K.S. Venkataraman, J.
1. The Cosmopolitan club, Madras, which is a well-known members' club, owns 66 grounds 2150 sq. ft. of land in Mount Road. The club was required to pay urban land tax under the Tamil Nadu Urban Land Tax Act, 1963, for eight years from 1st July, 1963 at the standard tax rate of 0-4 p.c. on the market value of the urban land owned by the club. The club claimed that it was entitled to the concession of 25 percent, under Section 26 of the Act, which, so far as material says:
26.--(1) Where any building is occupied wholly by the owner for residential purposes only and where such owner makes an application to the Urban Land Tax Officer, that officer shall. reduce by 25 per cent the amount of urban land tax payable on the urban land on which the building has been constructed and on the urban land appurtenant to such building.
The Urban Land Tax Officer rejected the claim, observing:.section 26 (1) is very clear that a building occupied wholly by the owner for residential purposes only is eligible for concession, of 25 per cent. But in your case it is an. association and the land under reference issued for different purposes (i.e., recreational lodging and boarding etc.). Hence the request for concession under Section 26 (1) cannot be complied with.
Aggrieved by this order the club filed W.P. No. 1856 of 1972. Another writ petition No. 3069 of 1973 was filed later in respect of Fasli 1381. The point involved is the same.
2. Before dealing with the arguments advanced before us, we can briefly notice the facts which are really not in controversy . The club is a members' club, that is to say, no person who is not a member is admitted to enjoy the benefits of the club, and all the assets really belong only to the members. It was founded in 1873, by a few men of vision. They formed, themselves into an association 'for social intercourse, discussion, exchange of ideas, recreation etc.' In 1934 the members got the club registered under Section 26 of the Indian Companies Act, 1913, as a non-profit organisation. As already stated, the club owns 66 grounds 2150 square ft. of land. Upon this land there are a few buildings, and appurtenant to them are vacant spaces requisite for those buildings. The main building houses the administrative offices, members lounge, restaurant, billiard room, card room, library, conference room etc. Behind the main building there are the mofussal quarters wherein mofussal members come and stay. The space in between is occupied by tennis Courts, car parks, pathways and roads. In the front there is a garden All the buildings and appurtenant lands are in the exclusive occupation of the club for the club's own purposes. No portion of the buildings or appurtenant lands has been let out on rent to any party. The club exists for no purpose other than for its purposes as a members' club. A stranger cannot get in unless he is introduced by a member. If a stranger partakes of refreshments, it has to be paid for by the member who introduces him.
3. The submission of Mr. V. Balasubramaniam, learned Counsel for the petitioner, consists of two steps : (i) Though normally a company is a different juristic entity from its shareholders, in the case of a members' club, like the petitioner, the incorporation does not make any difference. The club belongs only to the members and the incorporation is only a convenient method for suing and for being sued. It does not alter the character of the members' club. Hence for the purposes of Section 26 of the Act, it can be assumed that the building is occupied wholly by the members. (ii) The occupation is for residential purposes only.
4. Mr. Satyadev, learned Assistant Government Pleader, concedes, in view of some Supreme Court decisions, that the incorporation does not alter the essential character of a members' club, and that, consequently, we can proceed on the assumption that the buildings are occupied wholly by the members. But, he stoutly resists the second limb of the submission of the petitioner's learned Counsel. According to the learned Assistant Government Pleader, the occupation is for recreational purposes; it is not at all for residential purposes, much less for residential purposes, only.
5. Though it is a matter of concession that, for the purpose of Section 26 of the Act, incorporation does not make any difference, and the buildings can be said to be occupied wholly by the members, we shall say just a few words explaining the position on that point. Section 7 requires every owner of urban land, liable to pay urban land tax to submit a return. Section 8 specifies the persons who should sign the return in the case of 'an individual, a Hindu undivided family, company, firm, other association and any other person'. Technically, in this case, the owner will be the company. But, the case law shows that, where the company is a members' club, virtually the owners are the members themselves. The importance of this, for the purpose of Section 26, is obvious, namely, it is easier for the assessees to build up an argument that the members are occupying the buildings for residential purposes only than to contend that the company is occupying it for residential purposes only. No doubt, in statutes like the Income-tax Act, 1961, there is a distinction between a company resident in India and not resident in India, but the Income-tax Act itself gives a definition to determine that question, and where there was no such definition in England,, some tests were applied to determine-whether a company was resident in, England or not.
