Wealth tax---

----Status---Club formed purely with objects of social nature to provide facilities for members---Not a public charitable trust---No enquiry made to determine status---Whether assessment as individual proper---Cannot be answered---Indian Wealth Tax Act, 1957.

The applicant was a club. The club directory stated that its objects were of purely social character, to afford to the members free scope and facility for, mingling with one another, for the healthy cultivation of personal intercourse and inter-change of thoughts, for recreation and amusements and in general, for the promotion of social amenities. The assessee claimed in Wealth Tax proceedings for the assessment year 1978-79, that it was a public charitable trust or in the alternative that it should be assessed as an association of persons. The claim was rejected and it was assessed as an individual. On a reference:

Held, (i) that the document in question showed that the club's object was purely of a social character and mainly and specifically to afford facilities to the members. The assessee was, therefore, not a public charitable trust.

(ii) That there had been no enquiry with regard to the factual aspect of determination as to the legal status of the assessee. Therefore, the question whether the assessment of the club in the status of an individual was proper could not be answered.

P.Balachandran for the Assessee.

P.K.R. Menon and N.R.K. Nair for the Commissioner.

JUDGMENT

V.V. KAMAT, J.---The following two questions expect our answer with regard to the proceedings under the Wealth Tax Act, 1957, in the matter of the assessee, Banerji Memorial Club, for the assessment year 1978-79:

"(1) Whether, on a reading of the bye-laws and rules of the applicant -club the Appellate Tribunal had material to come to the conclusion that the applicant was not a public charitable trust?

(2) Whether, on the facts and in the circumstances of the case, the assessment of the applicant which was an association of persons, under the Wealth Tax Act in the status of an 'individual' was proper and legal?"

As regards question No. l as to whether the applicant-assessee is a public charitable trust or not, a bare reading of the background as available from the document Annexure "D" relied upon in support of the contention would be more than enough. The said background is as follows:

"A score of prominent gentlemen of Trichur, after the day's work was through, used to meet regularly under the canopy of two huge mango trees---Unkindly destroyed since---in the south-west maidan facing the Vadakkunathan Temple, for fun, relaxation and gossip. From the current files in the palace to the new damsel in town, topics for discussion were wide-ranging and illuminating. Creating scandals and broadcasting them as widely as possible, making or marring reputations, were taken as a sacred birthright, as all gatherings of aristocracy dutifully did everywhere. One had only to whisper something and then rest assured that it would get discussed over and over again at the right places at the right time with the desired effect. This was, i.e., those days, endearingly called 'The Scandal Points', very meaningful indeed. The rudimentary beginning of the Banerji Memorial Club could be traced to this deserted spot.

Vagaries of the weather and monstrosity of the monsoon' was something beyond the control of aristocracy, even with all the connections with royalty, official and otherwise. Thirteen of them under the chairmanship of Sri Kochukrishna Marar met at Kottilil Madhom, at 4 p.m. on the 17th day of May, 1914, and formed themselves into the B.M.C. with membership, open to all, irrespective of religion, caste or creed. "

Against the backdrop of this above background, available from the only document at page 14 of the print, we further find (at page 28 of the print) the following aims and objects:

"The objects of the club are purely of a social character, to afford to members free scope and facility for mingling with one another, for the healthy cultivation of personal intercourse and interchange of thoughts, for recreation and amusements and in general, for the promotion of social amenities. Promotion of social, cultural and athletic activities among the public shall be a vital part of its objects".

We have gone through the contents of Annexure "D" which is "Club Directory of 1989". The aims and objects reproduced hereinabove are undisputed even by learned counsel for the assessee. When we read the document with the help of counsel, certainty features that the object is purely of a social character and the too only to afford to the members for certain affording of facilities as found to have been specified would also obviously show that the assessee is understood only to be looking after the members.

Seeing this obvious situation from the contents of Annexure "D", we found that the document Annexure "D" would not be a trust much less either charitable or public. In fact, on a reading of the document, we pointedly put the position before learned counsel for the assessee. Learned counsel firstly stated that beyond this document (Annexure "D"), there is no other factual material with regard to the determination as to whether the assessee could be considered as a trust, much less charitable and/or public. Learned counsel also on reading the above document, could not make any submission that the assessee could be considered as a trust on any hypothesis based on the contents thereof. In view of this position, and also on reading the contents of the document, there would be no difficulty in recording that the assessee is not a trust in any sense of the situation. Even reading the document, the conclusion would be further inevitable that neither charity nor concern of public would have any connection with the activities of the assessee. In the above situation, it would be wholly unnecessary for us to continue to dwell upon the situation with regard to question No. l because basically the assessee could not be a trust on the bare reading of the document and this position is also not disputed, but gets established from the contents of the document.

With regard to question No.2, having gone through the contents of the three orders, in our judgment, the contents of the document have not been considered for determination of the legal status of the assessee. A plea appears to have been raised, firstly, that the assessee is a public charitable trust and, secondly or alternatively, that it is an association of persons. The discussion relates to the consideration of these pleas which are mutually exclusive. The Wealth Tax Officer has not considered the contents of the documents. Similarly, the first appellate Authority---Appellate Assistant Commissioner of Income-tax, Calicut, considered the contention as to whether the material suggests that the assessee-club is a public charitable trust and the executive committee holds the assets of the club in trust.

The proceedings further traveled before the Income-tax Appellate Tribunal in the same manner, with concentration with reference to the objects of the assessee and the concern of public in regard thereto.

The Tribunal (in paragraph 7 of its order) on the footing that it is an association of persons has considered the situation as to whether it could be "individual" in the context of the tax liability under the Wealth Tax Act, 1957.

We find that the authorities concentrated on this aspect from the point of view that the assessee is a trust, which could be categorized as a public charitable trust. We find that there has been no enquiry with regard to the factual aspect of determination as to what the assessee could be with reference to the legal status.

For the above reasons, we answer question No. l in the affirmative, in favour of the Revenue and against the assessee. We decline to answer question No-2 in the absence of necessary factual matrix and conclusion in regard thereto as discussed above.

A copy of this judgment under the seal of the Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.

M.B.A./1346/FCReference answered.