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Hyderabad Race Club Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberReferred Case Nos. 107 of 1978 and 187 and 291 of 1982
Judge
Reported in[1985]153ITR521(AP)
ActsIncome Tax Act, 1961 - Sections 2(15), 11, 11(2), 80G and 256; Companies Act - Sections 25
AppellantHyderabad Race Club
RespondentCommissioner of Income-tax
Appellant AdvocateM. Uttam Reddy, Adv.
Respondent AdvocateM.S.N. Moorthy, Adv.
Excerpt:
direct taxation - charitable purpose - sections 2 (15), 11, 11 (2), 80g and 256 and section 25 of companies act - assessee claimed before income tax officer that income derived by it from various sources is exempt under section 11 - according to assessee it is established for charitable purposes within meaning of section 2 (15) - income tax officer rejected claim on ground that assessee carrying on business by conducting races which was an activity for profit - assessee challenged correctness of view held by lower authorities - assessee contended that its main object for income tax act is imparting knowledge of horse breeding - said object is an object of general public utility and consequently charitable purpose within meaning of section 2 (15) - memorandum of association of assessee.....anjaneyulu, j. 1. these there references arise under the i.t. act, 1961 ('the act' for short). the reference are made by the income-tax appellate tribunal at the instance of the hyderabad race club, hereinafter referred to as 'the assessee'. r.c. no. 107 of 1978 relates to the income-tax assessment years 1971-72, 1972-73 and 1973-74. r.c. no. 187 of 1982 relates to the income-tax assessment years 1974-75 and 1975-76 while r.c. no. 291 of 1982 relates to the income-tax assessment year 1976-77. the following questions of law are referred to this court under s. 256(1) of the act : r.c. no. 107 of 1978 : '1. whether the income of the assessee, a society registered under the societies registration act, for the assessment year 1971-72 is not exempt under section 11 of the income-tax act, 1961 .....
Judgment:

Anjaneyulu, J.

1. These there references arise under the I.T. Act, 1961 ('the Act' for short). the reference are made by the Income-tax Appellate Tribunal at the instance of the Hyderabad Race Club, hereinafter referred to as 'the assessee'. R.C. No. 107 of 1978 relates to the income-tax assessment years 1971-72, 1972-73 and 1973-74. R.C. No. 187 of 1982 relates to the income-tax assessment years 1974-75 and 1975-76 while R.C. No. 291 of 1982 relates to the income-tax assessment year 1976-77. The following questions of law are referred to this court under s. 256(1) of the Act :

R.C. No. 107 of 1978 :

'1. Whether the income of the assessee, a society registered under the societies Registration Act, for the assessment year 1971-72 is not exempt under section 11 of the Income-tax Act, 1961

2. Whether the income of the assessee, a company registered under the companies Act, 1956, and licensed under section 25 of the said Act by the Central government for the assessment years 1972-73 and 1973-74 is not exempt under section 11 of the Income-tax Act, 1961 ?'

R.C. No. 187 of 1982 :

'Whether the income of the assessee, a company registered under the Companies Act, 1956, and licensed under section 25 of the said Act by the central government for the assessment years 1974-75 and 1975-76 is not exempt under section 11 of the Income-tax Act, 1961 ?' R.C. No. 291 of 1982 : 'Whether the income of the assessee, a company registered under the companies Act, 1956, and licensed under section 25 of the said Act by the Central Government for the assessment year 1976-77 is not exempt under section 11 of the Income-tax Act, 1961 ?'

