COMMISSIONER OF INCOME TAX Vs. UNITED CLUB

JUDGEMENT

(1.) A statement of the case has been submitted by the Income-tax Appellate Tribunal, "B" Bench, Patna (hereinafter referred to as "the Tribunal"), under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act"), referring the following question of law for the opinion of this court :

(2.) ON appeal before the Appellate Assistant Commissioner, he took the view that the entrance fees received from the new members of the club were not a recurring or revenue receipt which could be brought to tax. This, according to him, had to be paid once and for all by a new member in order to win the right to participate in the activities of the club and a regular monthly susbcription had to be paid as cost of participation. The Appellate Assistant Commissioner noted that the initial admission fee conferred the right of membership but did not entitle the members to participate without paying monthly subscription. The Appellate Assistant Commissioner, therefore, held that this fee was in the nature of a share capital of the company and was a capital receipt in the hands of the club. The Appellate Assistant Commissioner, therefore, deleted the addition of Rs. 25,050. A copy of the order of the Appellate Assistant Commissioner has been annexed and marked as annexure B forming part of the statement of the case.

(3.) MR. B.P. Rajgarhia has relied on the case of CIT v. Calcutta Stock Exchange Association Ltd. [1959] 36 ITR 222 (SC), which is a decision of their Lordships of the Supreme Court. In this case, the assessee, Calcutta Stock Exchange Co. Ltd., was a company formed to facilitate transaction of business on the Calcutta Stock Exchange under its bye-laws. Members with a certain standing were allowed to have six "authorised assistants" to transact business on the stock exchange in their names and on their behalf. Members appointing such assistants had to pay an entrance fee for each assistant and also a periodical subscription for continuing the services of such assistant in addition to the subscription payable by each member for his membership. Every member who wished to have the name of any company included in the quotations list so that its shares or stock may be placed on the stock market, had to make an application in that behalf with a fee of Rs. 1,000. The assessee received during the accounting year Rs. 60,750 as entrance fees and Rs. 15,687 as subscriptions in respect of the authorised assistants and a sum of Rs. 16,000 as application fees from the members for including new companies in the quotations list. In those circumstances, it was held that each of the aforesaid sums of money accrued to the assessee on account of its performing specific services for its members, that these sums were remuneration definitely related to distinct services performed by the assessee for its members or such of them as availed themselves of such services and the said sums were, accordingly, assessable to income-tax under Section 10(6) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the 1922 Act"), as profits and gains derived from carrying on business. It was also held in this decision that the words "performing specific services "in Section 10(6) of the 1922 Act mean "conferring particular benefits", that is, conferring on the members some tangible benefit which would not be available to them unless they paid the specific fees charged for such special benefits and that the word "remuneration" is a term of much wider import than "wages" and includes "recompense", "reward" or "payment".