DAS. J - (1.) THE judgment of the court was delivered by .:
(2.) THIS is an appeal, by special leave granted by this court, from the judgment and order pronounced by the High court of Judicature at Bombay on the 22/03/1950, on a reference (I. T. Reference No. 30 of 1947) made by the Income-tax Appellate tribunal at the instance of the appellant under section 66(1) of the Income-tax Act (XI of 1922). The facts necessary to be stated for the purpose of disposing of the present appeal are these: The Royal Western India Turf Club Ltd. (hereinafter referred to as the `company`) was incorporated in 1925 under the Indian Companies Act, 1913. The objects for which the company was incorporated were, inter alia as follows:- (a) To take over the assets, effects and liabilities of the then unincorported club known as the Western India Turf Club; (b) to carry on the business of a Race Course Company in all its branches............... ; (c) to establish any Clubs, Hotels and other conveniences in connection with the property of the company; (d) to carry on the business of Hotel Keepers, Tavern Keepers, licensed victuallers and refreshment purveyors-, (e) to sell, improve, manage, develop, lease, mortgage, dispose of or otherwise deal with all or any part of the property of the company, whether movable or immovable, with power especially to sell and distribute or to permit to be sold and distributed wines, spirits, tobacco and other stores. The liability of the members is limited by guarantee, each member undertaking to contribute to the assets of the company, in the event of its being wound up, such sum as May be required, not exceeding one rupee, for payment of the debts and liabilities of the company and the costs, charges and expenses of the winding up. Clause 6 of the memorandum provides that if upon the winding up or dissolution of the company there remains after the satisfaction of all debts and liabilities any property whatsoever, the same would be paid to or distributed among the members of the club in equal shares. Under the Company's Articles of association that were in force during the accounting year, besides Honorary Stand Members, Visiting Members and Temporary Members there were two main categories of members, namely, the Club Members and Stand Members. The number of Club Members was limited to 350, exclusive of four designated high dignitaries and the number of Stand, Members was liable to be limited by the committee at any time. Club Members and Stand Members had to be elected by ballot by the committee. On election every Club member had to pay an entrance fee of Rs. 150.00 and a stand member had to pay an entrance fee of Rs. 75.00 Members of either class had also to pay an annual subscription of Rs. 25.00. The entire management of the company and the control over its funds and property were left in the hands of a committee of nine Club Members elected as provided in the articles of association of the company. The company was and is the lessee of two plots of land, one in Bombay and the other in Poona. Two race courses have been laid out on these plots of land. On each race course there are three enclosures known as Members' Enclosure, First Enclosure and Second Enclosure. Each enclosure has a stand or stands from which races are watched. The Members' Enclosure is for the exclusive use of the members, their wives and unmarried daughters above the age of 12 years and their guests. The First and Second Enclosures are open to the public. For admission into each of the three enclosures an admission fee is charged. In the Members' Enclosure admission is by season tickets or daily admission gate tickets. Private Boxes in the Members' Enclosure are available to members on payment according to the number of chairs in the box. In addition to the admission fees to the Members' Enclosure, a member has to pay, in respect of his guests, an additional fee. In each of the enclosures there is a totalisator run on the parimutuel system at which persons in that enclosure place their bets on each race. These several totalisators are linked by electric appliances, so that the moneys received from members and non-members are included in one pool and distributed amongst the holders of the winning tickets in equal proportions. In each enclosure there is arrangement for the supply of refreshments on payment. 87 The present disputes arose in connection with the assessment of the company's income, profits or gains in the accounting year 1/07/1938, to 30/06/1939. The company received large sums of money on admission tickets from members as well as from non-members besides other moneys on other accounts. The company claimed that in computing its total income, the following four items of receipts should be excluded: (1) Season admission tickets from members Rs. 23,635.00 (2) Daily admission gate tickets (3) from members Rs. 51,777.00 (3) Use of private boxes by members Rs. 21,490.00 (4) Income from entries and forfeits received from the members whose horses did not run in the races during the season Rs. 82,490.00 There was no dispute as to the liability of the company in respect of moneys received from non-members and moneys received on all other accounts. The Income-tax officer held that all the four items mentioned above were receipts from business falling under section 10(1) of the Income-tax Act or, in the alternative, were receipts by an association performing specific services for its members for remuneration definitely related to those services within the meaning of section 10(6) of the Act and assessed accordingly. On appeal by the company the Appellate Assistant Commissioner dismissed the appeal. He held that the company was carrying on business and that all the above-mentioned four on business and that all the abovementioned four items were receipts from business within the meaning of section 10(1), although none of those items fell within section 10(6). On a further appeal by the company to the Income-tax Appellate tribunal the latter came to the conclusion that none of the sums in question could be said to be profits or gains of a business coming under section 10(1). The tribunal also held that items 1, 2 and 3 did not also come within the ambit of section 10(6) of the Act. Apparently the Tribunal did not consider the applicability of section 10(6) with regard to the fourth item.
