COMMISSIONER OF INCOME TAX Vs. MADRAS RACE CLUB

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following two questions for the opinion of this court under section 256(1) of the Income-tax Act, 1961 :

(2.) THE assessee is a limited company carrying on the business of conducting horse-racing. For the assessment year 1972-73, it returned a business income of Rs. 16,35,320. THE Income-tax Officer made certain additions and computed the total income of Rs. 26,37,223. One of the major items of dispute is the inclusion by the Income-tax Officer, of a sum of Rs. 3,87,832 being the net collection for three days of racing, on March 4, 1972; March 5, 1972 and March 12, 1972. THE assessee's claim was that it conducted races for two days on March 4 and 5, 1972, for the benefit of the Chief Minister's Relief Fund and on March 12, 1972, for the benefit of the Beggars' Rehabilitation Fund and the net collections were passed over to those funds and there was diversion of income, even before accrual, by means of an overriding title, created in favour of those funds and so the amount cannot be brought to tax in the hands of the assessee.

(3.) REGARDING the surplus in the accident fund, the Appellate Assistant Commissioner found that the assessee had not donated any part of its money to the fund; but instead one of its officers had been empowered under different rules to make the collection and deposit it into the fund directly. The accounts of the fund were maintained separately and the income of the fund need not be included in the hands of the assessee-club. The assessee-club had no power to deal with the said money. It was decided altogether by a different body under a separate set of rules and guidance. Here also the Appellate Assistant Commissioner held that there was diversion of income by overriding title. In the light of the above facts, the Appellate Assistant Commissioner held that the surplus of the accident fund should not be treated as the assessee's income.