9911796707
TMI Blog1983 (10) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... t from tax. In the covering letter the assessee has stated that though it made income as per the income and expenditure statement for the years under consideration, since the club is established for the mutual benefit of the members, even though it derived income from non-members it is not taxable. The assessee relied upon a decision of the Madras High Court in the case of Presidency Club Ltd. v. CIT [1981] 127 ITR 264. The ITO refused to accept the contention put forward by the assessee. According to the ITO, in this case, in all the previous years, that part of the income which is attributable to the services rendered to non-members was subjected to tax. The ITO was also of the view that in the case of a club which carries on business whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in IT Appeal No. 152 (Hyd.) of 1980 for the assessment year 1976-77 dated 11-2-1981. 3. On appeal, the AAC following the ratio of the decision of the Madras High Court in the case of Presidency Club Ltd., held that receipts attributable to services rendered to the non-members' guests cannot be made subject to tax in view of the existence of the factor of mutuality among the members of the club. 4. Aggrieved, the assessee filed the present appeals before the Tribunal. The learned departmental representative contended that the AAC ought not to have directed the ITO to exclude the receipts attributable to services of non-members for the purpose of estimating income. It was further submitted that the AAC ought to have held that the receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO, it is not the same case as though the total expenditure of the club is apportioned amongst the members. Specific items were charged specifically and it partakes the character of business. According to the AAC, the Tribunal in its order dated 11-2-1981 in the case of the assessee for the assessment year 1976-77, did not hold that the ratio laid down in the case of Presidency Club Ltd. was not applicable to the facts of this case nor was it held by the Tribunal on merits that the case did not support the stand of the assessee. In para 4 of the order of the Tribunal dated 11-2-1981 it was stated that--- "He sought to place reliance on the decision of the Madras High Court in the case of the Presidency Club Ltd. v. CIT (127 ITR 264). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices rendered to the members and not to the guests. In this context, the Andhra Pradesh High Court in the case of CIT v. Merchant Navy Club [1974] 96 ITR 261 held that the supplies made by a club to its members for a price was not a sale for profit. Registration of the club as a society did not affect the nature of the transactions or the taxability of the surplus. The club in all such cases is only acting as an agent of the members for making supplies to the members. The submission of the assessee in these appeals is that in respect of guests, the charges are to be borne by the members only and inasmuch as the guests are not the guests of the club, but the guests of the members and the members themselves borne the charges on account of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a sharing of common amenities in a spirit of camaraderie. The separate payment for some of the amenities is only a mode of contribution and does not bring its case within the vortex of taxation. The question whether even in a case of a members' club, the profits arising from transactions with non-members could be subjected to tax, will have to be considered in the light of the decisions in Madras Race Club [1976] 105 ITR 433, Carlisle Silloth Golf Club v. Smith [1913] 6 TC 198 (CA) and National Association of Local Government Officers v. Watkins [1934] 18 TC 499 (KB). So long as the occupation of the room is referable to the amenity provided for the members for themselves no income can be said to be earned, so as to be brought to tax by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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