2. We may notice a few facts relevant for the purpose of these references. Initially, the assessee was a society registered under the societies Registration Act in the year 1951. On April 15, 1971, the society was wound up and its assets and liabilities were taken over as a going concern by a public company incorporated under the companies Act, 1956, and known as the Hyderabad Race Club Limited. In exercise of the powers vested under s. 25 of the Companies Act. the Central government licensed the registration of the assessee as company with limited liability, without the addition to its name of the word 'limited'. For the income-tax assessment years 1971-72, 1972-73 and 1973-74, the assessee filed its returns of income for the corresponding accounting years which ended on March 31, 1971, March 31, 1972, and March 31, 1973. The assessee claimed before the ITO that the income derived by it from various sources is exempt under s. 11 of the Act inasmuch as, according to the assessee, it is established for charitable purposes within the meaning of s. 2(15) of the Act. The ITO rejected the assessee's claim that it is a charitable institution and that its income is exempt under s. 11 of the Act, basically on the ground that the assessee was carrying on a business by conducting races which was an activity for profit. According to the ITO, the assessee was not established for any object of general public utility not involving the carrying on an activity for profit, and, consequently, the assessee's claim for exemption of its income could not be admitted. The assessee carried the matter is appeal to the AAC of Income-tax, who upheld the view taken by the ITO and confirmed the rejection of the assessee's claim that it is a charitable institution. The assessee carried the matter in second appeal to the income-tax Appellate Tribunal and reiterated its plea that it is established for charitable purposes within the meaning of s. 2(15) of the act, and that its income qualifies for charitable purposes within the meaning of s. 2(15) of the Act, and that its income qualifies for exemption under s. 11 of the Act. The assessee challenged the correctness of the view held by the lower authorities. The matter was argued at considerable length before the Tribunal and there was a conflict of opinion between the judicial member and the accountant member. Learned judicial member held that the income earned by the assessee is not entitled to exemption under s. 11 read with s. 2(15) of the Act, upholding the view taken by the ITO and confirmed by the Assistant commissioner of Income-tax in first appeal. The learned accountant member, on the other hand, held the view that the assessee's income for the years under consideration is exempt from tax in terms of s. 11 and s. 2(15) of the Act and, accordingly, allowed the assessee's contention that it is a charitable institution. In view of the above difference of opinion between the learned judicial member and the learned accountant member, the matter was referred under s. 255(4) of the Act by the President of the Tribunal to the vice-president for consideration. The vice-President agreed with the view expressed by the learned judicial member and held that the assessee is not a charitable institution and, consequently, it cannot claim exemption of its income under s. 11 of the Act for the assessment years 1971-72, 1972-73 and 1973-74. In view of the majority opinion, the Tribunal eventually dismissed the appeals filed by the assessee on the above point. Thereafter, the assessee required the Tribunal, by filing applications under s. 256(1) of the Act, to refer certain questions of law arising from the order of the Tribunal. that is how the Tribunal referred the two questions set out in paragraph 1 for the opinion of this court in R.C. No. 107 of 1978.

3. In connection with the income-tax assessment years 1974-75, 1975-76 and 1976-77, the assessee reiterated its plea for being recognised as a charitable institution and for exempting its income under s. 11 of the Act, Suffice it to state that the assessee's claim was rejected, following the view taken by the Tribunal in connection with the income-tax assessment years 1971-72, 1972-73 and 1973-74. Consequently, the assessee's claim for exemption of its income for the assessment years 1974-75, 1975-76 and 1976-77 was also rejected. thereafter, the Tribunal referred, at the instance of the assessee, the questions of law enumerated in paragraph 1 in R.Cs. Nos. 187 of 1982 and 291 of 1982.

4. All the three references came up for consideration before a Division Bench of this court consisting of Amareswari and Seetharam Reddy JJ. The Division Bench felt that in view of the important questions of law involved in the references and the divergent opinions expressed by the two Division Benches of this court in (1) AAOs. Nos. 216 and 279 of 1970, dated December 13, 1971 (Municipal corporation of Hyderabad v. Hyderabad Race Club) and (2) CIT v. Hyderabad Race club : [1978]115ITR453(AP) in the assessee's own case, the matter should be considered by a Full Bench. That is how the matter is placed before us for consideration of the questions of law referred to this court in the above three references.