6. But the question before us is very-limited, namely, whether Section 26 of the Tamil Nadu Urban Land Tax Act applies, and it will be noted that there-is no definition in the Act of the words 'residential purposes' or of the word 'residence'.
7. The direct case of this Court dealing with this point is reported in Toting Men's Indian Association, Madras : v. Joint Commercial Tax Officer : AIR1964Mad63 . It was a decision of Ramachandra Iyer,. C.J. and Aaantanarayanan, J. The Young Men's Indian Association was assessed to sales-tax under the provisions of the Madras General Sales-tax Act, 1959, in respect of supply of refreshments by the club to its members. The decision was that there was no sale at all,, that the true character of the transaction was that the club menely acted as an. agent of the members in purchasing the articles, making them into refreshments and supplying them to the members, that consequently throughout it was only the members as a whole who bought the articles, made the refreshments and distributed them amongst themselves, and that consequently there was not transfer of property which is one of the essential elements of a sale. This decision was upheld on appeal by the Supreme Court in Joint Commercial tax Officers v. Young Men's Indian Association Madras : 3SCR680 their Lordships. observed:
The law in England has always been that members' club to which category the clubs in the present case belong cannot be made subject to the provisions of the licensing Acts concerning sale because the members are joint owners of all the club property including the excisable liquor. The supply of liquor to a member at a fixed price by the club cannot be regarded to be a sale. If however, liquor is supplied to and paid for by a member who is not a bona fide member of the club or his duly authorised agent there would be a sale. With regard to incorporated clubs a distinction has been drawn. Where such a club has all the characteristics of a members' club consistent with its incorporation, that is to say where every member is a shareholder and every shareholder is a member, no licence need be taken out if liquor is supplied only to the members. If some of the share-holders are not members or some of the members are not share-holders, that would be the case of a proprietary club and would involve sale. Proprietary clubs stand on a different footing. The members are not owners of or interested in the property of the club. The supply to them of food or liquor though at a fixed tariff is a sale. (See Halsbury's Laws of England, 3rd Edn. Vol. 5 pages 280-281). The principle laid down in Craff v. Evans (1882) 8 Q.B.D. 373, had throughout been followed. In that case Field J., put it thus : 'I think, the true construction of the rules is that the members were the joint owners of the general property in all the goods of the club, and that the trustees were their agents with respect to the general property in the goods'.
The difficulty felt in the legal property ordinarily vesting in the trustees of the members' club or in the incorporated body was surmounted by invoking the theory of agency, i.e., the club or the trustees acting as agents of the members....What was essential was that the holding of the property by the agent or trustee must be a holding for and on behalf of and not a holding antagonistic to the members of the club.
At page 247 they observed:
The final conclusion of the High Court in the judgment under appeal was that the cases of each club was analogous to that of an agent or mandatory investing his own moneys for preparing things for consumption of the principal, and later recouping himself for the expenses incurred....As no transaction of sale was involved there could be no levy of tax under the provisions of the Act on the supply of refreshments and preparations by each one of the clubs to its members.
This was a judgment of five of their Lordships. Shah, J. also agreed with the final result.
8. Mr. Satyadev, referred also two other decisions of the Supreme Court, where-it was held that the incorporation does not alter the character of the members' club : Madras Gymkhana Club Employees Union v. Management of Gymkhana Club : (1967)IILLJ720SC (e.g., paragraph 32 to 34 : and Cricket Club of India v. Bombay Labour Union : (1969)ILLJ775SC ).
9. Mr. Balasubramaniam, referred also-to 5 Halsbury (Simonds) 3rd Edn., pages 253-255, and 6 Halsbury (Hailsham) 4th Edn., pages 58-59, where-members' clubs are divided into unincorporated members' club and incorporated members' clubs. In respect of an unincorporated members club, it is stated:
It is not recognised as having any legal existence apart from the members of which it is composed.
Under the heading of 'Incorporated members' clubs', the following is stated:
A members' club incorporated under the Companies Act, 1948, or earlier Companies Act, enjoys the advantages incidental to incorporation as a company, especially that of suing and beings sued as a legal entity.
He also referred to Roscoe Pound's Jurisprudence, Vol. IV, at page 250, where Jhering's (Cracket) Theory in. respect of incorporated association is discussed. It is stated.
In this theory of incorporated associations (happily called by Maitland the Cracket theory) the members of an incorporated association are considered the bearers of rights and as bound by the duties which for convenience are referred to as the rights and duties of the corporation itself.
