COMMISSIONER OF INCOME TAX Vs. OOTACAMUND GYMKHANA CLUB

JUDGEMENT

(1.) THE assessee appears to have come into existence some time in 1857. It was registered under the provisions of Section 26 of the Indian Companies Act, 1913. Its objects were : (1) to provide a club for the accommodation of members and their friends and the encouragement and management of sports and games " and (9) to promote social intercourse amongst the members of the club and their friends and encourage and manage sports and games ". THE rest of the clauses are in the nature of ancillary clauses. Clause 11 provides that the objects of the club as set out in the earlier paragraphs would extend to all the States in the Indian Union. Clause 12 provides that the income and property of the club whensoever derived shall be applied solely towards the promotion of the objects of the club as set forth in the memorandum of association and that no portion thereof should be paid or transferred directly or indirectly by way of dividend, bonus or otherwise howsoever, by way of profit to the persons who at any time were or have been members of the club, or to any of them, or to any person claiming through any of them. THE assessee could, however, pay remuneration to any officers or servants of the club or to any member thereof or other persons, in return for any services rendered to it. Under Clause 13 the local Government could impose any further conditions than those set out in Clause 12 above, which should be duly observed by the club. THE club did not have a share capital, but in the event of winding up, the members undertook to contribute such sum as may be required not exceeding rupees fifty. On the winding up or dissolution of the club, any surplus assets were not to be distributed amongst the members of the club, but were to be transferred to some other institution or institutions having similar objects to be determined by the members of the club at the time of the dissolution, and in default thereof by the appropriate court. THE club has in particular a well-known golf course in Ooty.

(2.) THE assessee was not assessed to tax till the year 1960-61. For that year the assessee was originally assessed at Rs, 50 on "property" income under the assessment order dated 29th March, 1961. THEreafter, it was noticed by the Income-tax Officer that the assessee had been in receipt of advertisement and donations from non-members. In the view of the Income-tax Officer, the assessee was not entitled to the exemption in regard to such receipts. He found also that the property income computed already required modification. He, accordingly, took proceedings under Section 147. He brought to tax Rs. 1,833 as "property" income and Rs. 12,965 as income from " other sources ". THE " property " income is from the club house. It is not clear from the statement of the case or from the orders of the authorities below whether the cluh house had any rooms, which were let out for the occupation of members or others. We were, however, told that the property income represents merely the bona fide annual value of the club house which was not let out to any one.

(3.) ON behalf of the assessee the submission was that it came into existence for the encouragement or management of sports and games and that the other clauses in the memorandum were only ancillary and incidental to the main object. Reliance was placed on the licence granted under Section 26 of the Companies Act, 1913, as showing that the assessee had been established for the charitable purposes. It was, therefore, contended that the assessment was bad in law.