5. Learned counsel for the assessee, Sri M. Uttam Reddy, reiterated before us the contentions urged by the assessee in the courts below. It is submitted that the society, which was in existence during the previous year relevant to the assessment year 1971-72, as also the company, which had taken over the assets and liabilities of the erstwhile society, were established for charitable purposes within the meaning of s. 2(15) of the Act, and, consequently, the income derived by the assessee qualified for exemption under s. 11 of the Act, subject to the fulfillment of the requirement specified in s. 11[2] of the Act. The objects for which the assessee was established as a society under the socie-ties registration act were specified in clause 3 of the memorandum of association to which our attention has been invited by the learned counsel. We may, for the purpose of convenience, extract below some of the objects specified in the memorandum which are relevant for our purpose :

'(a) To encourage and promote the scientific breeding and training of horses, ponies and mules.

(b) To promote, organise and control race meetings at Hyderabad and elsewhere.

(c) To carry on the business of a race club in all its branches, etc.

(d) To impart instructions in and to diffuse useful and scientific knowledge of horse breeding; to encourage horse breeding in all its aspects; and to give monetary assistance to bona fide breeders.

(e) To devote sums of money from the income of the club to public charitable purposes and to other worthy causes.'

6. There are various other objects specified in the memorandum. Learned counsel submitted that most of the other items specified as objects were in reality powers which can be exercised by the society and were not in the nature of objects for which the society was established. Learned counsel submits that the basic purpose for which the assessee-society was established was specified in clauses (a), (d) and (e) and the objects specified in these clauses were, according to the learned counsel, charitable in character. The object relating to the carrying on of a business of a race club in all its branches specified in clause (c), the learned counsel contends, was only a power conferred on the society in order to promote and advance the objects specified in clauses (a), (b) and (e). In other words, according to the learned counsel, carrying on the business of a race club in all its branches is not an object at all for which the assessee-society was established. It is urged by the learned counsel that the scientific breeding and training of horses, ponies and mules, specified in clause (a), is an object of general public utility and is consequently a charitable purpose within the meaning of s. 2(15) of the Act. It is also submitted that the object of imparting instructions in and to diffuse useful and scientific knowledge of horse breeding, to encourage horse breeding in all its aspects, and to give monetary assistance to bona fide breeders, specified in clause (d), and devoting sums of money from the income of the club to public charitable purposes and to other worthy causes, specified in clause (e) above-referred, are again objects of general public utility and come within the meaning of the expression 'charitable purposes' under s. 2(15) of the Act. The power given to the assessee-society for carrying on the business in racing should be regarded as a power conferred on the society to achieve the above objects and the business carried on in racing is merely ancillary to the main objects specified in clauses (a), (d) and (e) above-referred.

7. It would be relevant at this stage to refer to the memorandum of association of the assessee after its incorporation as a company. Paragraph III of the memorandum of association sets out 'the objects for which the company is established'. The following two are stated to be the 'main objects to be pursued by the company on its incorporation' :

'1. To take over the assets and liabilities of the present club known as the 'Hyderabad Race Club.'

2. To carry on the business of a race club in all its branches and to conduct, hold and promote race meetings and athletic sports, sports, polo, lawn tennis, golf and other matches, horse and other shows and exhibitions and otherwise utilise the company's properties and sites and to give and contribute towards prizes, cups, stakes and other rewards.'

8. The objects which are incidental or ancillary to the attainment of the main objects are also specified in the memorandum. The following object is specified in the memorandum of association against serial No. 4 of the objects incidental or ancillary to the attainment of the main objects :

'4. To impart instructions in and to diffuse useful and scientific knowledge of horse breeding and to encourage horse breeding in all its aspects and to give monetary assistance to bona fide breeders.'

