2001 (1) TMI 217 - AT - Wealth-tax

Issues Involved:

1. Whether the assessee-club is assessable to wealth-tax under the Wealth-tax Act, 1957 for the assessment years 1983-84 to 1987-88.
2. Application of the Kerala High Court decision in the case of Sreemulam Club.
3. Application of the Supreme Court decision in Trustees of Gordhandas Govindram Family Charity Trust v. CIT.
4. Interpretation and applicability of section 21AA of the Wealth-tax Act.
5. Determination of the status of the assessee-club as an Association of Persons (AOP) or an individual for wealth-tax purposes.
6. Impact of the amendment to section 21AA by the Finance Act, 1989.

Detailed Analysis:

1. Assessability to Wealth-tax:
The primary issue was whether the assessee-club, a society registered under the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955, was liable to wealth-tax for the assessment years 1983-84 to 1987-88. The Assessing Officer issued a notice under section 17 and brought the wealth of the assessee-club to tax. However, the CWT (Appeals) held that the assessee-club was not liable to wealth-tax, referencing the Kerala High Court decision in CWT v. Sri Mulam Club [1991] 191 ITR 370 (Ker.).

2. Application of Kerala High Court Decision:
The CWT (Appeals) relied on the Kerala High Court's decision in the case of Sri Mulam Club, which stated that an Association of Persons (AOP) was not an individual for wealth-tax purposes and hence not assessable as an individual. The High Court observed that the assets of an AOP were not chargeable under section 3 before the insertion of section 21AA in the Act. The Tribunal agreed with this view, noting that the jurisdictional High Court's decision was applicable as the Assessing Officer had not invoked section 21AA.

3. Application of Supreme Court Decision:
The learned Departmental Representative argued that the assessee-club should be regarded as an AOP based on the Supreme Court's decision in Trustees of Gordhandas Govindram Family Charity Trust v. CIT [1973] 88 ITR 47. However, the Tribunal distinguished this case, noting that the Supreme Court's decision pertained to joint trustees of a family trust, not a members' club like the assessee.

4. Interpretation and Applicability of Section 21AA:
The Tribunal examined whether section 21AA, which was inserted by the Finance Act, 1981, made any difference to the assessability of the assessee-club. The Tribunal concluded that the remarks of the Kerala High Court regarding section 21AA were obiter dicta and not binding. The Tribunal also noted that section 21AA did not extend the scope of the term "individual" used in section 3, and thus, the assessee-club, being a members' club, could not be brought within the wealth-tax net under section 21AA.

5. Status of Assessee-Club as AOP or Individual:
The Tribunal referred to the characteristics of a club as explained by the jurisdictional High Court in the case of Sri Mulam Club. It was observed that a club is a voluntary association of persons, and its members do not have any share in the property of the club. The assets of the club, upon dissolution, go to another society with similar objects, not to the members. Therefore, the assessee-club was considered an AOP and not an individual for wealth-tax purposes.

6. Impact of Amendment to Section 21AA:
The Tribunal noted that section 21AA was amended by the Finance Act, 1989, to exclude societies registered under the Societies Registration Act from its purview. The Tribunal regarded this amendment as clarificatory and applicable retrospectively. Additionally, the Tribunal referenced the Andhra Pradesh High Court decision in CWT v. George Club [1991] 191 ITR 368, which held that a club registered under the Societies Registration Act was not liable to wealth-tax.

Conclusion:
The Tribunal upheld the CWT (Appeals) decision, concluding that the assessee-club was not taxable to wealth-tax for the years in question. The appeals were dismissed, and the Tribunal did not address the valuation of the properties of the assessee-club as this issue was not considered by the CWT (Appeals) and no arguments were advanced on this question.

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