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TMI Blog1976 (3) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... red directly or indirectly by way of dividend, bonus or otherwise howsoever, by way of profit to the persons who at any time were or have been members of the club, or to any of them, or to any person claiming through any of them. The assessee could, however, pay remuneration to any officers or servants of the club or to any member thereof or other persons, in return for any services rendered to it. Under clause 13 the local Government could impose any further conditions than those set out in clause 12 above, which should be duly observed by the club. The club did not have a share capital, but in the event of winding up, the members undertook to contribute such sum as may be required not exceeding rupees fifty. On the winding up or dissolution of the club, any surplus assets were not to be distributed amongst the members of the club, but were to be transferred to some other institution or institutions having similar objects to be determined by the members of the club at the time of the dissolution, and in default thereof by the appropriate court. The club has in particular a well-known golf course in Ooty. The assessee was not assessed to tax till the year 1960-61. For that year t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Appellate Tribunal was right in law in holding that the assessee-club was entitled to relief under section 4(3)(i) of the Income-tax Act, 1922, for the assessment year 1960-61 ?" The learned counsel for the revenue submitted that this is a case where the assessee has come into existence for the mere promotion of sports and games and that its objects are not charitable in character. In any event, according to the learned counsel, there were some objects, like promotion of social intercourse among the members, which were not charitable in character, so that the assessee could not be said to have been established wholly for charitable purposes. On behalf of the assessee the submission was that it came into existence for the encouragement or management of sports and games and that the other clauses in the memorandum were only ancillary and incidental to the main object. Reliance was placed on the licence granted under section 26 of the Companies Act, 1913, as showing that the assessee had been established for the charitable purposes. It was, therefore, contended that the assessment was bad in law. Section 26 of the Indian Companies Act of 1913 provided that where it was pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto existence for the advancement of "any other object of general public utility." The learned counsel for the department contended that in the present case the claim for exemption is not admissible in view of the decision of the Calcutta High Court in Cricket Association of Bengal v. Commissioner of Income-tax [1959] 37 ITR 277 (Cal). The Cricket Association of Bengal was an unregistered and unincorporated body. There was no trust deed or other document vesting any property in the association for any purpose connected with its activities. The association had only framed certain rules, which envisaged the promotion of the game of cricket played in accordance with the highest standard. One of the objects of the association was to organise cricket tournaments and leagues and to carry on any other activity which may seem to it capable of being carried on in connection with its main objects. As between its members, it was a mutual association and received payments by way of subscriptions and donations. The surplus of its receipts from those sources had not been assessed. The association, however, had other receipts from the sale of tickets at the time of the cricket matches. When th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC). It was also pointed out that reliance, on British precedents in order to ascertain the existence of a charitable purpose under section 4(3) is not proper. In All India Spinners' Association v. Commissioner of Income-tax [1944] 12 ITR 482 (PC), Lord Wright, speaking for the judicial Committee, observed at page 486 as follows : "It is now recognised that the Indian Act must be construed on its actual words and is not to be governed by English decisions on the topic. The English decisions on the law of charities are not based upon definite and precise statutory provisions. They have been developed in the course of more than three centuries of the Chancery Courts. The Act of 43 Elizabeth (1601) contained in a preamble a list of charitable objects which fell within the Act, and this was taken as a sort of chart or scheme which the court adopted as a groundwork for developing the law. In doing so they made liberal use of analogies so that the modern English law can only be ascertained by considering a mass of particular decisions often difficult to reconcile. It is true that section 4(3) of the Act has largely been influenced by Lord Macnaghten's definition of charity in Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies Act, 1913. It was established to promote and protect trade, commerce and industries, to aid, stimulate and promote the development of trade, commerce and industries, and to watch over and protect the general commercial interests of India or any part thereof. Power was also taken for promotion of or opposition to legislation and to procure change of law and practice affecting trade, commerce and manufactures. The income of the chamber was to be applied solely towards the promotion of its objects as set forth in the memorandum. The Chamber of Commerce purchased a building part of which was utilised for itself and part of which was let out to tenants. The question was whether the building was property held under trust or other legal obligation, wholly for charitable purposes, so that the income therefrom was exempt under section 4(3)(i) of the 1922 Act. It was held that advancement or promotion of trade, commerce and industry leading to economic prosperity enured for the benefit of the entire community. Though the prosperity would be shared by those who are engaged in trade, commerce and industry, it did not follow, it was held, that the purpose was any the less an object of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety. Whatever may be the British precedents, examined in the light of the decision of the Supreme Court in the Andhra Chamber's case [1965] 55 ITR 722 (SC), it is clear to us that in the present case a charitable purpose is discernible. It was argued for the revenue that one of the clauses, viz., clause (9), provided for the promotion of social intercourse among the members of the club and that, to that extent, there was a non-charitable purpose. As we read the memorandum of association, we consider that the promotion of social intercourse among the members is not the primary object with which the assessee had come into existence. We understand the clause to mean that the promotion of social intercourse among the members is achieved by encouragement and management of sports and games. Lord Reid in Baddeley v. Commissioners of Inland Revenue [1955] 35 TC 661 (HL) had pointed out at page 707 as follows : "On a playing field a person can learn the value of endurance, and perseverance, of assiduous practice, of unselfish association in a team, and of winning with modesty and losing with a good grace, and, to my mind, that is the kind of moral and social training which the donor' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is a club incorporated under the Companies Act. The club cannot be taken to belong to any particular religion, so that the customary notions of the laws applicable to that religion could be given operative force in construing the trust. We do not, therefore, find it possible to apply this decision to the facts herein. In that case several decisions of the U. K. courts and also the decision of the Calcutta High Court in Cricket Association of Bengal v. Commissioner of Income-tax [1959] 37 ITR 277 (Cal) were cited. It was pointed out that those decisions arose under section 4(3)(i) of the Income-tax Act of 1922 and that they would have no relevance to a case arising under Hindu law. The Supreme Court cannot, therefore, be taken to have given its seal of approval to the decision of the Calcutta High Court in the case of Cricket Association of Bengal [1959] 37 ITR 277 (Cal) as it did not deal with section 4(3)(i). During the course of the arguments, we were referred to the decision of the Mysore High Court in Bangalore Race Club v. Commissioner of Income-tax [1970] 77 ITR 435 (Mys). That was a case where a race club claimed exemption under section 11 of the Income-tax Act of 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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