COMMISSIONER OF INCOME TAX Vs. MADRAS RACE CLUB

JUDGEMENT

(1.) THE assessee in these cases is the Madras Race Club, Madras. It was assessed to income-tax for the assessment years 1961-62 to 1964-65. It was incorporated as a company under Section 26 of the Indian Companies Act, 1913. THE liability of the members is limited. It was established with the following objects :

(2.) WE have omitted the rest of the clauses of the objects clause as they are not material. Under Clause 4 of the memorandum, the income and property of the club whensoever derived was to be applied solely towards the promotion of the objects of the club as set forth in the memorandum of association and no portion thereof was to be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoever by way of profit to the members of the club. In Clause 5 it was stated that a licence was granted by the Government of India to the club in pursuance of Section 26 of the Indian Companies Act on the basis of the said condition in Clause 4. On the winding up or dissolution of the club if there was any surplus left it was not to be paid to or distributed among the members of the club, but had to be given or transferred to some other institution or institutions having objects similar to the objects of the club, or to such charitable object or objects to be determined by the members of the club at or before the time of dissolution, or in default thereof by the High Court of Judicature at Madras.

(3.) THE assesses appealed to the Appellate Assistant Commissioner for each of these years objecting to the assessment of the subscriptions. THE appeals for 1961-62 aad 1962-63 came before one Assistant Commissioner, while those for the succeeding years came before another. THE appeals for 1961-62 and 1962-63 were dealt with by a common order passed on 20th March, 1965. THE Assistant Commissioner, who heard and disposed of the said appeals, referred to Clauses 4 and 8 of the memorandum of association and held that the members who contributed and paid for some services and facilities were not entitled to receive back the amounts by way of participation in the profits and that, therefore, there was no scope for the application of the exemption on the basis of mutuality.