1953 (10) TMI 9 - SC - Income Tax

Whether the first three items are receipts from business carried on by the company? Whether those three items are receipts by a trade or professional or similar association performing specific services for its members for remuneration definitely related to those services? Held that - All the items of receipts from members referred to in the questions were received by the company from business with its members within the meaning of Section 10(1) and that none of them was received by the company as a trade, professional or similar association within the meaning of Section 10(6). In our judgment the High Court should have answered question No. 1 in the affirmative and question No. 2 in the negative. The appeal is allowed

Issues Involved:
1. Whether the first three items of receipts from members are from business carried on by the company.
2. Whether those three items are receipts by a trade or professional or similar association performing specific services for its members for remuneration definitely related to those services.

Detailed Analysis:

Issue 1: Receipts from Business
The company, Royal Western India Turf Club Ltd., argued that the first three items of receipts from members (season admission tickets, daily admission gate tickets, and use of private boxes) should not be considered as income from business. The High Court held that these items were not taxable under Section 10(1) of the Income-tax Act, as they were charges for amenities provided exclusively to members.

The Supreme Court examined the objects of the company, which included carrying on the business of a Race Course Company and hotel-keeping. The Court noted that the company carried on horse racing business and earned income from both members and non-members. The rates charged to members and non-members for similar facilities were identical. The Court found no basis to exclude the first three items from the computation of the total business income of the company, as the dealings with members were similar to those with non-members and were part of the same business.

The Court referred to the principle laid down in the case of New York Life Insurance Co. v. Styles, which involved mutual assurance and the identity of contributors and participators. However, the Court found that this principle did not apply to the present case as there was no mutual dealing between the members inter se, no common fund for mutual benefit, and no refund of surplus to the contributors.

The Court concluded that the principles of mutual assurance could not be applied to an incorporated company carrying on a business like horse racing, which realizes money from both members and non-members for similar facilities. Therefore, the first three items of receipts were considered part of the income from the business carried on by the company.

Issue 2: Trade or Professional Association
The second issue was whether the first three items of receipts were from a trade or professional or similar association performing specific services for its members for remuneration related to those services under Section 10(6) of the Income-tax Act.

The Supreme Court analyzed the meaning of "trade or professional or similar association" and concluded that the company was not a professional association. The Court referred to the definition of a "trade association" as an association of tradesmen, businessmen, or manufacturers for the protection and advancement of their common interest. The Court held that the company did not fit this description, even though it carried on a business.

The Court found it unnecessary to discuss whether the facilities provided by the company to its members could be regarded as "services" under Section 10(6) since the company was not a trade or professional or similar association within the meaning of that sub-section.

Conclusion:
The Supreme Court held that all the items of receipts from members were received by the company from business within the meaning of Section 10(1) and that none of them was received by the company as a trade, professional, or similar association within the meaning of Section 10(6). The High Court's judgment was reversed, and the appeal was allowed, with costs awarded to the Commissioner of Income-tax.

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