TaxTMI 
TaxTMI 
1988 (2) TMI 147
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.... failed to take note of the fact that clause 1 of the Entrance Rules of the assessee association enables the committee to refuse admission to any person without assigning any reason and therefore the benefits do not endure for the cross section of the public identifiable with reference to public or impersonal character. 3. Ground No. 3 is in respect of holding that the income of the assessee association is also exempt on the ground of mutuality by the CIT(A). Revenue's grievance is that the CIT(A) has failed to appreciate that under the Articles of Association of the assessee there were two classes of members but only one of them was beneficiary and therefore, the test of mutuality was not satisfied and consequently income cannot be exempted on this ground also. 4. Ground No. 4 in ITA No. 2/PN/83 is regarding the allowance of depreciation of Rs. 19,226 and deletion of addition of Rs. 81,527 on account of increase in the specific funds. Revenue's grievance is that the assessee has not satisfied the conditions laid down allowing depreciation and moreover, exemption u/s 11 was not available and thus the addition by way of donation was to be taxed, as the income of the assessee. ....
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....ate the same, (f) To acquire and hold immovable property, (g) To plan a colony for the members of the society and to make other arrangements ancillary to it, (h) To raise funds and loan, to invest amounts and advance loans, etc. (i) To do all other things helpful in the achievement of the above objects. Question arose whether clauses (f) and (g) are ancillary clauses to clauses (a) to (e) and whether clauses (a) to (e) are dominant clauses and whether clauses (f) and (g) are subsidiary clauses To our minds, clauses (f) and (g) have equal force as that of clauses (a) to (e). 8. The facts pertaining to each point would be discussed while discussing them, but the issues for our consideration are as follows : (1) Whether the decision of this Bench of Pune Tribunal for the assessment year 1973-74 holds good for all subsequent years, or otherwise does it at least hold good for the assessment year 1973-74 ? (2) Whether the assessee trust is a members' club or it is a public trust ? If the assessee trust is a private trust, whether its benefits are available only to members, i.e., identifiable individuals, then question of holding it as a charitable trust does not a....
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....on of charitable purpose in which the following expression was used at that time. "The advancement of any other object of general public utility not involving the carrying on of any activity for profit". The Tribunal was considering whether the objects were of general public utility. Since the Tribunal was satisfied that the benefits were not to the members of the public, but to the specific members of the club, it held that the assessee trust was not a charitable trust. This being the position, the decision of this Bench for the assessment year 1973-74 supports the department's view that the assessee trust exists only for members and therefore, it is not a charitable trust. Therefore, this decision is required to be followed for all the subsequent years, particularly when the matter is before the Bombay High Court. If the decision cannot be followed for all the years because the assessee wanted to rely on several other aspects of the question for subsequent years, the propriety would demand that the decision of the Tribunal should be followed for the assessment year 1973-74 for which additional ground was raised. 12. After the CIT passed the order which was confirmed by the Tri....
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....s Cricket Club in 1906 which was subsequently divided into two. The one division was Poona Young Cricketeers Hindu Gymkhana (P.Y.C. Hindu Gymkhana) and the other was Deccan Gymkhana, Throughout the pages of this report, i.e., page Nos. 1, 2, 5, 6, 7, 8 and 11, there is abundant evidence to show that Deccan Gymkhana started as members' club and continued to be a members' club. The various branches of Deccan Gymkhana which subsequently started, i.e., Colony Panchayat started in 1922, Billiards Department started in 1928, Vanita Vishram started in 1932, were essentially for the benefit of the members. 14. The colony was established for the members of the Gymkhana Club. The assessee trust had given lease hold land to its members. The terms of this lease deed clearly show that the colony as envisaged had to be kept as a live institution to see whether the members of the colony were acting as per the terms of the lease deed. Secondly, as per clause 10 of the lease deed, the club had to decide from time to time the issue of succession of members on their death as the members were hereditary. As per clause 16 of the lease deed, the assessee trust had to return the deposits and also to g....
