1921 (1) TMI 5 - HC - Indian Laws

Summary

Issues Involved:
1. Liability of the Royal Calcutta Turf Club to excess-profits duty.
2. Definition and scope of "business" under the Excess Profits Duty Act, 1919.
3. Applicability of the Carlisle and Silloth Golf Club case.
4. Impact of non-distribution of profits to members and charitable contributions on liability.

Detailed Analysis:

1. Liability of the Royal Calcutta Turf Club to excess-profits duty:
The primary issue referred to the High Court by the Board of Revenue was whether the Royal Calcutta Turf Club (RCTC) is liable to excess-profits duty under the Excess Profits Duty Act, 1919. The RCTC contended that its income does not constitute profits from a business within the meaning of the Act. The Board of Revenue, however, opined that the Club is liable to excess-profits duty for income derived from entrance fees to stands, paddocks, enclosures (gate money), fees paid by horse owners, bookmakers' license fees, and percentages on the totalisators and sweeps on the Derby and St. Leger. The Court had to determine if these sources of income constituted "business" under the Act.

2. Definition and scope of "business" under the Excess Profits Duty Act, 1919:
Section 3 of the Excess Profits Duty Act, 1919, applies to every business carried on in British India. The term "business" as per Section 2 includes "any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce, or manufacture." The Court had to decide if the RCTC's activities fell under this definition. The Club argued that it did not carry on a business as its operations were not trade, commerce, or manufacture, and it did not seek to make a profit. The Court, however, found that the activities of the Club, such as charging entrance fees and licensing bookmakers, amounted to carrying on a business.

3. Applicability of the Carlisle and Silloth Golf Club case:
The Board of Revenue based its opinion on the Carlisle and Silloth Golf Club v. Smith case, where a Golf Club was held liable for income tax on fees received from non-members. The Court of Appeal in that case determined that the Club was carrying on an adventure or concern in the nature of trade. The High Court found the RCTC's situation analogous, as it admitted the public to its facilities and charged fees, similar to the Golf Club. The Court concluded that the RCTC was carrying on a business by providing facilities for horse racing to the public for a fee.

4. Impact of non-distribution of profits to members and charitable contributions on liability:
The RCTC argued that since its members did not derive any pecuniary profit and the surplus was used for charitable purposes, it should not be liable to excess-profits duty. The Court held that the ultimate destination of the surplus was immaterial. The test was whether the Club received money from non-members in exchange for services, which constituted profit. The Court concluded that the RCTC was liable to excess-profits duty if there were any excess profits from the specified sources of income.

Conclusion:
The High Court concluded that the Royal Calcutta Turf Club is liable to excess-profits duty if, upon accounting, there are any excess profits from the specified sources of income, namely entrance fees to stands, paddocks, and enclosures (gate money), entrance fees paid by horse owners, bookmakers' license fees, and percentages on the totalisators. The Court directed that a copy of the judgment be sent to the Board of Revenue and ordered the Club to pay the costs of the Reference.