Case Law Details
RELEVANT PARAGRAPH
16. We heard both the parties and perused the orders of the revenue as well as other records available before us. The issue before us is whether the assessee is the charitable organisation and entitled to the benefits u/s 11 or alternatively the mutual organisation is controlled by the principles of mutuality. In brief, the case of the assessee is that he is a charitable organisation and the objects and the activities of the club confirm the same and rely on various judicial findings such as the AP High Courts judgment in the case Andhra Pradesh Riding Club (supra) for the proposition that the object to promote and popularise the equestrian games and to impart training in the art of horsemanship is of general public utility. On the other hand, the case of the revenue is that the assessee did nothing charitable and the dominant object of the assessee to provide amenities and facilities to the members of the club, which is a characteristic feature of a mutual organisation. Regarding the activities enlisted above by the assessee, the revenue considers all of them as tall-claims and factually, the assessee did not carry out any activity which can be described as charitable nature. As per the revenue, the club did nothing extraordinary to qualify the charitable nature, which is not done by other agencies considered mutual organisations. As per the revenue, under the circumstances of the diversion of funds to the building funds and trading on alcohol to the members and their guest, the club does not become charitable entity and such activities are not of general public utility. Sports activities are not the dominant activity of the club. To become entitled for exemption u/s 11 of the Act, the trust must exist wholly for charitable purposes.
17. We have considered the above rival views and also examined the annual accounts of trust which are placed at pages 22 to 44 of the paper book. For deciding the issue whether the assessee is the charitable organisation or the mutual organisation, the following aspects require detailed analysis and they are: (A) the object of the trust, which is engaged in running a club to translate its objects; (B) the activities of the club; (C) restrictions on the admission of the members to the club; and (D) generation of income and application of income. The relevant discussion is given in the following paragraphs.
(A) (i) The assessee is registered under Bombay Public Trust (BPT) Act, 1950 since February, 1975 and also registered under old provisions of section 12A of the Income-tax Act I April 1981 and assessee claims that it is charitable club. Thus, the club is regulated by the trust’s objects and the objects assume importance. Relevant objects of the club read as follows.
(a) to provide as far as possible for general public utility grounds and buildings, convenient, desirable or necessary for games and sports generally both indoor and outdoor and all things commonly or conveniently used for the same;
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