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....edition, Vol. 1). Page 282 of Palkhiwala refers to the decision in JR v. City of Glasgow Police Athletic Association 34 TC 76. It was held that an association formed to provide and expend its fund exclusively on sports and recreation for its own members was not established for charitable purpose only even though it was found that the activities of the association had tended to promote Incidentally the efficiency of the police force. The mutual association is not regarded charitable since charity has to be by way of bounty, but in mutual association, the benefits are derived by the members as a matter of right. Reliance is also placed on the following decisions of the Gujarat, Madras, Delhi and Calcutta High Courts: Addl. CIT v. Ahmedabad Millowners' Association [1977] 106 ITR 725, Madras Hotels Association v. CIT [1978] 111 ITR 241, Truck Operators' Union v. CIT [1981] 132 ITR 62 and Indian Sugar Mills Association v. CIT [1984] 150 ITR 593 respectively. In view of this clear position in law and in view of the evidence, i.e., (1) the assessee's letter dt. 22-12-1975, (2) report dt. 23-10-1966, and (3) the way in which the various departments of the assessee trust claimed exemp....
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....ld that swimming bath advances public health and such an object is charitable. But the earlier clause insofar as it makes a distinction of sports which tends to amusement and recreation was obviously not considered as a charitable object. 20. Reliance is placed on the decision of the Calcutta High Court in Cricket Association of Bengal v. CIT [1959] 37 ITR 277, where it was held that the mere promotion of the practice of the game of cricket in general either for entertainment of the public or for advancement of the game itself was not a charitable purpose. Though it is true that the decision also considered other factual aspects, it cannot be overlooked that one of the reasons for holding promotion of cricket as not charitable was that it was for entertainment. The decision of the Madras High Court in CIT v. Saraswathi Viswanathan [1977] 107 ITR 208 is also to the same effect. Particular attention is invited to the last paragraph on page 116. It is stated as follows : "Encouragement of mere entertainment, which is included in object number 1 cannot be called as charitable purpose. If the contentions of the learned counsel were to be accepted, then any cinema house or music ha....
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....everal objects which are severable and are of equal importance and some of which are of non-charitable nature, the entire trust fails as a charitable trust. 22. The learned advocate for the assessee Shri S. N. Inamdar's contention is that a subsidiary object which subserves the main purpose may not by itself be charitable. According to him, the object of the colony is a subsidiary object. To our minds, this contention does not appear correct. The test to see whether the object is subsidiary or principal is to see whether the activity covered by the object can stand by itself apart from the so-called main object. In the present case, the colony panchayat can exist by itself whether or not Gymkhana carries on the object of promotion of sports. Thus, the objects of Deccan Gymkhana cannot be regarded as charitable objects. 23. Now, we have to see whether the CIT's decision on the question of the charitable nature of the assessee trust is proper and correct. The case of the assessee before the CIT(A) was based on the ruling of the Supreme Court in the cases of Surat Art Silk Cloth Mfrs. Association and CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722. The assessee also made ref....
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....charitable trust, it cannot be simultaneously a mutual association. Similarly, if the assessee is a mutual association, it cannot, at the same time, be a charitable trust. The CIT(A) in this behalf ought to have given a firm finding of fact based on clear evidence whether the assessee extended its benefits to its members alone or to the general public. The CIT(A), in any case, could not have given findings in favour of the assessee on both these issues. 25. The next question which arises for our consideration is whether the assessee is a mutual association, it has already been pointed out that the assessee existed for the benefits of its members. But still the question remains as to whether it could earn exemption on the ground of mutuality. In this behalf, attention is invited to the constitution of the assessee. Clause 2 in part II qualifies the members into various categories such as patrons, life members, beneficiaries, general members, basic members, branch members, student members, female members and temporary members. As per clause 16, student members, female members and temporary members do not have any voting right, though they might have contributed to the common fund.....
