1976 (3) TMI 18 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee-club was entitled to relief u/s 4(3)(i) of the Income-tax Act, 1922, for the assessment year 1960-61.
2. Whether the promotion of sports and games constitutes a charitable purpose under the Income-tax Act.

Summary:

Issue 1: Entitlement to Relief u/s 4(3)(i)
The assessee-club, established in 1857 and registered u/s 26 of the Indian Companies Act, 1913, was assessed to tax for the first time in the year 1960-61. The Income-tax Officer brought to tax Rs. 1,833 as "property" income and Rs. 12,965 as income from "other sources." The assessee appealed, and the Appellate Assistant Commissioner held that the assessee was not established with any object of general public utility, thus not qualifying for exemption. However, the Appellate Tribunal, relying on the Supreme Court decision in Commissioner of Income-tax v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC), upheld the assessee's objection, recognizing a trust or legal obligation to use the income for the club's objects.

Issue 2: Charitable Purpose
The primary contention was whether the promotion of sports and games by the assessee-club constituted a charitable purpose. The learned counsel for the revenue argued that the club's objects were not charitable, citing the decision in Cricket Association of Bengal v. Commissioner of Income-tax [1959] 37 ITR 277 (Cal). However, the court noted that the Indian definition of "charitable purpose" includes "the advancement of any other object of general public utility," which differs from British precedents. The court emphasized that the dominant object of the assessee-club was the encouragement and management of sports and games, which promotes physical well-being and is a charitable purpose. The court also clarified that the promotion of social intercourse among members was ancillary to the main object of promoting sports and games.

Conclusion:
The court concluded that the assessee-club's dominant object was charitable in nature, and the other objects were ancillary. Therefore, the assessee-club was entitled to exemption u/s 4(3)(i) of the Income-tax Act, 1922. The question referred was answered in the affirmative and in favor of the assessee. The assessee was also entitled to costs, with counsel's fee set at Rs. 25.