10. We can therefore proceed on the basis that the incorporation of the club does not matter, and that, for the purpose of Section 26 of the Act, the building is occupied wholly by the members of the club. The more important question is whether the occupation is for 'residential purposes only. In our opinion, the occupation of the club by the members cannot at all be said to be for residential purposes. The occupation is only for recreational purposes and for purposes of social intercourse. The term 'residential purposes' is not defined in the Act, and its meaning is what an ordinary layman would understand by it. The common man, in cur opinion, will not say that the members occupy the club for residential purposes. He would only say that the members resort to the club for recreational purposes and for purposes of social intercourse etc. He would further say that each of the members has his own residence and comes to the club only for other purposes, like recreation, meeting others etc. We have no hesitation in adopting this common man's interpretation Without meaning any offence or disrespect to the learned Counsel for the petitioner, we would venture to remark that the Legislature must have thought, when it used the term 'residential purposes only' that there could be no doubt about the matter, and the Legislature could not have imagined that an argument could be put forth at all in respect of a members' club like the Cosmopolitan Club, Madras that its building is occupied by the members for residential purposes or for residential purposes only. The mofussil quarters are, no doubt, occupied as temporary residence, by the mofussil members, but such temporary residence, is only part of the amenities extended to the mofussil members as members of the club, and we doubt whether that would qualify as 'residential purposes only' under Section 26 of the Act. In any case, that is only on a small portion of the buildings in the club and the main buildings are occupied for purposes of recreation, social intercourse, taking refreshments etc., which are not at all residential and therefore, it cannot be said that the buildings, taken together, are occupied wholly for residential purposes only.
11. In our view, the position is very clear and simple and it is unnecessary even to refer to the dictionaries. We may, however, refer to some of the standard dictionaries. The Concise Oxford dictionary, which everybody uses, has this to say:
Reside--(of persons) have one's home, dwell permanently.
Residence : 1. residing, dwell; 2. place where one resides, a bode of.
Residential : suitable for or occupied by private houses; connected with residence.
The Shorter Oxford English dictionary says:
Reside : 1. To settle; to take up one's abode or station.
2. To dwell permanently or for a considerable time to have one's settled or usual abode, to live in or at a particular place.
Residence : 1. To have one's residence; . to have one's usual dwelling place or abode; to reside; to take up one's residence, to establish oneself; to settle;
the circumstances or fact of having one's permanent or usual abode in or at a certain place; the fact of residing or being resident;
2. the fact of living or staying regularly at or in some place for the discharge of special duties;
3. the place where a person resides ; his dwelling place; the abode of a person;
Residential.--serving or used as a residence; adapted or suitable for the residence of those belonging to the better class characterised by houses of a superior kind; connected with, pertaining or relating to residence.
Words and Phrases, Permanent Edition by West Publishing Company, under the heading 'residential' says:
A house a portion of which was used in the practice of dentistry, was not being used exclusively for 'residential' purposes.
'Residential' means used, serving, or designed as a residence or for occupation by residents or residences, as residential trade, occupied by residents, as a residential quarter; or, pertaining to, or connected with, residents or residences residential trade qualifications, or, zones : or pertaining to a resident.
Residential building--A residential building, within restrictive covenant, is a building which is used for residential purposes, that is, one in which people reside or dwell or in which they make their homes, as distinguished from one which is used for commercial or business purposes.
Residential purposes : Where deed of housing authority contained valid covenant restricting use of realty sold to 'residential purposes', and purchaser purchased the lots with full knowledge of the covenant, use of the reality for church purposes would violate the restrictive covenant.
Stroud's Judicial Dictionary. 4th Edn., at page 2358, says:
'Residence' signifies a man's abode or continuance in a place.....I take that that word where there is nothing to show that, it is used in a more extensive sense, denotes the place where an individual eats, drinks and sleeps, or where his family or his servants, eat, drink, and sleep.. A man's residence is where he habitually sleeps.
Webster's Third New International dictionary says:
Reside : 1. to settle oneself or a thing in a place; be stationed:
2. to dwell permanently or continuously; have a settled abode for a time; have one's residence or domicile;
3. to have an abiding place.
Residential : 1. used, serving or designed as a residence or for occupation by-residents:
2. adapted or restricted to or occupied by residences:
3. relating to or connected with residence or residences.