9. It would thus be seen that the scientific breeding and training of horses and the imparting of instructions relating to horse breeding in all its aspects, is shown as an incidental or ancillary object in the memorandum of association of the assessee-company which was established in April 1971. Learned counsel submits that in the memorandum of association constituting the assessee as a company in April, 1971, carrying on the business of a race club in all its branches had to be specified as the main object in order to meet the requirements of the company law, although in point of fact the main object for which the assessee-company was established, was what was stated as an incidental or ancillary object against sl. no. 4 referred to above. It is pointed out that for the purpose of incorporating a company, the business which the company carries on has to be specified as the main object and all other objects have to be specified as incidental or ancillary objects, and this classification for the limited purpose of the Companies Act should not, according to the learned counsel, be confused with the real object for which the assessee-company was established. According to the learned counsel, the basic or dominant object for which the assessee was established, whether as a society prior to April, 1971, or as a company from April, 1971, was to encourage and promote the scientific breeding and training of horses and to impart instructions in and to diffuse useful and scientific knowledge of horse breeding and to encourage horse breeding in all its aspects which, according to the learned counsel, are objects of general public utility. The other objects specified, whether in the memorandum of association relating to the assessee as a society or in the memorandum of association relating to the assessee as a company, are all subservient to the main object of 'scientific horse breeding'. Consequently, the doctrine of dominant or primary object should be invoked in the present case in order to examine whether the dominant or primary object for which the assessee is established, is charitable in character.

10. We are unable to agree with the learned counsel that the dominant or primary object for which the assessee is established either as a society or as a company, is the scientific breeding of horses, and not for the purpose of carrying on business in conducting races. Referring to the memorandum of association of the assessee as a society under the Societies Registration Act, we see no ground to regard the object specified in clause (c) of para 3 as a power conferred on the society to carry on the business to advance and promote the so-called main object of scientific breeding and training of horses. In the first place, paragraph 3 specifically mention that carrying on the business of a race club is an object for which the society is established. It is not in the nature of a power conferred on the society. It is true that some of the objects specified in para 3 of the memorandum of association relate to powers conferred on the society and there is, to some extent, a mix-up of the objects and powers in pars. 3. We have, however, no difficulty in regarding the carrying on of the business by conducting races as being in the nature of an objects rather than a power. If any doubt in the above regard subsists as regards the memorandum of association of the society, that is clearly set at rest while setting out the objects for which the assessee was established as a company. As we have already referred to above, the memorandum of association of the assessee after its incorporation in April, 1971, as a company clearly states that the main object to be pursued by the assessee-company on its incorporation, is to carry on the business of a race club in all its branches. Even when the assessee was a society, carrying on the business of a race club was obviously the main object although it was mixed up with other objects, as there was no statutory requirement that the main objects and ancillary objects should be separately specified in the case of society. We are unable to appreciate the learned counsel's contention that notwithstanding the memorandum of association specifying the carrying on of the business of a race club as the main object for which the assessee-company was incorporated, we should hold that the main object for the purpose of the Companies Act is the carrying on of the business of a race club, and the main object for the purpose of the I.T. Act is the scientific breeding of horses. We must reject the contention that the main objects for which the assessee was established should be regarded differently for the purpose of the companies Act and the I.T. Act. The provision contained in the memorandum of association is unlearned counsel. We have, therefore, no difficulty in coming to the conclusion that the main object for which the assessee was established whether as a society or as a company, was to carry on the business of a race club and all other objects are either incidental or ancillary to the above main object. Thus, even invoking the doctrine of dominant or primary object, we must hold that the assessee was established with the dominant or primary object of carrying on the business of a race club by conducting a races which, on the own admission of the learned counsel, is not charitable in character. This itself is sufficient to demolish the assessee's claim that it must be regarded as having been established for charitable purposes by invoking the doctrine of dominant or primary object.