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....of the assessee trust is liable to be taxed. 28. The next question which arises for our consideration is whether even if mutuality principle is acceptable, to what extent it will apply to the assessee's income. Reference may be made to the second compilation wherein the income of different branches has been shown. From this and from the computation for the assessment year 1974-75, it can be illustrated that even if the principle of mutuality is applicable, it applies only to part of the income. For example, for the assessment year 1974-75, the income from house property which is derived from non-members, income from colony panchayat, income from interest, income from Billiards and Vanita Vishram which is exclusively from interest, will be outside the purview of mutuality. 29. It has been held by the Allahabad High Court in the case of CIT v. Wheeler Club Ltd. [1963] 49 ITR 52 that income from house property is taxable even in a case of mutual association. It has been held that income from house property is notional income and taxed on the basis of ownership of the property. The fact that the assessee does not derive any income is totally immaterial while determining the incom....
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.... of his order has dealt with this aspect, but has only recorded the contentions of the assessee, wherein reliance was placed on CIT v. Delhi Race Club (1940) Ltd. [1970] 75 ITR 111 (Delhi), CIT v. Merchant Navy Club [1974] 96 ITR 261 (AP), Madras Race Club's case and Presidency Club Ltd.'s case . All these cases are distinguishable on facts inasmuch as there was a complete identity between the contributors and the participators. On this premise, the decisions proceeded to examine to what extent the income of different nature qualified for exemption. In the present case, it has been shown earlier that there being no identity between the contributors and participators the principle of mutuality does not apply in the first place and even assuming that it applies, only part of the income would enjoy exemption. 32. The next question which arises for our consideration is whether the disallowance of depreciation of Rs. 19,226 for the assessment year 1973-74 and addition, of Rs. 81,527 on account of increase in the funds is proper or not. According to the department, depreciation is allowable only if income is assessable under the head 'profits from the business.' In the present case, e....
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....lowance. 35. The arguments advanced by the learned advocate for the assessee to the various points are as follows. The assessee's counsel Shri S.N. Inamdar has stated that the assessee trust is registered both under the Societies' Registration Act as well as under Bombay Public Trust Act. He agreed that definition of charitable purpose under the Income-tax Act is different from that under Bombay Public Trust Act and therefore, the registration under Bombay Public Trust Act may be only persuasive but not conclusive to decide whether the assessee trust is charitable or not. But according to the learned counsel, the above registration is conclusive on the point whether the trust is public or not. 36. The issues whether assessee is a public trust or not and whether it is a charitable trust or not are to be decided independently in the context of Income-tax Act. The registration under the Societies' Registration Act or under the Bombay Public Trust Act is relevant but certainly not conclusive. The decision of the Delhi High Court in the case of CIT v. All India Hindu Mahasabha [1983] 140 ITR 748 shows that though the assessee in that case was registered under Societies' Registrati....
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....he Societies' Registration Act and Bombay Public Trust Act to register the trust as a public trust is not binding on the Income-tax authorities. In this behalf, the decision of the Madras High Court in the case of V. Datchina Murthy v. Assistant Director of Inspection. [1984] 149 ITR 341 may be referred to. In that case to prove the genuineness of certain credits, the assessee relied on certain decrees of the court and contended that once the decree was obtained by the creditor against the assessee, the question of genuineness could not be raised. The Madras High Court considered at length to what extent the orders of the court were binding on the ITO. In this behalf, the portion of the judgment at page 360 (second para) onwards is very relevant. On page 362, following observations are given : "But to say that the ITO is bound to respect a court decree and he cannot proceed with his allotted task of investigating a fact relevant for the assessment of an assessee in Ms charge cannot be accepted even on the basis that a decree of court has to be shown the respect it deserves. The ITO has a job to do under the Income-tax Act and he cannot be prevented from doing it because a court ....
