COMMISSIONER OF INCOME TAX Vs. DELHI RACE CLUB 1940 LIMITED

JUDGEMENT

(1.) THE Delhi Race Club (1940) Ltd. (hereinafter referred to as the "assessee") is an incorporated body and members' club. The objects for which the assessee -company was incorporated are, inter alia :

(2.) THE liability of the members is limited. By cl. 5 of the memorandum of association, every member of the club has undertaken to contribute to the assets of the club in the event of the same being wound up during the time that he is a member or within one year afterwards, for payment of the debts and liabilities of the club contracted before the time at which he ceases to be a member, and the costs, charges and expenses of winding up the same, and for the adjustment of the rights of the contributories amongst themselves, such amounts as may be required, not exceeding one hundred rupees. According to cl. 6, if upon the winding up of the club or its dissolution, there remains after the satisfaction of all debts and liabilities any property whatsoever, the same shall be paid or distributed amongst the members of the club in equal shares. "Regular members" of the assessee -club are required to pay an entrance fee and annual subscription, while "life members" pay a life membership subscription. The life members are not required to pay any further subscriptions for the rest of their lives. Each of the above members has a vote on every motion before the assessee -club in general meetings. There are "stand members" also who do not pay any entrance fee, but pay regular periodical subscriptions. "Honorary members" are under no obligation to pay entrance fee or any subscription, but are entitled to all the rights and privileges of a regular member.

(3.) THE assessee -company claimed exemption in regard to this item before the ITO who, in the assessment order, stated thus :