COMMISSIONER OF INCOME TAX Vs. MADRAS RACE CLUB

JUDGEMENT

(1.) THE Madras Race Club is a company registered under the Companies Act. It has a committee of management elected from among its members. THE managing committee in turn elects stewards. THE managing committee also includes nominees of the State Government who by virtue of such nomination are also stewards. THE income of the club is assessed to tax. THE club conducts racing at Madras and Ootacamund. THE racing is conducted under the rules of racing framed by the club. THE rules, inter alia, require the jockeys, trainers and others to obtain licences for which they are required to pay a licence fee. THE stewards under the rules are empowered to impose fines and levy penalties. THE relevant rule providing for levy of licence fees, fines and penalties are rules 36, 37, 84, 91 and 92.

(2.) RULE 36 is in Part IV of the rules of racing which part enumerates powers of the stewards of the club and the relevant portion reads thus :

(3.) THE Supreme Court in the case of CIT v. Tollygunge Club Ltd. [1977] 107 ITR 776 dealt with the case of an assessee, which was a social and sports dub and which conducted horse races with amateur riders and collected the charge as also a surcharge from those seeking admission to witness the races. THE surcharge had been levied by the assessee in terms of a resolution which it had passed by which it had resolved to levy a surcharge over and above the admission fees, the proceeds of which were to go to the Red Cross Fund. That resolution had been modified by the assessee in the year 1950, earmarking the proceeds of the surcharge for local charities and not solely for the Indian Red Cross. THE assessee therein had taken the stand that the surcharge levied by it being one meant for local charities, the same did not constitute its income. That stand of the assessee was upheld by the apex court. THE court held that (page 781) "when the race-goers paid the surcharge to the assessee, they did so for a specific purpose and thereby imposed an obligation on the assessee to utilise it for local charities".