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Issues:
1. Whether the Dibrugarh District Club, Limited, is liable to pay income tax on its profits. 2. Clarification on the distinction between membership of the club and ownership of shares in the company. 3. Interpretation of the company's articles of association and club rules regarding entitlement to club premises and accommodations. 4. Analysis of the company's profit-making activities and its relationship with club members and shareholders. 5. Determination of the company's liability for income tax based on its profit-making activities. Analysis: 1. The judgment by the Calcutta High Court, delivered by Sir George Rankin, KT., CJ., and Justices C.C. Ghose and Buckland, addresses the issue of whether the Dibrugarh District Club, Limited, is liable to pay income tax on its profits. The company claimed exemption from income tax based on various grounds related to its dealings with club members and shareholders. 2. The court highlighted the distinction between membership of the club and ownership of shares in the company. It noted that membership of the club did not necessarily entail ownership of shares in the company. The company's articles of association and club rules clarified that individuals could become club members without being shareholders. 3. The interpretation of the company's articles of association and club rules regarding entitlement to club premises and accommodations was crucial in determining the company's tax liability. Article 12 of the company's articles specified the conditions under which shareholders could use the club premises, emphasizing the separation between club membership and share ownership. 4. The court analyzed the company's profit-making activities and its relationship with club members and shareholders. It noted that the company had made profits from charges to club members and had paid dividends to shareholders. The court rejected the company's claims that it made no profit from dealings with non-members and emphasized the importance of the company's incorporation status. 5. Ultimately, the court held that the company was liable to pay income tax on its profits, irrespective of its proposed use of those profits. The judgment underscored the distinction between the company as a legal entity and its individual shareholders, emphasizing the company's obligation to pay income tax on its full profit amount. The court also directed the assessee to bear the costs of the reference. In conclusion, the judgment by the Calcutta High Court clarified the company's tax liability based on its profit-making activities and relationship with club members and shareholders, emphasizing the legal distinction between club membership and share ownership.
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