(b) of the memorandum of association the chamber is required to promote and protect the interests of all merchants carrying on business in Bombay in seeds and other commodities referred to therein. One of its objects is to regulate the method of doing business in these commodities and to remove all causes of friction between merchants carrying on such business as also between such merchants and their constituents. Thus, one of the objects of the association is to provide for the smooth carrying on of trade and commerce in the commodities mentioned in that clause. This becomes more apparent when one looks at the subsequent sub-clauses of clause 3; for example, under sub-clause (i) the principles of framing contracts in these commodities are to be prescribed in order to eliminate the possibility of speculative manipulation. Under sub-clause (g) regulations and bye-laws are to be framed for the conduct of sales and purchases of these commodities and provision has to be made for adjustment of all differences in order to ensure smooth dealings between merchants and their constituents in these commodities. In order to pave the way for smooth dealings in these commodities the chamber, under sub-clause (h), is entitled to act as a mediator or arbitrator in respect of any disputes between merchants doing business in these commodities, and under sub-clause (1) the chamber is required to promote friendly feelings amongst the members with a view to promote the welfare of the trade and the members of the chamber. An analysis of the other clauses which have been set out earlier also shows that the chamber is formed for promoting trade and commerce in the commodities which have been specifically referred to in the objects clause. Thus, under sub-clause (e), the chamber is entitled to disseminate statistical and other information and to make efforts for the spread of commercial and economic knowledge. It is entitled to consider any question relating to any custom or tradition in the business of these commodities and to provide any decision which may be used as a precedent in future. It is entitled to take measures for the promotion of trade and business in these commodities. It is entitled to take action, including regulation of employment of labour in various industries represented by the members of the chamber. It is entitled to nominate delegates and advisers, etc., to represent the employers of India at the annual International Labour Conference; to take up, consider and formulate ideas on the subjects which may be discussed at each International Labour Conference. It is also entitled to print and publish newspapers and journals in connection with or in furtherance of the objects of the chamber, and it is also entitled to establish and maintain a clearing house for the purpose of regulating the dealings and transactions in the commodities in question. There is no dispute that the income which is derived by the assessees is utilised for the above objects.

Can these objects for which the chamber has been incorporated be described as objects of general public utility ? It is now well established that in order that an object can be described as an object of general public utility, it is not necessary that the object should be beneficial to the entire public. An object which is beneficial to a section of the public can also be considered as of general public utility. Thus, Commissioner of Income Tax, Madras Vs. Andhra Chamber of Commerce, , the Supreme Court has held that to serve as a charitable object it is not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or province. It is sufficient if the intention is to benefit a section of the public as distinguished from specified individuals. The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by " some common quality of a public or impersonal nature ". Applying these criteria to the present case, from the objects clause in the memorandum of association, it cannot be said that the object of this association is only to benefit some specified individuals. The object is to benefit an entire community carrying on trade and commerce in seeds, wheat and other commodities mentioned in the objects clause and thereby indirectly to benefit the public at large. The objects, therefore, of the assessees can be described as objects which benefit at least a section of the public if not the public at large.

The test mentioned in the case of Commissioner of Income Tax, Madras Vs. Andhra Chamber of Commerce, has been subsequently reiterated by the Supreme Court in the case of Additional Commissioner of Income Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association, . The same test has been followed in a number of judgments of various High Courts. In the case of Commissioner of Income Tax, Gujarat I Vs. Ahmedabad Rana Caste Association, , Bhagwati CJ. (as he then was), had observed as follows (p. 364)

....the only question would be whether they are purposes covered by the expression ''advancement of any other object of general public utility''. ''General'' means pertaining to a whole class; ''public'' means the body of people at large including any class of the public; ''utility'' means usefulness. Therefore, the advancement of any object of benefit to the public or a section of the public as distinguished from an individual or group of individuals would be a charitable purpose. Applying this test, can it be said that the purposes set out in sub-clauses (4) and (5) of clause 3 and sub-clause (4) of clause 8 are charitable purposes. Are they purposes which are useful and beneficial to the Rana community or which promote the welfare of the Rana community ? If they are, they would be objects of general public utility and would be covered by the statutory definition.

Thus, an association is charitable if it is for the advancement of any object beneficial to the public or a section of the public as distinguished from an individual or group of individuals. In order that a purpose can be considered as beneficial to a section of the people as distinguished from a group of individuals, it is necessary that the object of the association must not be purely to secure private gain to any group. If the object of an organisation is purely to secure some special advantage for a group, such an object may not be considered as charitable if such an advantage is likely to be procured at the expense of the rest of the public. Thus, for example, an association formed purely to advance the interests of merchants may exert pressure to push up prices of commodities to the detriment of the public. Therefore, the benefit sought to be secured to a section of the public must be such that it is in harmony with public benefit. At least it must not be discordant with public benefit. The Supreme Court, in the case of Commissioner of Income Tax, West Bengal III Vs. Indian Sugar Mills Association, , held that if the objects of an association contained an element of private gain which was inconsistent with the object of general public utility, it could not be said that the association was for charitable purposes. In the present case, however, the assessee organisation has not been formed purely for the private gain of merchants and traders dealing in the commodities referred to in the objects clause at the expense of the public. Although the objects clause in some places refers to benefit to merchants and traders, the various sub-clauses of the objects clause when analysed and read in the context of one another make it clear that in effect such benefit is sought to be procured by benefiting trade and commerce in the commodities in question and not at the expense of the public. The objects of the association, therefore, in effect are to benefit trade and commerce in seeds and other commodities which are referred to in the objects clause.