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....ecision of the Bombay High Court in the case of J.M. Chhagla v. M.V. Subramanian [Writ Petition No. 2358 of 1983 dated 10-9-1984]. 41. The Board's circular referred to by the assessee's learned counsel is not applicable to the facts of the present case. Following sentence in the circular is relevant. "The Board are advised that the advancement of any object beneficial to the public or section of the public as distinguished from an individual or group of individuals would be an object of general public utility." In the present case, even the assessee has admitted in his letter dt. 22-12-1975 that its benefits are available to the members only. Thus, there is no question of applying the circular of the Board to the present case. 42. The decision of the Bombay High Court in Gulf Oil (Great Britain) Ltd.'s case has no application to the facts of the present case. In the case before the Bombay High Court, there was a circular of the Board dt. 23-7-1969 issued by the Central Board of Direct Taxes. It was the departmental counsel in that case who conceded that the said circular applied to the facts of the case and that the guidelines therein regarding applicability of sec. 42 ....
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....e's counsel placed on record a resume of the activities of the trust in different fields. Basing himself on this note, he pointed out that the assessee trust has always taken keen interest in promoting the various sports activities. In replying to the departmental representative's contention that tennis by its nature excluded poor, the assessee's counsel pointed out that the assessee trust had selected boys from the slums to train them in tennis recently. There have been regular classes conducted to teach and train the boys in various sports activities. In this behalf, he relied on the decision of the Madras High Court in the case of CIT v. Ootacamund Gymkhana Club [1977] 110 ITR 392. He also relied on the decision of the Bombay High Court in Breach Candy Swimming Bar Trust's case . The assessee's learned counsel further referred to the restrictions on admission of members and stated that these restrictions on membership are necessary to protect the assessee's trust from undesirable elements and also to protect the property of the trust. The mere fact that the Board of Trustees had power to reject the application for membership did not mean that the trust existed only for the membe....
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.... a specified section of it. A fluctuating body of private individuals such as the present and future officers and members of the staff and other employees of a company could not be a part of general public or of any section of the public and therefore, the income of the trust was held to be not exempt. Applying the same principles here, it is seen that the benefits of the trust are exclusively for the benefit of a body of the present and future members who are identifiable persons. They cannot be considered to be members of the public. 48. The restrictions on the membership contained in the constitution are in absolute terms and the governing body's decision to reject any application of membership is unfettered and cannot be challenged on any ground. It is also seen from the constitution of the club house that restrictions have been placed on the number of members that can be admitted. This will clearly show that the benefits of the trust are to go to a limited number of persons. The decision of the Bombay High Court in Seksaria Biswan Sugar Factory Ltd.'s case was relating to the Explanation to sec. 23A of the Income-tax Act, 1922. Under that Explanation, a company was consider....
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....nt case, on the interpretation and consideration of all the evidence the benefits are restricted to the members, benefit to the public being of incidental nature only. It has already been stated that the words 'sports and games' would include the element of recreation, amusement and entertainment and promotion of games may include also promotion of games like card games or video games which are purely recreational in nature. There being thus no nexus between the object and the purpose of physical well-being, these objects cannot be considered to be charitable objects. 52. The learned advocate for the assessee, Shri S.N. Inamdar has referred to the broader outlook and broader perspective whereas the department insists on correct approach to the problem. In answer to the last question posed by the assessee as to why the Gymkhana is existing, the answer is obvious that it exists to extend sports and games facilities to its own members. This is the purpose for which the Gymkhana was established and continues to exist for the same purpose, as the assessee has not been able to rebut the evidence brought on record by the department. 53. As regards the training in sports, it has alre....