11. We may, for the sake of completeness, examine the contention of the learned counsel that the scientific breeding and training of horses and imparting instructions in and to diffuse useful and scientific knowledge of horse breeding, are objects of general public utility within the meaning of the s. 2(15) of the Act. It is contended by the learned counsel that scientific breeding of horses is an object connected with animal husbandry and the scientific breeding of horses is closely associated with the welfare of animals and should, therefore, be regarded as an object of general public utility for the purpose of s. 2(15) of the Act. In support of this proposition, learned counsel relied on the judgment of the Gujarat High Court in CIT v. Swastik Textile Trading Company Pvt. Ltd. : [1978]113ITR852(Guj) . Learned counsel for the assessee has taken us through the above judgment of the Gujarat High Court. We find it entirely different on facts. That is a case where the assessee donated certain sums in favour of a charitable trust and claimed deduction under s. 80G of the Act in respect of the said donations. The tax authorities held that the relevant object in clause 4(g) of the trust deed of the establishing, maintaining, running and helping 'gaushalas, panjarapoles' and other similar institutions for animals, was a religious object and was, therefore, non-charitable in character. It, therefore, fell for consideration whether establishing, maintaining, running and helping gaushalas, panjarapoles and other similar institutions for animals, could be regarded as a charitable object. Examining the above aspect, the court observed that (p. 857) :

'... the object beneficial to mankind or humanity is interpreted in a wide manner so as to embrace within its scope those acts of charity, which advance general public morality, alleviating suffering of weak, infirm animals or preventing cruelty to animals, encouraging compassionate feeling and tender treatment by protecting such domestic animals, by service of such animals or looking after and promoting the well-being of these domestic animals, including such bovine animals which are the mainstay of our agricultural community. Such objects are looked upon as proper objects of public charity in this country.'

12. The court referred to various authorities in support of the basic proposition that any trust created or institution established which tends to promote public morality by checking the innate tendency to cruelty towards animals, should be regarded as charitable in character. The following observations of Lord Justice Swinfen Eady in In re Wedgwood : Allen v. Wedgwood [1915] 1 ch 113 are instructive :

'A gift for the benefit and protection of animals tends to promote and encourage kindness towards them, to discourage cruelty, and to ameliorate the condition of the brute creation, and thus to stimulate humane and generous sentiments in man towards the lower animals, and by these means promote feelings of humanity and morality generally, repress brutality, and thus elevate the human race.'

13. The following observations of chagla J. in Vallabhdas Karsondas Natha v. CIT [1974] 15 ITR 32 .

'It is perfectly true that the basis of holding a trust for the benefit of animals as a goods charitable trust is that it falls within the fourth category of Lord Macnaghten's famous definition in pemsel's case [1891] AC 531 namely, that it is a trust beneficial t the community. Whatever the view may be in England as to protection of animals and as to feeding of animals, we must consider what the views are in our own country and it is patent that Indians as a race are extremely kindly disposed towards animals which have been the object of charity at the hands of many munificent donors.'

14. The Gujarat High Court referred to the decision of the Bombay High Court in Pradhan v. Bombay State Federation of Gaushalas and Panjarapoles [1957] 59 Bom LR 890 wherein Chagla C.J. in terms held that the object of a society which was formed to admit into its membership institutions like gaushalas and Panjarapoles, that is to say, for taking all possible means for the complete protection of cows and bovine cattle from premature death, neglect and deterioration and to save bovine cattle by improving their bred and raising their economic standard, was for a charitable purpose under the head of 'Any other object of general public utility'. It was pointed out that a gaushala was a public charitable institution working for the protection and preservation of cows and calves and bovine cattle and panjarapole was also an institution working for the protection, welfare and preservation of bovine cattle and other animals. Having regard to the above views, the Gujarat High Court eventually held that a society whose object was to save cows from destruction and of improving the standard of cattle in out country was surely working for the object of general public utility because cattle are most important for the rural economy of India. On the above premises, the Gujarat High Court held that clause 4(g) of the trust deed for establishing, maintaining, running and helping gaushalas, panjarapoles and other similar institutions for animals, was a charitable purposes.