Mr. Joshi, learned counsel for the applicants, has urged that the object of the association is only to confer benefits on merchants carrying on trade in these commodities and the object is not to benefit in general the trade and commerce in these commodities. Such an object cannot be considered as an object of general public utility. He relied upon a decision of the Gujarat High Court in Additional Commissioner of Income Tax, Gujarat Vs. Ahmedabad, Millowners'' Association, . A Division Bench of the Gujarat High Court, after analysing the objects for which the Ahmedabad Millowners'' Association had been formed, came to the conclusion that the various objects for which the association had been formed were all independent objects, some of which might be considered as of general public utility and some of which may not be so considered. The Division Bench held that some of the objects seek to protect the interests of persons and not the activity which they do. It was open to the association to spend its entire revenue in protecting such personal interests of its members. The Division Bench, therefore, came to the conclusion that the income of the association could not be considered as being held under a legal obligation for the advancement of objects of general public utility. The ratio of that case cannot apply to the present case. From the various objects set out earlier, it cannot be said that the objects of the Western India Chamber of Commerce Ltd. are only to protect the interests of its individual members or even the personal interests of merchants carrying on trade in the commodities as specified in the objects clause. The objects appear to be promotion of trade and commerce in the commodities mentioned in the objects clause, and securing to the merchants trading in the said commodities advantages which would accrue to them as a result of improvement in trade and commerce in these commodities.

Learned counsel for the revenue has urged before us that the dominant object of the assessee-organisation is contained in clause 3(b) and this object is to promote and protect the interests of merchants carrying on business in seeds and other commodities. He has submitted that all the other objects mentioned in clause 3 of the memorandum of association are purely ancillary to the dominant object which is set out in clause 3(b). We are unable to accept this argument. In a given case, it is possible that the objects for which an organisation is constituted may have a dominant object and a. number of other ancillary objects. It is also possible for an organisation to have a number of objects which can be considered as its main objects. Each case has to be determined on the basis of the facts of that case. In the present case, looking to the various objects for which the assessee-organisation has been formed, it is not possible to hold that the main object of the association is spelt out only by sub-clause (b); for example, clauses (g), (h) and (k) deal with framing of rules and regulations, etc., for the conduct of business in the commodities concerned. They also provide for the resolution of disputes between merchants and the determination of questions in respect of any custom or tradition in the business in question. Under clause (f) the chamber is entitled to prescribe principles for framing contracts in these commodities with a view to eliminate any possibility of speculative manipulation. These are objects which are as important as those mentioned in sub-clause (b). Some of the other clauses are undoubtedly ancillary; for example, sub-clause (j), which deals with fixing the time and period during which business may or may not be conducted, sub-clause (m), which deals with communicating with other chambers of commerce and other mercantile and public bodies throughout the world, sub-clauses (m2) and (m3), which deal with representation at the International Labour Conference and so on. The present organisation has a number of main objects, and when these objects are read together, it becomes apparent that the objects for which this organisation has been formed are promotion and proper conduct of trade and commerce in the commodities which are referred to in the objects clause. Sub-clause (b) does talk of promoting and protecting interests of merchants. But when this sub-clause is read along with other sub-clauses, it becomes clear that the interests which are sought to be protected and promoted are not private or personal interests of merchants, but those interests which synchronise with the promotion and protection of the trade and commerce in general.

A number of High Courts which have dealt with cases involving organisations having similar objects have held that such organizations are formed for the advancement of objects of general public utility, and have held such organisations to be charitable. In fact, in the case of the Commissioner of Income Tax, Madras Vs. Andhra Chamber of Commerce, , the Supreme Court, which was dealing with an organisation which had as its object the promotion and protection of trade and commerce, has observed at page 727 as follows :

Advancement or promotion of trade, commerce and industry leading to economic prosperity ensures for the benefit of the entire community. That prosperity would be shared also by those who engage in trade, commerce and industry, but on that account the purpose is not rendered any the less an object of general public utility. It may be remembered that promotion and protection of trade, commerce and industry cannot be equated with promotion and protection of activities and interests merely of persons engaged in trade, commerce and industry.