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....that ground if it is held that there is a complete identity between the participators and contributors, the only income that can be exempted is that from subscription and surplus from the sports sections. The income from Billiards Club and income from Vanita Vishram was taken by the ITO after excluding the income which was exempt on mutuality. Similarly, the income of the assessee, i.e., the oldest trust insofar as it related to interest from outsiders, no exemption was permissible as there was no activity with the members. The interest arose on account of the transaction with the outsiders and it would be wrong to treat it as exempt. As regards the income from property, it is admittedly from outsiders and the decision of Poona Club Ltd.'s case where letting was only to the members is clearly distinguishable. 56. Thus the department's case and contentions can be summarised as under : (1) The assessee is not a charitable trust as it is not for the benefit of public, but for the benefit of identifiable members, (2) The assessee-trust is not existing for a charitable purpose. In any case, some of its objects-- either because they are restricted to members or because they are ....
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....earned Judicial Member. 2. Issue No. 1 at page 4 concerns "whether the decision of this Bench of Pune Tribunal for the assessment year 1973-74 holds good for all the subsequent years, or otherwise does it at least hold good for the assessment year 1973-74 ?" One does not find, in the learned Judicial Member's order, a specific decision arrived at by him on this issue. In paragraph 56 while the learned Judicial Member has summed up the Department's case and the contentions, which he finds acceptable and, therefore, accepts the same, does not make a reference to the above referred issue No. 1. Manifestly, therefore, the learned Judicial Member has taken the view that the order of the Bench in the 1973-74 proceedings, being ITA No. 270/PN/77-78 dated 20th October, 1978 does not hold good for either the assessment year 1973-74 or the subsequent assessment years. I find that on this issue, unfortunately, the learned Judicial Member has not given any specific reasons to come to the decision he has done. Unless his decision was against the Department, it would not have been necessary for him to consider in details the submissions made by the Department. In the circumstances, I consider....
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....o law on the lines of the legal position discussed above". 4. As regards the two types of order earlier referred to and their effect, if one requires any authority, one finds it in the decision of the Delhi High Court in Gee Vee Enterprises v. Addl. CIT [1976] 99 ITR 375. 5. The second and the third issues raise the main dispute. The second issue as framed is covering more than one controversy, (i) whether the assessee-trust is a members' club or it is a public trust, (ii) if the assessee-trust is a private trust, whether its benefits are available only to members, i.e., identifiable individuals, then the question of holding it as a charitable trust does not arise as a charitable trust has to be for the benefit of members of the public ; and the third issue is even otherwise, whether the objects of the assessee can be said to be of charitable nature ? 6. These appeals were heard in the afternoon session on 16th, 17th and 18th January, 1985 and on Saturday, the 19th January, 1985 in both the sessions. The earlier effective hearing was almost two years earlier on 28th March, 1983. At that stage, the Bench was differently Constituted, the Judicial Member being a different inc....
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....tural, physical and social activities in Western India. During the hearing, Mr. Sathe had laid great stress on the decision of the Supreme Court in CIT v. Andhra Chamber of Commerce [1981] 130 ITR 184. In particular, Mr. Sathe laid great stress on the observations of Mr. Justice Sen at page 207 thus : "It is the vagueness of the fourth head of charity, 'any other object of general public utility' that impelled Parliament to insert the restrictive words 'not involving the carrying on of any activity for profit'. In my minority opinion in the Surat Art Silk case, I had endeavoured to give reasons why the correctness of the majority decision was open to question. There is no point in traversing the same ground over again. It is clearly inconsistent with the settled principles to hold that if the dominant or primary object of a trust was 'charity' under the fourth head 'any other object of general public utility', it was permissible for such an object of general public utility, to augment its income by engaging in trading or commercial activities." Based on this observation, it was the submission of Mr. Sathe that a, public charity should not be a means to achieve tax evasion and....
