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2003 (2) TMI 36 - HC - Income Tax1. Whether, Tribunal is justified in holding that the assessee is an institution which satisfied the conditions of section 2(15), read with section 11? - 2. Whether, Tribunal is justified in holding that the assessee derived income from property held in trust and even if it is not to be treated as property held under trust, it can only be treated as property held under trust as voluntary contribution given by Hyderabad Race Club? - 3. Whether, Tribunal is justified in holding that the activity carried on by the assessee did not constitute a business and even if it were business, it was not such business as would be hit by section 13(1)(bb) of the Act? - questions are answered in favour of the assessee and against the Revenue.
Issues Involved:
1. Whether the assessee is an institution satisfying the conditions of section 2(15), read with section 11 of the Income-tax Act, 1961. 2. Whether the income derived by the assessee from property held in trust, or as voluntary contributions, qualifies for exemption under section 11. 3. Whether the activity carried on by the assessee constitutes a business, and if so, whether it is hit by section 13(1)(bb) of the Act. Issue-wise Detailed Analysis: 1. Whether the assessee is an institution satisfying the conditions of section 2(15), read with section 11 of the Income-tax Act, 1961: The Hyderabad Race Club Charitable Trust was created with the main objects of advancement and propagation of education, medical aid, and relief of the poor. The Appellate Tribunal concluded that the objects of the trust are clearly charitable in nature. The activities undertaken by the trust, such as conducting races and inter-venue betting, were for achieving the primary objects of the trust. The High Court upheld this view, stating that none of the objects of the trust can be said to be non-charitable in nature. The trust's activities were found to be for the benefit of the public, thus satisfying the conditions of section 2(15), read with section 11 of the Act. 2. Whether the income derived by the assessee from property held in trust, or as voluntary contributions, qualifies for exemption under section 11: The Income-tax Officer initially rejected the assessee's claim for exemption, arguing that the income derived was from business and not from property held under trust. However, the Appellate Tribunal held that the licence obtained by the trust to conduct races could be treated as property. Moreover, even if not treated as property held under trust, the income could be seen as voluntary contributions from the Hyderabad Race Club, which would be capital receipts and not business income. The High Court agreed, stating that the income derived from such activities is exempt under section 11 of the Act, as it is utilized to achieve the primary objects of the trust. 3. Whether the activity carried on by the assessee constitutes a business, and if so, whether it is hit by section 13(1)(bb) of the Act: The Revenue argued that the activities of conducting races and inter-venue betting amounted to business, and thus, the income derived should be taxable. They emphasized that even occasional or isolated transactions could be considered business under section 2(13) of the Act. The High Court, however, found that the activities undertaken by the trust were not systematically organized as a business but were meant for achieving the primary charitable objects of the trust. Even if considered a business, it was not such that would be hit by section 13(1)(bb) of the Act, as it was carried out in the course of achieving the trust's primary purposes. The High Court concluded that the income derived from these activities is exempt under section 11 of the Act. Conclusion: The High Court ruled in favor of the assessee, holding that the trust satisfied the conditions of section 2(15), read with section 11 of the Act. The income derived from the activities conducted by the trust was either from property held under trust or voluntary contributions and thus exempt under section 11. The activities did not constitute a business in the sense that would be hit by section 13(1)(bb) of the Act. Therefore, the questions were answered in favor of the assessee and against the Revenue, with no order as to costs.
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