COMMISSIONER OF INCOME-TAX, BOMBAY CITY vs. ROYAL WESTERN INDIA TURF CLUB LTD.

CIVIL APPEAL No. 165/1951Supreme Court[1954] 1 S.C.R. 28926 October 1953Bench: 5 JudgesAuthor: M. PATANJALI SASTRI, SUDHI RANJAN DAS, VIVIAN BOSE, GHULAM HASAN, NATWARLAL HARILAL BHAGWATI22 pages
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What did the Supreme Court hold?

The Supreme Court held that the principles of the Styles case were not applicable because there were no mutual dealings between members in the nature of mutual insurance or contributions to a common fund for discharging liabilities to each other, with a refund of surplus. Instead, the company realized moneys from both members and non-members for the same consideration by providing similar facilities in the course of its business. The Court found that the company was formed to carry on a business and had dealings with its members in the ordinary course of business, offering similar amenities to both members and non-members. Therefore, the principle applicable to the surplus of contributions in a members' club was also not applicable. The Court further held that the company was not a 'trade association' as defined by Webster's New International Dictionary, meaning an association of tradesmen, businessmen, or manufacturers for their common protection and advancement. Consequently, Section 10(6) was not applicable. The Court concluded that all four items of receipts from members were received by the company from business carried on with its members within the meaning of Section 10(1) and were therefore assessable to income-tax. The High Court's decision was reversed in part.

What were the facts?

The assessee, Royal Western India Turf Club Ltd., was incorporated to carry on a racecourse business. It had two classes of members: club members and stand members. Members paid entrance fees and annual subscriptions. The company levied admission fees from members for the Members' Enclosure and from non-members for other enclosures. A totalisator was present in each enclosure, and proceeds were pooled and distributed among winning ticket holders. Refreshments were also sold. The company conceded that receipts from non-members were taxable business income. However, it argued that certain receipts from members were not taxable: season admission tickets, daily admission gate tickets, use of private boxes, and income from entries and forfeits of horses that did not run. The High Court held that the first three items were not taxable under Section 10(1) or 10(6) of the Income-tax Act, but the fourth item was taxable.

What were the issues?

1. Whether the receipts from members for season admission tickets, daily admission gate tickets, and use of private boxes fall within the ambit of Section 10(1) or Section 10(6) of the Income-tax Act, 1922, and are therefore assessable to income-tax. 2. Whether the income from entries and forfeits received from members whose horses did not run is assessable to income-tax under Section 10(1) and Section 10(6) of the Income-tax Act, 1922. Assessee's Contentions: The assessee contended that the receipts from members for season admission tickets, daily admission gate tickets, and use of private boxes were not taxable. They argued that these were not receipts from business but rather related to mutual dealings among members for providing amenities. They also contended that the company was not a 'trade or similar association' within the meaning of Section 10(6). Revenue's Contentions: The Revenue contended that all four items of receipts from members were derived from the business carried on by the company with its members and were therefore taxable under Section 10(1) of the Income-tax Act. They argued that the principle of mutual dealings, as applied in cases like Styles, was not applicable here because the company dealt with both members and non-members for the same consideration in the course of its business.

Which sections of the Income-tax Act were involved?

Section 10(1),Section 10(6)

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J '1 S.C.R. SUPREME COURT REPORTS 289 has been raised that in the community to which the parties belong there was any such well recognised practice or belief.

The defendants in the written statement make no assertion about it. But on the other hand, the plaintiff in paragraph 12 of his plaint asserts that the-- " Institution of samadhi and ceremonies connected 1953 Saraswathi Ammal and Another v, Rajagapal Ammal. with it are not usual in the community to which the Jagannadhada• parties belong ". J.

Indeed it may be assumed that such a practice is not likely to grow up amongst Hindus where crema- tion and not burial of the dead is the normal practice, except probably as regards sannyasis and in certain dissident communities. We see no reason to think that the Madras decisions are erroneous in holding that perpetual dedication of property for worship at a tomh it; not valid amongst Hindus.

We accordingly affirm the judgment of the High Court and dismiss the appeal but in the circumstances without costs.

Appeal dismissed.

Agent for the appellant: S. Subramanian.

Agent for the respondent: M. S. I~. Aiyangar . ., COMMISSIONER OF INCOME-TAX, BOMBAY CI

The order continues below.

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