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Issues Involved:
1. Whether the assessee-club's activities qualify as a charitable purpose u/s 2(15) of the Income-tax Act. 2. Whether the assessee-club is entitled to exemption u/s 11(1)(a) of the Income-tax Act. 3. Whether the club's activities involve the carrying on of any activity for profit, thereby attracting the exclusionary clause in section 2(15). Summary: Issue 1: Charitable Purpose u/s 2(15) of the Act The primary object of the assessee-club is to promote and popularise equestrian games, including riding, mounted sports, racing, and polo, and to train its members in the art of horsemanship. The court analyzed whether these activities fall under "advancement of any other object of general public utility" as defined in section 2(15) of the Act. It was concluded that promoting sports contributes to public health and well-being, which is an object of general public utility. The court found no restriction preventing any member of the public from joining the club, thus satisfying the criterion of benefiting a discernible section of the public. Issue 2: Entitlement to Exemption u/s 11(1)(a) of the Act The court examined whether the club qualifies as an association or institution established for charitable purposes. Section 10(23) of the Act recognizes sports as a discernible entity entitled to exemption. The court dismissed the Revenue's contention that section 10(23) and section 11(1)(a) are mutually exclusive, affirming that the club can seek exemption under section 11(1)(a) if it meets the criteria of being established for charitable purposes. Issue 3: Activity for Profit The Revenue argued that the club's main object is racing, which involves profit-making activities. The court referred to the Supreme Court's decision in Addl. CIT v. Surat Art Silk Cloth Mfrs. Association, emphasizing that the object of general public utility must not involve the carrying on of any activity for profit. The court found that the club's primary object is to impart training in equestrian games, and conducting races is incidental to this main object. The income from races is used to defray expenses related to maintaining stables and staff salaries, thus not constituting a profit-making activity. The court concluded that the club's activities do not attract the exclusionary clause, and the income earned is exempt from taxation u/s 11(1)(a). Conclusion: The court held that the assessee-club qualifies as a charitable institution under section 2(15) and is entitled to exemption under section 11(1)(a) of the Act. The reference was answered against the Revenue and in favor of the assessee, with each party bearing its own costs.
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