15. The following principles emerge from the observations enumerated above :

'(a) A trust for improving the standard of cattle in our country is regarded as an object of general public utility because cattle is the mainstay of our agricultural community and most important for the rural economy of India.

(b) A trust for the protection of cows and bovine cattle from premature deaths, neglect and deterioration and destruction and to save bovine cattle by improving their breed and raising their economic standard, was for a charitable purpose under the head 'Any other object of general public utility.'

(C) A trust created or institution established which tends to promote public morality by checking the innate tendency to cruelty towards animals should be regarded as beneficial to the community as a whole and, therefore charitable in character.'

16. The object of scientific breeding of horses hoes not come within any of the above principles. In the first place, horses are no longer used in this country for agricultural purposes and they are much less looked upon this country for agricultural purposes and they are much less looked upon as important for the rural economy of the country. The part played by horses in the above purposes is very insignificant. It is not denied that the so-called object of scientific breeding of horses by the assessee is confined only to such category of horses useful for the conduct of races. The assessee does not undertake scientific breeding of horses not useful for conducting races, say, for example, horses which are used for transport in small villages. Scientific breeding of horses connected with the conduct of races hardly confers any benefit on the community. It is also not denied that the assessee does not undertake the preservation and protection of bovine and infirm horses as a measure of kindness towards animals and prevention of cruelty towards them. The assessee does not even check the innate tendency to cruelty in destroying race horses once the race horse is found unsuitable by reason of any injury suffered. surely the assessee-club does not promote and encourage kindness towards horses, discourage cruelty and stimulate humane and generous sentiments in man towards infirm horses. There is then no difficulty in understanding the real object for which the assessee-club is established and that object is for scientific breeding of such horses as are useful for conducting races and that object is to promote its own main object of carrying on business in conducting races. We should not, therefore, confuse the high-sounding words 'scientific breeding of horses' employed in the memorandum of association of them assessee either as a society or as a company, with any purpose beneficial to the community; on the contrary, it is a purpose beneficial to itself in the sense that the scientific breeding of horses has reference only to the main object of conducting races and not to any general laudable object of breeding horses for the benefit of the community.

17. Learned counsel for the assessee relied on the decision of the Madras High Court in CIT v. Ootacamund Gymkhana Club : [1977]110ITR392(Mad) . The facts in that case are totally different from the facts of the present case and is, therefore, clearly distinguishable.

18. Learned counsel for the assessee, Sri Uttam Reddy, urged that there was no dispute before the Tribunal that the object of scientific breeding of horses, etc., is a charitable purpose being an object of general public utility. According to the learned counsel, the only dispute was whether the object of general public utility in the assessee's case is hit by the exclusionary clause 'not involving any activity for profit.' within the meaning of s. 2(15) of the Act. Learned counsel pointed out that the judicial as well as the accountant member of the Tribunal and also the vice-president considered the question only from the above point of view. It is, therefore, suggested that this court ought not to examine the questions whether the scientific breeding of horses, etc., is a charitable purpose or not, as it does not arise out of the Tribunal, who differed, and also the Vice-president, proceeded on the assumption that the scientific breeding of horses, etc., is an object of general public utility and came to the conclusion by a majority that such an object of general public utility is hit by the exclusionary clause in s. 2(15) of the Act 'not involving any activity for profit'. We do not understand the relevancy of entering into a detailed discussion aforementioned exclusionary clause, without first determining whether there is an object of general public utility at all. Unless it is possible first to come to the conclusion that the dominant or primary object for which the assessee is established either as a society or as a company is an object of general public utility, no purpose is served by examining the law on the point whether such object involved any activity for profit. We do not accept the learned counsel's contention that this basic and larger issue does not arise out of the Tribunal's order, because unless that basic question is considered and a conclusion arrived at, any discussion of law governing the matter will be purposeless. It was for this reason that we did not accede to the submission of the learned counsel, Sri Uttam Reddy, that we should examine the decision of the Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers : [1980]121ITR1(SC) . The principles enunciated in that decision would be helpful only if we come to the conclusion that the dominant or primary object for which the assessee is established is an object of general public utility. If at the threshold, we are confronted with the difficulty of accepting the assessee's contention that the dominant or primary object for which the assessee is established is an object of general public utility, nothing further survives for consideration and the doctrine of dominant or primary object does not fall to be invoked at all.

