COMMISSIONER OF WEALTH TAX Vs. TRIVANDRUM CLUB

JUDGEMENT

(1.) A common question arises in these references at the instance of the Revenue. The question is :

(2.) THE respondent is a members' club by name Trivandrum Club, Thiruvananthapuram. THE Wealth-tax Officer treated the club as an individual and subjected it to wealth-tax for the assessment years 1970-71 to 1979-80. On appeal, the Commissioner of Wealth-tax (Appeals) held that the assessee is an association of persons and not taxable under the Wealth-tax Act. In consequence, the assessment was cancelled. On further appeal, the Income-tax Appellate Tribunal upheld the order of the Commissioner of Wealth-tax (Appeals). While considering the assessments for the years 1970-71 to 1978-79 in Wealth-tax Appeals Nos. 43 to 51/(Coch.) of 1984, the appellate authority has followed their order in the case of Sreemulam Club in Wealth-tax Appeals Nos. 293 to 296/(Coch.) of 1983, dated May 20, 1986, where it was held that the club cannot be assessed as an individual since it is only an association of persons which is not an assessable entity for the purpose of wealth-tax. THE same view was adopted by the Tribunal for the year 1979-80. It was thereafter at the instance of the Revenue that the question aforesaid was referred to this court for a decision.

(3.) LEARNED counsel for the Revenue would point out that the assessee-club is a trust and as per Rule 3(iii)(a) of the Rules and bye-laws of the club all the properties of the club vest in the trustees. Relying on the decision in Trustees of Gordhandas Govindram Family Charity Trust v. CIT [1973] 88 ITR 47 (SC), it was contended that a club is an individual and as such liable to be taxed under Section 3 of the Wealth-tax Act. As observed by the Bombay High Court in Orient Club v. CWT [1982] 136 ITR 697, merely because co-trustees have been treated as a single unit, it does not necessarily follow that an association of persons formed by the members of a club must also be treated as an individual. The Bombay High Court stated that in an unincorporated members' club, there are usually trustees appointed in pursuance of the provisions in the rules in whom the property and assets of the club are vested in trust for the members for the time being and who are given power to invest the funds of the club, sometimes at their own discretion and sometimes according to the directions of the committee. In a non-proprietary club like the respondent, the members for the time being are jointly entitled to all the properties and funds. The individual interest of members can be ascertained only at the time of dissolution. The description of the club as a trust and the vesting of the properties in the members of the club as trustees is, therefore, of no significance.