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....egistered on 5th October, 1906 as modified and approved by the Ordinary General Meeting held on 23rd February, 1964 and the report published by the Chief Trustee and the General Secretary on the occasion of the celebration of the Diamond Jubilee. 12. To some of the facts stated in the report, the learned Judicial Member has made a reference in paragraph 13 of the order. However, I find that after stating the facts in paragraph 13, the manner in which Gymkhana developed from 1906 to 1932, when the learned Judicial Member stated in the opening sentence in Paragraph 14 that "the colony was established for the members of the Gymkhana Club", it is not a fully correct statement of facts. 13. As pointed out earlier, Tilak, more popularly known as Lokmanya Tilak, was fired with the idea of fostering, developing and promoting gymnastics, sports, games and sportsmanship and it was with that objective that the persons around him started this institute in 1906. The first General Secretary of the institute was equally a person of eminence, Mr. N.C. Kelkar. In the 1966 report, a reference has been made to the splitting up of the activities of an older club so far as cricket was concerned, ....
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....aw. One recollects the decision of the Privy Council in All India Spinners' Association v. CIT [1944] 12 ITR 482, a decision given on 27th June, 1944. Now, the head-note at page 483 would show that the Privy Council has observed : "If an Association is set on foot by a political organisation and is connected with it but still has for its real object the relief of poverty, its connection with the political organisation does not make its real object any the less charitable." 15. The real issue is now what is the real or the dominant object of the respondent. Mr. Inamdar explained that the dominant object of the respondent is "to foster and develop (promote) gymnastics (sports), games and sportsmanship". Mr. Inamdar stated that one cannot foster and develop or promote gymnastics, sports, games and sportsmanship unless one gives the necessary infrastructure. Mr. Inamdar stated that if one has to develop and promote gymnastics, sports, games and sportsmanship, one must create the necessary conditions where all those who are interested and others whose interest could be roused, do take part in gymnastics, sports and games. Mr. Inamdar stated that Deccan Gymkhana was formed on split....
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....il as cricketers provided to India by Gymkhana. Equally, Mr. Inamdar stated that Meena Parande and Dwarka Gore of Gymkhana were instrumental in enabling Maharashtra to be the first in National Table Tennis championships Mr. Inamdar then explained that when land was being sold in a comparable area at as low as one anna a sq. yd., the members of Gymkhana, who were called colonists, had deposited with the assessee one rupee a sq. yd. to enable the Gymkhana to tide over financial difficulties. Mr. Inamdar further pointed out that from the surplus of the income of colony panchayat, half is kept for the panchayat as such and the moiety is handed over for encouragement of sports. Now Mr. Sathe did not challenge any of the above statements made by Mr. Inamdar. 18. I find merit in Mr. Inamdar's submission that one cannot merely say that one wants to foster, develop and promote gymnastics, sports, games and sportsmanship by merely saying so but one must then provide the necessary infrastructure. Accordingly, I do not find anything objectionable in the assessee-trust running a Gymkhana as a members' club wherein the surplus is utilised for the purpose of fostering, developing and promoting....
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....atter and do not repeat the reasons for caution stated by the Board in the Tribune Press case. The limits fixed by the section must be strictly observed and its definition must be satisfied by the character of the Association and its activities. Whether that is so depends on the trust construction of the section and on the meaning and effect of the constitution which defines the character of the Association. The construction of the section is obviously a question of law, but so also is the question what is the real purpose of the Association. The Court must make its decision on the latter point on the basis of the facts found for it, but given the facts the question is one of law. In this particular case the principal fact is the constitution, the true construction of which is again a question of law." and towards the end of page 488 : "But private profit was eliminated in this case. Though the connexion in one sense of the Association with the Congress was relied on as not consistent with 'general public utility' because it might be for the advancement primarily of a particular party, it is sufficiently clear in this case that the Association's purposes were independent of a....
