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TMI Blog1975 (4) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (iii) to do all such other things as are incidental or conducive to attainment of the above objects. Every member of the association undertook to contribute to its assets in the event of winding up a sum not exceeding Rs. 100 for payment of debts and liabilities of the association and the costs, charges and expenses of winding up. The association was to consist of an unlimited number of members. There were life members, resident members, non-resident members, temporary members, special members and honorary members. There is provision for admission of not more than five cricketers, ten hockey players and ten football players upon the recommendation of the respective members of the executive committee in charge of cricket, hockey and football. Such associated cricketers, hockey and foot-ball players had no voice in the management nor could they compete in any tournament open only to members. They had to pay an ordinary subscription of Rs. 3 per month. The powers of the governing body included powers to make, amend or cancel bye-laws from time to time for the good order of the association. The bye-laws would remain in force unless cancelled by a general meeting. The committee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 963. The assessee filed a return for the assessment year 1962-63 claiming a loss of Rs. 117 under the head " House property " and an income of Rs. 2,619 under the head " Business ". There was a receipt of Rs. 4,337 in this year, which was credited to the building fund account. This building fund account came into existence in accordance with the resolution passed on 18th March, 1960, by the executive committee of the assessee. It was resolved that a separate building fund account be opened in the Indian Bank Ltd., Periamet, and that all donations received should be credited to that account. During the year ended 31st March, 1962, there was a receipt of Rs. 4,337.41 as donation. There was an opening balance in this account on 1st April, 1961. Along with the opening balance, the total amount to the credit of the building fund account as on 31st March, 1962, was Rs. 14,522.91. Out of this amount only Rs. 11,522.91 stood credited to the Indian Bank account referred to in the resolution and the balance was merged in some other account. During the accounting year ended 31st March, 1963, relevant for the assessment year 1963-64 a sum of Rs. 11,435 was shown as received towards the build ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he managing committee and it did not relate to any distribution of income between the members. The Appellate Assistant Commissioner pointed out that the said rule limited the scope of powers of the committee, but not of the general body, so that the members could distribute the profits, if they so liked. As long as there was no restriction prohibiting the members to distribute the profits among themselves it could not be held that the members were not legally entitled to the property. He, therefore, held that the mere fact that the income had not been applied for any personal or private purposes would not enable the assessee to claim the exemption. The assessee appealed to the Appellate Tribunal and repeated the objections to the assessment and relied on the decision in Commissioner of Income-tax v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). The assessee's objection was not sustained. Promotion and encouragement of entertainment set out as clause (1) of the objects, it was pointed out, was not an object of general public utility. Similar was the case of promotion of social intercourse among the members. It was, therefore, held that the association was not one whose income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the second question would only be of an academic interest. In the circumstances, we do not think it necessary to reframe the question to bring out the real issue between the parties and to answer it especially when there is some possibility of the reference being academic in nature. We may also make it clear that we ought not to be understood as having made any observation on the merits or otherwise of the assessee's submission on this aspect. When these aspects were pointed out during the hearing, the learned counsel for the assessee said that so long as the point was capable of being raised, if necessary later, he would not mind the question not being answered. It would be open to the assessee to contest the conclusion after the investigation is over, if the assessee is so advised. We decline to answer the second question for the reasons mentioned above. We now turn to the first question, which requires an examination of two points, viz., (1) whether the purpose for which the assessee-association has come into existence is a charitable purpose, and (2) whether the income and property of the assessee-association are held under trust or other legal obligation wholly for su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 Commissioners for Special Purposes of Income-tax v. Pemsel [1891] AC 531, 583 (HL) but that definition has no statutory authority and is not precisely followed in the most material particular ; the words of the section are " for the advancement of any other object of general public utility " whereas Lord Macnaghten's words were 'other purposes beneficial to the community'. The difference in language, particularly the inclusion in the Indian Act of the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the will of a desire to encourage mere sport and that the health and welfare of the working classes was obviously the dominant object in the testator's mind. The purpose was held to be a charitable one. In the present case there is no provision of a playing field, park or gymnasium open to the entire public. We shall explain this aspect a little later after considering the other two cases cited. In Inland Revenue Commissioners v. Baddeley [1955] 2 WLR 552 (HL), certain properties were transferred for conversion and the capital money arising from the sale of the properties was liable to be used for the promotion of the religious, social and physical well-being of persons resident in the County Boroughs of West Ham and Leyton by the provision of facilities for religious services and instruction and for the social and physical training and recreation of such aforementioned persons who for the time being are in the opinion of such leaders or members likely to become members of the Methodist Church and of insufficient means otherwise to enjoy the advantage provided by the trust. The question was whether the trust was for a charitable purpose. The House of Lords by a majority held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of entertainments, as such, is not a charitable purpose. It suffers also from vagueness, as no court would be in a position to administer a trust for mere promotion and encouragement of entertainment. Encouragement of art is different from encouragement of mere entertainment. Similarly, promotion of intercourse among the members of the association cannot be considered to be a charitable purpose. The Privy Council in Mohammad Ibrahim Riza Malak v. Commissioner of Income-tax AIR 1930 PC 226 (PC) and the Supreme Court in East India Industries (Madras) Private Ltd. v. Commissioner of Income-tax [1967] 65 ITR 611 (SC) held that if there are several objects of a trust, some of which are charitable and some non-charitable, and the trustees in their discretion could apply the income to any of the objects, the whole trust must fail and no part of the income would be exempt from tax. In the present case the members of the association could apply the income to any of the objects, which we have found to be non-charitable, so that it would fall within the decisions mentioned above. The Tribunal's conclusion is, therefore, correct. We have in the above discussion not considered the object ..... X X X X Extracts X X X X X X X X Extracts X X X X
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