{"id":14338,"date":"2020-12-07T15:12:46","date_gmt":"2020-12-07T15:12:46","guid":{"rendered":"https:\/\/itatonline.org\/digest\/bangalore-club-v-cwt-2020-427-itr-260-316-ctr-622-193-dtr-441-sc\/"},"modified":"2021-05-07T15:34:26","modified_gmt":"2021-05-07T10:04:26","slug":"bangalore-club-v-cwt-2020-427-itr-260-316-ctr-622-193-dtr-441-sc","status":"publish","type":"post","link":"https:\/\/itatonline.org\/digest\/bangalore-club-v-cwt-2020-427-itr-260-316-ctr-622-193-dtr-441-sc\/","title":{"rendered":"Bangalore Club v. CWT (2020) 427 ITR 260\/ 316 CTR 622\/ 193 DTR 441\/ 275 Taxman 480 (SC )"},"content":{"rendered":"

The objects of the assessee-club included, inter alia, the provision for its members, of social, cultural, sporting, recreational and other facilities, the promotion of camaraderie and fellowship among its members, and the undertaking of measures for social service consequent on natural calamities or disasters, national or local. Rule 35 of the club\u2019s rules provided that upon liquidation any surplus assets remaining after all debts and liabilities of the club were discharged shall be divided equally amongst the members of the club. On the ground that the rights of the members of the assessee-club were not restricted to user or possession, that the assets of the club belonged to them, that the number of members and the date of dissolution were uncertain and variable and therefore indeterminate, the Assessing Officer came to the conclusion that the assessee was liable to be taxed under section\u00a021AA\u00a0of the Wealth-tax Act, 1957 for AY.s 1981-82 and 1984-85 up to 1990-91. The Commissioner (Appeals) dismissed the assessee\u2019s appeals, but the Appellate Tribunal characterised the assessee as a \u201csocial club\u201d and held that since the members were entitled to equal shares in the assets of the club on a winding-up after paying all debts and liabilities, the shares so fixed were determinate, thus making it clear that section\u00a021AA\u00a0of the Wealth-tax Act, 1957 would have no application to the facts. As a result, the Appellate Tribunal set aside the orders of the Assessing Officer and the Commissioner (Appeals). On appeal, the High Court decided in favour of the Department and dismissed a review petition by its order. On further appeal , allowing the appeals,the Court held that the assessee was a social club whose objects made it clear that persons did not band together for any business purpose or commercial purpose in order to make income or profits. The assessee was an association of persons and not the creation, by a person who was otherwise assessable, of one among a large number of associations of persons without defining the shares of the members so as to escape tax liability. Section\u00a021AA\u00a0of the Wealth-tax Act, 1957 was not attracted to the facts.<\/em> Court also\u00a0 observed that \u00a0That under rule 35 of the assessee\u2019s rules, on liquidation, any surplus assets remaining after all debts and liabilities of the club had been discharged, shall be divided equally amongst all categories of members of the club. This would show that \u201cat any time thereafter\u201d within the meaning of section\u00a021AA(1)\u00a0, the members\u2019 shares were determinate in that on liquidation each member of whatsoever category would get an equal share. What had to be seen was the list of members on the date of liquidation in terms of rule 35 of the assessee\u2019s rules. Given that as on that particular date, there would be a fixed list of members belonging to the various classes mentioned in the rules, it was clear that such list of members not being a fluctuating body, but a fixed body as on the date of liquidation, and this would make the members \u201cdeterminate\u201d, as a result of which, section\u00a021AA\u00a0would have no application. Court also held that The definition of \u201cperson\u201d in section\u00a02(31)\u00a0of the\u00a0Income-tax Act, 1961<\/em>\u00a0would take in both an association of persons and a body of individuals. \u201cBody of individuals\u201d is a wider expression than \u201cassociation of persons\u201d in which such body of individuals may have no common object at all but would include a combination of individuals who had nothing more than a unity of interest. Apart from this, to be taxed as an association of persons under the Income-tax Act is to be taxed as an association of persons per se. Section\u00a021AA\u00a0of the Wealth-tax Act does not enlarge the field of taxpayers but only plugs evasion as the association of persons must be formed with members who have indeterminate shares in its income or assets. The argument that where a club is taxed as an association of persons under the Income-tax Act, it must be regarded to be an \u201cassociation of persons\u201d for the purpose of a tax evasion provision in the Wealth-tax Act as opposed to a charging provision in the Income-tax Act, is not tenable.(<\/em> AY:1981-82,1984-85 to 1990-91)<\/p>\n","protected":false},"excerpt":{"rendered":"

Wealth -tax Act, 1957 <\/p>\n

S. 21AA: Assessment \u2013 Association of persons – Members\u2019 Club \u2014 No business or profession carried on by social members\u2019 Club- Surplus assets to be divided equally amongst members \u2014 Members\u2019 shares determinate at that date \u2014Club not chargeable to Wealth-Tax. [ S.2(31) 3(1) ] <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-14338","post","type-post","status-publish","format-standard","hentry","category-digest"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3Jg","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/14338","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=14338"}],"version-history":[{"count":2,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/14338\/revisions"}],"predecessor-version":[{"id":17678,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/14338\/revisions\/17678"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=14338"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=14338"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=14338"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}