(3.) ON the application of the Commissioner of Income-tax, Bombay, the Appellate tribunal, under section 66(1) of the Act referred the following two questions for the opinion of the Bombay High court, namely(1) whether on the facts found or admitted in the case, The Royal Western India Turf Club Ltd., Bombay, received the sums of Rs. 23,635.00, Rs. 51,777.00, Rs. 21,490.00 and Rs. 82,490.00 from a business carried on by it with the members within the meaning of section 10(1) of the Indian Income,tax Act? (2) whether on the facts found or admitted in the case, The Royal Western India Turf Club Ltd., Bombay, received the sums of Rs. 23,635.00, Rs. 51,777.00 and Rs. 21,490.00 [and Rs. 82,490.00 with regard to which sum the tribunal did not consider the applicability of section 10(6)] as a trade, professional or similar association performing services for its members for remuneration definitely related to those services within the meaning of section 10(6) of the Indian Income-tax Act? The reference having come up for hearing the High court found that the statement of the case was insufficient and incomplete and accordingly it sent back the reference to the Appellate tribunal with directions to submit a proper statement of facts. The Appellate tribunal thereupon submitted a supplementary statement of the case setting forth in greater detail the facts necessary for the disposal of the reference. On further hearing of the reference in the light of this supplementary statement of the case the High court held that the company performed two distinct functions, namely, the carrying on of the business of racing and the carrying on of the club and that the first three items of Rs. 23,635.00, Rs. 51,777.00 and Rs. 21,490.00 were charged to the members in respect of the various amenities specified in the supplementary statement of the case which were given by the club only to its members namely, the use of the Members' Enclosure on payment of admission fee, the use of the members' totalisator, the right to watch the races from the lawn or from an unreserved seat in the Members' stand, the use of a private box subject to payment and the use of the Guest House at Poona. Accordingly the High court held that the said first three items did not fall either under section 10(1) or section 10(6) of the Act. With regard to the sum of Rs. 82,490.00 the High court held that it did not come under section 10(6) but was a part of the income of the business of horse racing done by the company. Accordingly the High court answered question No. 1 in the negative as regards the first three items of Rs. 23,635.00, Rs. 51,777.00 and Rs. 21,490.00 and in the affirmative as regards the fourth item of Rs. 82,490.00 and it answered question No. 2 in the negative in respect of the first three items and in the affirmative with regard to the fourth item. In effect the High court held that the first three items were not taxable either under section 10 (1) or section 10(6) and that the fourth item was taxable under both the said Ss. of that section. The Bombay High court having dismissed the application of the Commissioner of Income-tax under section 66-A (2) to appeal to this court, the Commissioner applied for and obtained special leave to appeal to this court. The company has not appealed from that part of the order which declared that the fourth item of Rs. 82,490.00 was taxable. Therefore, the questions we have to decide in this appeal are: (1) whether the first three items are receipts from business carried on by the company, and (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. ;