1995 (7) TMI 15 - HC - Income Tax

Summary

Issues Involved:
1. Whether the net collections from races conducted for the Chief Minister's Relief Fund and the Beggars' Rehabilitation Fund should be treated as the income of the Race Club.
2. Whether the surplus in the Race Club Accident Fund should be treated as the assessee's income.

Summary:

Issue 1: Net Collections from Races for Charitable Funds
The assessee, a limited company conducting horse-racing, claimed that the net collections from races held on March 4, 5, and 12, 1972, for the Chief Minister's Relief Fund and the Beggars' Rehabilitation Fund should not be treated as its income, arguing there was a "diversion of income by overriding title" before accrual. The Appellate Assistant Commissioner (AAC) and the Appellate Tribunal agreed with the assessee, holding that the collections were earmarked for the charitable funds and thus did not belong to the Race Club. The Tribunal found that the races were conducted for the benefit of the charitable funds and that the income was diverted at source. The High Court upheld this view, stating that the collections for the three days were not the income of the Race Club due to the overriding title in favor of the charitable funds.

Issue 2: Surplus in the Race Club Accident Fund
The surplus of Rs. 7,733 in the Race Club Accident Fund, created for the benefit of jockeys injured while riding, was contested by the Department. The AAC and the Tribunal held that the fund was separate from the Race Club's income, maintained under distinct rules and accounts, and administered independently. The High Court affirmed this, concluding that the surplus in the Accident Fund should not be treated as the assessee's income.

Conclusion:
The High Court ruled in favor of the assessee on both issues, affirming that the net collections from the races conducted for the charitable funds and the surplus in the Accident Fund should not be treated as the income of the Race Club. The appeal by the Department was dismissed.