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TMI Blog1984 (2) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,11,202 for the assessment year 1980-81 to tax. The assessee took up the matter in appeal. The first appellate authority in an elaborate order found that the objects of the trust were objects of general public utility and that the institution qualified for exemption under section 11. He, however, found that the only property held under trust was the initial amount of Rs. 1,116 which was provided by Hyderabad Race Club as the corpus of the trust fund and that only income therefrom could have been exempted. He was of the view that the assessee's income from conducting races and/or inter-venue betting as permitted by Hyderabad Race Club could not be treated as income from property. He was also of the view that the assessee cannot be said that the business was carried on in pursuance of the primary object of the trust. He was, therefore, of the view that it gets hit by section 13(1)(bb). It is in this view that he confirmed the assessments and dismissed the appeals. The assessee is in second appeal. 3. The learned counsel for the assessee took us over the order of the first appellate authority. He pointed out that the finding that all the objects of the assessee-trust are of charita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signed the benefit of profits on races run on specified dates or on betting. The Hyderabad Race Club used its Organisation and the assessee had reimbursed the cost thereof. There was practically no element of risk for the trust inasmuch as the normal collections on a race day were Rs. 3,39,000, while the expenses for a day amounted to about Rs. 1,38,000 or, in other words, there was an expected average profit of Rs. 2,00,000 per race day. As for inter-venue betting, the collection is of the order of Rs. 1,48,400, while the expenses to be reimbursed to the Hyderabad Race Club were only about Rs. 32,400. In other words, the net surplus in any single day was Rs. 1,16,000. It was further pointed out that when a race day or inter-venue betting is allowed to the assessee, this fact is prominently publicised so that charitable minded race goers turn out in larger numbers. The element of risk, therefore, was practically absent. There were also not other characters of business such as risking of trust capital (which was only Rs. 1,116), nor had it any Organisation by way of staff, premises, etc. It was, therefore, contended that there was no business inferable from the mere fact that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical aid and relief ; (iii) for the relief of the poor and the destitute, including the establishment, maintenance and support of the institutions or funds for the eradication and relief of any form of poverty ; (iv) for the promotion and advancement of Indian culture, fine arts, literature and philosophy and the preservation of our national heritage ; (v) for awarding scholarships and fellowships and grants by way of loans and otherwise and on such terms and conditions as the trustees may think fit in their absolute discretion for the purpose of undertaking, prosecuting and encouraging research work in any branch of engineering, technology or any other branch or branches of knowledge in its widest and more comprehensive sense ; (vi) for promoting and encouraging all public activities in sports and games ; and (vii) for advancement of any other object of general public utility not involving the carrying on of any activity for profit." The object which was specifically found fault with is in clause (vi), that is ' promoting and encouraging all public activities in sports and games '. This object was treated to be not charitable within the meaning of English law relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n world arena. Such an object is considered to be of utmost public concern. That is the reason why the Government itself takes so much interest in promotion of sports. It is too late in the day, therefore, for the IAC/ITO to say that this object could not qualify for exemption. Even the other objects are clearly charitable in nature in the sense of involving general public utility. Though the learned departmental representative wanted to rely upon the order of the ITO, he did not bring in any material to successfully controvert the finding of the first appellate authority. 6. The next argument of the ITO which was rejected, rightly so, in our opinion, is that there was an attempted transfer of business of Hyderabad Race Club to the assessee and that such transfer was ultra vires of the memoradum and the trust deed. The first appellate authority found that the trust deed provided powers to the trustees to augment its property. The mere fact that the particular mode of augmentation noticed in this case was not provided in the trust deed did not, in the opinion of the first appellate authority, make the arrangement any the less legally valid. He further found that even if it is ille ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is whether the income from the race meet and the inter-venue betting could be treated as income from property as claimed by the assessee and not business as urged by the ITO. Property is, no doubt, a word of widest import. In CIT v. P. Krishna Warriar [1964] 53 ITR 176, the Supreme Court found that property may include business as well. A parties share in a partnership business was considered to be property in the case of CIT v. Hamdard Dawakhana [1960] 39 ITR 144 (Punj.). Right to exploit an over bridge as advertising space was treated as property in the case of A.J. Patel. Income from right to levy admission fee and to sell refreshments by a swimming bath were held to be income from property in the case of Breach Candy Swimming Bath Trust. Even the office of managing agency or that of a principal agency of an insurance company was held to be property within the meaning of section 11 even if it could be considered as business in the normal sense in the case of J.K. Trust v. CIT/EPT [1957] 32 ITR 535 by the Supreme Court and in Dharma Vijaya Agency v. CIT [1960] 38 ITR 392 by the Bombay High Court. But it is not every case of business which can be treated as property. If it were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ickets and for advertisement should, on the facts and in the circumstances of the case, be regarded as merely voluntary contributions attracting the exemption. Even if the receipts did not constitute the corpus, in the assessee's case, there was certainly no quid pro quo in the arrangement between the assessee and the Hyderabad Race Club as the assessee was getting an almost certain profit from the Hyderabad Race Club periodically at no risk or cost to the assessee. It could not have, therefore, the character of income assessable to tax, though no doubt, if it is not towards corpus, the assessee may have to either apply such income also for charitable purposes or obtain permission to accumulate the same. 8. From the discussion in the foregoing paragraphs, we find that the assessee is entitled to exemption in any of the two possible views. The assessee obtained licence on a letter from the Hyderabad Race Club for permission to conduct races and inter-venue betting from the Government under the Andhra Pradesh Gaming Act. The explanatory note relating to the resolution for creation of the trust as well as the terms of the trust deed clearly contemplate the assessee getting such prop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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