19. We have, for the reasons aforesaid, no hesitation in rejecting the assessee's two-fold contention that (a) its main object is scientific breeding of horses and imparting instructions in and to diffuse useful and scientific knowledge of horse breeding, etc., and (b) that the said object is an object of general public utility and is consequently a charitable propose within the meaning of s. 2(15) of the Act. On the contrary, we hold that the main object of the assessee, whether as a society or as a company, is to conduct races which admittedly is not a charitable purposes and that, in any event, scientific breeding of horses, etc., is not an object of general public utility and cannot, consequently, be regarded as a charitable purpose within the meaning of s. 2(15) of the Act.

20. This leaves us to examine only one decision which was pressed upon us by the learned counsel with sufficient justification and that is the decision of a Division Bench of this court in Municipal Corporation of Hyderabad v. Hyderabad Race club (AAOs NOS. 216 and 279 of 1970, dated December 13, 1971). Learned counsel heavily relied on the above decision as it was rendered in the assessee's own case, where it was accepted that the assessee, when it was constituted as a society under the Societies Registration Act, was a charitable institution. We have stated earlier that in a subsequent judgment concerning wealth-tax matters of the assessee, another Division Bench of this court in CWT v. Hyderabad Race Club : [1978]115ITR453(AP) , held that the assessee is not a charitable institution. It is because of this apparent conflict between the two Division Benches of this court that the matter has been referred to a Full Bench. We are inclined to hold that the decision of the Division Bench in CWT v. Hyderabad Race club : [1978]115ITR453(AP) , is correct. We are unable to agree with the decision in Municipal corporation of Hyderabad v. Hyderabad Race club (AAOs Nos. 216 and 279 of 1970, dated December 13, 1971), with great respect to the learned judges who decided that case. we may point out that the conclusion that the assessee is a charitable institution was reached in AAOs Nos. 216 and 279 of 1970, dated December 13, 1971 from a negative fact, namely, that the members of the assessee-society were not entitled for a personal or pecuniary benefit or advantage. The question whether the scientific breeding of horses, etc., is an object or general public utility was not examined from a positive angle. The mere fact that the members of the assessee-society are not entitled for any personal or pecuniary benefit or advantage, does not automatically render the assessee-society a charitable institution. Unless positive requirements of law are satisfied, the assessee cannot be regarded as a charitable institution. We have already indicated above our reasons for coming to the conclusion that the object for which the assessee is established, either as a society or as a company, do not spell out any charitable purpose.

21. The questions formulated for the opinion of this court in the three references above referred to seem to suggest that the registration of the assessee as a society under the Societies Registration Act and the licence granted to the assessee as a company under s. 25 of the Companies Act would prima facie clothe the assessee with the character of a charitable institution. Learned counsel for the assessee fairly accepted during the course of hearing that neither of the above events is conclusive and the question whether the assessee is established for a charitable purpose or not must be examined independently with reference to the provisions of the Act. The registration of the assessee as a society under the societies Registration Act and licence granted to the assessee under s. 25 of the Companies Act are only relevant factors in reaching an appropriate conclusion.

22. In the result, we answer the two questions referred to us in R.C. No. 107 of 1978 in the affirmative, that is, in favour of the Revenue and against the assessee. We also answer the questions referred to us in R.Cs. Nos. 187 of 1982 and 291 of 1982 in the affirmative, that is, in favour of the Revenue and against the assessee. In the facts and circumstances of the case, we direct the parties to bear their own costs.


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