Mr. Balasubramaniam has contended that even an individual residing in a particular house with his family may have a billiards table or tennis court in his house, or appurtenant to it and it will not be said that he is not residing in his house merely because of the existence of the billiards table or tennis court. Proceeding, he submits that, if, instead of having a billiards table and tennis court in his house, he goes to the Cosmopolitan club for playing billiards or tennis, it can be said that he resorts to the club for residential purposes. In our opinion, this argument is untenable. The vast majority of people do not have billiards tables or tennis courts in their houses and hence the existence of a billiards table or tennis court is not usually considered as an incident to residence. Indeed, it is precisely because an ordinary man cannot have a billiard table or tennis court in his house, he goes to the club to play billiards or tennis, and that purpose served by the club cannot in any sense be termed a residential purpose.
12. Mr. Balasubramaniam referred to Lyene v. Commissioners of Inland Revenue 13 Tax Cases 486, and the observations of Lord Hanworth, M.R. (at page 497) The question in that case was whether the appellant therein was a resident or ordinarily resident in the United Kingdom for the purposes of some provision of the Income-tax Act. The facts were briefly these. He was a British subject and until March, 1918, he was a house-holder in London. He then surrendered the lease of his house and sold his furniture, and from March, 1918 until January, 1925, he did not occupy any fixed place of residence,. but lived in hotels, 'whether in this country or abroad'. He was admittedly resident and ordinarily resident in the United Kingdom until December, 1919. He then went abroad and in each subsequent year he had spent between 7 and 8 months abroad and between 4 and 5 months in the United Kingdom. The Commissioners were satisfied, upon the evidence, that when he left the United Kingdom in December, 1919, he had formed the intention, which he had consistently carried out ever since, of living abroad for the greater part of the year, but of returning to that country each year and remaining there for considerable periods but not for a period equal on the whole to six months in any year. It was held that he was resident and ordinarily resident in the United Kingdom. This decision was upheld by the Court of appeal. It was in that connection that, after dealing with the case-law, Lord Han worth, M.R., observed that it was not possible to frame a concrete definition of the word 'residence'. He proceeds:
Residence must depend on questions of degree and of fact; and I think the Commissioners were right in saying that the subject's claim to exemption must be determined on the balance of the facts in each case.
I suggest as a characteristic factor for consideration, even if it does not fulfil the nature of a test, to ascertain if the suggested alternative place of residence is one which the subject seeks willingly and repeatedly in order to obtain rest or refreshment or recreation suitable to his choice; where for a time he is embedded in the enjoyment of what he desired to attain, and found in the abode of his option.
Another factor may be found--and an important one--if he returns to and seeks his own fatherland in order to enjoy a sojourn in proximity to his relations and friends.
The passage on which Mr. Balasubramaniam relies is this:.to ascertain if the suggested alternative place of residence is one which the subject seeks willingly and repeatedly in order to obtain rest or refreshment or recreation suitable to his choice.
Using this language, Mr. Balasubramaniam submits that Cosmopolitan Club is one which a member 'seeks willingly and repeatedly in order to obtain rest or refreshment or recreation suitable to his choice', and argues that, according to the suggestion of Lord Hanworth, the Cosmopolitan Club can be said to be occupied by the members for residential purposes. In our opinion, this submission is far-fetched. The observations must be understood in the background of the facts of that case. No question arose there similar to the present. There was no doubt that whatever place the assessee was occupying, it was for residential purposes and the only question for decision there was whether he was resident and ordinarily resident in the United Kingdom. The question here is, however entirely different, namely, whether the occupation of the Cosmopolitan Club by its members is for residential purposes at all and for residential purposes only.
13. Mr. Balasubramaniam laid great emphasis on the fact that the club made no profit and distributed no dividends to the members. But this will only mean that the occupation of the building is not for commercial purposes. But it does not follow therefrom that, the occupation is for residential purposes only. The assumption in the submission consists in thinking that the only alternative to commercial purpose is residential purpose. Actually there is at least one other alternative, like recreational purpose and purposes of social intercourse. To put it in another way, if the Legislature was anxious to give the concession to any person or set of persons using a building otherwise than for commercial purposes, it would have been the easiest thing to enact a provision to that effect;, but the Legislature has limited the concession by using the words 'for residential purposes only'. When the words are clear, it is really unnecessary to go into the reason why the Legislature used the words 'for residential purposes only'. But, taking the different juristic entities mentioned in Section 8 of the Act, it seems to us fairly clear that, where an individual, major or minor, or a family occupies a building for residential purposes only, the concession should be given-Perhaps the concession will also be admissible even where some persons form an, association and buy a building for residential purposes only- But beyond that the Legislature does not seem to have been prepared to go. However, it seems to us that this is a fit case where the Government may consider the question of granting concession under the provisions of Section 27 of the Act.
14. The writ petitions are accordingly dismissed, but without costs.