Relying upon the above observations of the Supreme Court, the Punjab and Haryana High Court in the case of COMMISSIONER OF Income Tax, PUNJAB Vs. TEXTILE MANUFACTURERS ASSOCIATION., , held that the Textile Manufacturers'' Association of Amritsar, incorporated as a company for the benefit of the textile manufacturers of Punjab, was a charitable organisation within the meaning of, and was exempt u/s 4(3)(i) of the Indian income tax Act, 1922. Similarly, in the case of Commissioner of Income Tax Vs. South Indian Film Chamber of Commerce, , the Madras High Court, relying upon the Commissioner of Income Tax, Madras Vs. Andhra Chamber of Commerce, , held that the assesses, which hail as its object encouraging and developing the film industry in all its branches in South India as also watching, protecting and extending the rights and privileges of its members and of film trade in general, was an organization with a charitable object. A SLP to the Supreme Court from this decision was heard along with a number of other cases by the Supreme Court. The Supreme Court, in view of its earlier judgments in the Commissioner of Income Tax, Madras Vs. Andhra Chamber of Commerce, and the Additional Commissioner of Income Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association, , rejected the petition of the Commissioner. On the same basis the Madras Jewellers and Diamond Merchants Association and the Automobile Association of Southern India as also the Hyderabad Stock Exchange Ltd. and South India Hire Purchase Association have been held to be organisations for the advancement of objects of general public utility and hence charitable [of Additional Commissioner of Income Tax, Madras-I and Another Vs. Madras Jewellers and Diamond Merchants Association, ; Addl. CIT v. Automobile Association of Southern India [1981] 1 27 ITR 730 (Mad.); HYDERABAD STOCK EXCHANGE LTD. Vs. COMMISSIONER OF INCOME TAX, A. P., and Addl. Commissioner of Income Tax Vs. South India Hire Purchase Association, ].

The Delhi High Court in the case of Addl. Commissioner of Income Tax, Delhi-I Vs. Delhi Brick Kiln owners Association, , also held that the Delhi Brick Kiln Owners'' Association, formed with the object of promoting, developing and protecting the brick kiln trade, commerce and industry and to watch and protect the interests of brick kiln owners, contractors, customers and brick dealers, members of the association and the interests of persons engaged in brick trade, commerce or industry, was an organisation for the advancement of objects of general public utility. Our attention was also drawn to the summary of a case, namely, CIT v. Indian & Eastern Newspaper Society (see p. 81 infra), in which the Delhi High Court held that the assessee-society was formed in order to advance objects of general public utility. There is no reason why the present organisation which is formed with objects comparable to the objects of organisations involved in the above cases should also not be considered as formed for a charitable purpose.

Learned counsel for the revenue drew our attention to article 92 of the articles of association (as it was at the relevant time), under which while property, capital and income of the chamber are to be applied solely towards promotion of the objects of the chamber and no portion of it is to be paid by way of bonus or otherwise to the members during the subsistence of the association, nevertheless provides that in the case of the winding-up of the chamber the property is to be distributed amongst its members. Learned counsel for the revenue has very fairly stated that this clause by itself does not render the organisation one that is formed purely for private gain. He has, however, submitted that such a. clause would indicate that the object of the organisation is to promote only the interests of its members. He has drawn our attention to sonic of the cases cited earlier in which a reference was made to such a clause. In our view, an organisation which provides for distribution of its property amongst its members on a winding-up is not for that reason an organisation formed for the private gain of its members. It is only in the case of a winding-up that the property and income of the organisation are to be distributed amongst members. If during the lifetime of the organisation it is under an obligation to spend its income for charitable purposes, it can claim exemption from taxation on that ground during its lifetime. In the present case, it is quite clear, that during the existence of the organisation its property and income have to be applied solely to the objects for which the association is constituted. During the relevant years the association was obliged to expend its entire income on the objects for which the association was formed. Therefore, during the relevant years, the income of the association was required to be spent for the advancement of objects of general public utility. The association would, therefore, be entitled to exemption under the relevant provisions of the income tax Act then in force which have been referred to by us earlier. Incidentally, we may also mention that article 92 has been amended in 1966. Under the amended article 92, on a winding-up, no portion of the property and income of the chamber is to be paid or distributed amongst its members.

The second question before us relates to the assessees'' right to set off its losses against its income from property. There is no dispute before us that if we had come to the conclusion that the assessee-organisation was not entitled to any exemption under the provisions of section 4(3)(i) of the Indian income tax Act, 1922, or u/s 11 of the income tax Act, 1961, then the assessees would have been entitled to set off its losses against its income from property. It is also not in dispute that this question of set-off does not arise if we come to the conclusion that the assessees are entitled to such exemption. In the circumstances, the first question is answered in the affirmative, that is, in favour of the assessees and against the revenue. The second question does not arise in view of our answer to question No. 1. Had question No. 1 been answered in the negative, the answer to question No. 2 would have been in the affirmative, that is, in favour of the assessees and against the revenue. The applicant will pay to the respondent the costs of the reference.