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....(3) of paragraph 56. The answer to the question given by the learned Judicial Member is that "though the assessee-trust is a club existing for its members, there being no complete identity between participators and contributors, none of its income is exempt". As I have said above, the reasoning is to be seen in paragraph 27. The reasoning is "in the present case, as per clause 16, the only voting members could control the funds and could be said to be participators whereas the contributors were not only the voting members but also the other members like student members, female members and temporary members. On this ground alone, it is quite clear that the principle of mutuality is not satisfied and the entire income of the assessee-trust is liable to be taxed". During the course of the hearing, Mr. Inamdar had relied on the decision of the Tribunal in the case of Poona Club Ltd. Now when one turns to the page 344 of the report, it would be seen that in Poona Club there were different classes of members, "a founder member, patron, life member and permanent member, the last category excluding a subsidiary member which is then defined as constituted of a corporate member, a gymkhana s....
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....en assuming that the assessee is a mutual association, whether the entire income will be exempt on the ground of mutuality and if not, which income does not satisfy the test of mutuality. The answer to this question is given by the learned Judicial Member at paragraph 56(4), namely, "alternatively and assuming that the assessee is a mutual association and that there is a complete identity between contributors and participators, the income from marriage hall, the income of property from the trustees, the income from interest earned by Billiards section and Vanita Vishram, are all taxable." 25. As I have said earlier, I do not propose to discuss in detail the submissions made by either of the parties. Now, as regards income from Marriage Hall, it has to be stated that Mr. Inamdar had brought to our notice that what was constructed was not a Marriage Hall but what was constructed was an indoor Badminton Hall. Mr. Inamdar stated that the use of the Badminton Hall for holding marriage reception was merely, incidental and that any income from that particular activity of Vanita Vishram had the same charge, namely, the utilisation of funds for furthering the main objects of the institut....
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....rted by eminent persons and that it was open to all. He has also stated that the colony for the members was started because the Gymkhana was in a far off place and so that the sports amenities provided by the Gymkhana could be availed of by the members. According to him, the Gymkhana may have made some profit but that was used for promoting sports and so it was incidental to the main object to promote the sports and sportsmanship. He has also stated that the learned Judicial Member has not given any specific decision on the question whether the Tribunal's order for the assessment year 1978-74 should be followed or not, but I find from paras 11 and 12 of the opinion of the Judicial Member, that the said order of the Tribunal should be followed for all the years. 3. Before me, the arguments on behalf of the Revenue were as follows : (a) Tribunal's order for the assessment year 1973-74 should be followed for all the years. (b) the assessee was an amorphous body without any legal basis. (c) the assessee was not entitled to the exemption under sec. 11 read with section 2(15) looking to its objects. (d) the alternative claim of the assessee based on mutuality should not be....
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....bers this time were made at that time. Such an order cannot be considered as a full precedent to be followed in appellate proceedings. Therefore, the Tribunal's order for the assmt. yr. 1973-74 need not be followed for any of the years. 6. Regarding the second point, the Standing Counsel brought to my notice the judgment of the Charity Commissioner in a revisional application filed by certain members of the colony against the assessee and others. In that judgment, it has been stated as follows : ". . . However, no evidence was produced by the original applicant to show the registration of Deccan Gymkhana under the Societies Registration Act. Apparently there is contradiction between the particulars submitted in the original application to the Asstt. Charity Commissioner in respect of the documents creating the trust. If the society is registered under the Societies Registration Act, then in that case there cannot be a trust deed creating the trust and if the trust deed has created the trust, there cannot be registration of the society under the Societies Registration Act. However, the Ld. Asstt. Charity Commissioner did not consider the said position which goes to the root of....
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....ion cannot be isolated from the controversy which exists between the two Members as seen from their opinions and those opinions as stated above do not show any such controversy. Finally in Hanutram Chandanmal's case , the facts were that according to one Member the figure of liability was Rs. 12,800 while according to the other Member, the figure was Rs. 2,800. According to the Third Member, the figure was Rs. 8,143 and the High Court said that the Third Member could only choose between those figures and could not arrive at a figure different from both of them. He had to agree with one or the other of the two Members. This case does not decide that any issue other than that before the two Members could be entertained by the Third Member and that the only restriction placed on him was regarding the choice between the two. I am therefore of the view that this issue cannot be considered by me. 7. Coming to the third point above, the Standing Counsel submitted that none of the objects of the assessee were of public and charitable character. He submitted that each object was separate by itself and none was ancillary to any other. He relied upon the aforesaid decision of the Suprem....
