1987 (11) TMI 115 - AT - Income Tax

Summary

Issues:
1. Taxability of surplus income from an exhibition football match organized by an Athletic Club.
2. Assessment of the actual surplus amount derived from the exhibition match.

Issue 1: The main issue in this case was the taxability of the surplus income of Rs. 5,29,832.37 generated from an exhibition football match organized by an Athletic Club. The Income Tax Officer (ITO) included this amount in the club's income, but the Commissioner of Income Tax (Appeals) deleted it based on a resolution by the Executive Committee to utilize the surplus for charitable purposes. The CIT (Appeals) found that the surplus was diverted for charitable uses before reaching the club, akin to a trust, following the precedent set in CIT v. Tollygunge Club Ltd. The department contended that there was no diversion of income for charity as per the resolution, and the surplus was not exempt under section 10(23) of the Income-tax Act, 1961. The Appellate Tribunal disagreed with the CIT (Appeals) and held that the surplus income was taxable as it was applied to discharge an obligation, not diverted before reaching the club.

Issue 2: The second issue revolved around the assessment of the actual surplus amount from the exhibition match. The CIT (Appeals) found the net surplus to be Rs. 9,29,542, differing from the initial assessment of Rs. 5,29,832 by the ITO. The discrepancy arose due to incomplete accounting for receipts and expenditures spanning across different accounting periods. The department raised an objection that the CIT (Appeals) did not enhance the assessment amount despite finding a higher surplus. The Tribunal referred to the scope of enhancement under section 251, emphasizing that the CIT (Appeals) cannot introduce new sources of income but can correct matters considered by the ITO during assessment. Consequently, the Tribunal allowed the appeal for statistical purposes and remanded the case to the ITO for a fresh assessment to determine the exact surplus amount after further inquiries.

In conclusion, the Appellate Tribunal held that the surplus income from the exhibition match was taxable as it was applied to discharge an obligation, rejecting the notion of diversion for charitable purposes. The case highlighted the importance of accurate accounting for income and expenditures to determine the actual surplus amount for tax assessment purposes.