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....ng the object clause (g), he submitted that if the object is not carried out for several years, the trust need not be regarded as non-charitable trust relying upon the following two Supreme Court decisions-Dharmodayam Co.'s case and Dharmaposhanam Co.'s case . He submitted that the colony was built giving plots to the members only in order that the sports facility of the Gymkhana may be available to the members because the Gymkhana was very far away from the Pune city in the earlier years. He pointed out that the last time, this clause (g) was acted upon was in the year 1922 and even at that time the land was given to the members at 8 annas per sq. yd. whereas the outside rate was only 1 anna per sq. yd. utilising the extra amount for the promotion of sports. The Standing Counsel rejoined that so far as the circular was concerned, the assessee must show that the assessee was engaged in the Promotion of sports in general and that playing of games between members was not the promotion of sports. 8. There are several issues under this head of argument. The first question is whether the objects of the assessee are independent and distinct or some are main objects and others are a....
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....he sports would promote, physical fitness and well-being. I am unable to agree with this criteria as stated above. Sports and sportsmanship are of general public utility irrespective of the physical well-being which they may promote. 9. Regarding the argument of the Standing Counsel that since the benefits are available to the members only, it must be said that the membership is not open to the public. It must be realised that the object of the assessee is promotion of sports etc. and it has to be done in an organised way. In doing so, the assessee has found a way i.e. establishment of an institution and carrying on that activity through that institution. It was therefore quite proper that the activity should be carried out by establishing a way, i.e., membership of that institution. Therefore, it is sufficient that the membership is open to the public. It may be true that there are certain restrictions on membership, but that is found in many public companies. The Board has got power to restrict the membership but that does not make any difference. Moreover, in the case of Riding Club , it has been decided that public need not be general public and it is sufficient if a sect....
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....f the power of appointment under which he might appoint to non-charitable purpose, the trust cannot claim exemption even though the power of appointment is in fact exercised in favour of a charitable object. It would be a different case where one or more of the objects mentioned in the Memorandum of Association, although included therein, was never intended to be undertaken. If there is evidence pointing to that conclusion, clearly, the Court will ignore the object and proceed to consider the case as if it did not exist in the Memorandum. In CIT v. Dharmodayam Co. [1977] 109 ITR 527 (SC), it was that basis on which this Court proceeded when it observed "that the assessee had never engaged itself in any industry or in any other activity of public interest". Thus the Court has laid down two propositions : (i) it is not the actual practice but the actual objects mentioned in the objects clause which is material ; (ii) if any object is to be ignored then it is necessary to prove that that object was never intended to be acted upon. In the light of these two propositions, we have to consider clause 'g' separately irrespective of the question whether it has been acted upon or not. ....
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....sisted. The observations of the Supreme Court quoted above are clear and binding. Secondly, when once that clause has been acted upon, there is no objective criteria left to decide that it is no longer operative and no longer intended to be acted upon. Therefore the assessee's claim to exemption u/s. 11 fails. 12. That brings me to the last point, i.e., the claim on the ground of mutuality. The Standing Counsel emphasised the fact that there were various classes of members. He also pointed that the assessee had income from outside sources, i.e. such as the marriage hall, colony panchayat etc. and all these were not available to all the members. The assessee's counsel at the very beginning conceded that the entire income could not be exempt on the basis of mutuality, and that income from outside sources was not eligible to this exemption. His claim on the basis of mutuality was restricted to the income from the activities of the members only. The established principle in this regard is that the capacity of those who contribute and those who benefit should be the same. Therefore, for the purpose of exemption on the ground of mutuality, it is unnecessary that the very same persons ....