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Royal Calcutta Turf Club Vs. Wealth-tax Officer, b Ward Viii and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberCivil Rule No. 1585(W) of 1977
Judge
Reported in1983(2)CHN53,(1983)2CompLJ345(Cal),(1984)43CTR(Cal)195,[1984]148ITR790(Cal)
ActsWealth Tax Act, 1957 - Sections 2, 3 and 4(1); ;Wealth Tax Rules, 1957 - Rule 2; ;Income Tax Act, 1961 - Section 2(31)
AppellantRoyal Calcutta Turf Club
RespondentWealth-tax Officer, "b" Ward Viii and ors.
Appellant AdvocateDebi Prasad Pal and ;Monisa Sil, Advs.
Respondent AdvocateAjit Kumar Sengupta and ;Mihir Lal Bhattacharjee, Advs.
Cases ReferredV. Venugopala Ravi Varma Rajah v. Union of India
Excerpt:
- m.n. roy, j.1. 'net wealth' under the wealth-tax act, 1957 (hereinafter referred to as 'the said act'), means the amount by which the aggregate value computed in accordance with the provisions of the said act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under the said act, is in excess of the aggregatevalue of all the debts owed by the assessee on the valuation date otherthan-(i) debts which under section 6 are not to be taken into account; (ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this act; and (iii) the amount of the tax, penalty or interest payable in consequence of any.....
Judgment:

M.N. Roy, J.

1. 'Net wealth' under the Wealth-tax Act, 1957 (hereinafter referred to as 'the said Act'), means the amount by which the aggregate value computed in accordance with the provisions of the said Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under the said Act, is in excess of the aggregatevalue of all the debts owed by the assessee on the valuation date otherthan-

(i) debts which under Section 6 are not to be taken into account;

(ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act; and

(iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of the Act, or any law relating to taxation of income or profits, or the E.D. Act, 1953, the Expenditure-tax Act, 1957, or the G.T. Act, 1958,

(a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him, or

(b) which, although not claimed by the assessee as not being payable by him, is nevertheless outstanding for a period of more than 12 months on the valuation date; and the said Act has defined ' assessee ' as a person by whom wealth-tax or any other sum of money is payable under the said Act, and includes, (i) every person in respect of whom any proceeding, under the said Act, has been taken for the determination of wealth-tax payable by him or by any other person or the amount of refund due to him or such other person ; (ii) every person who is deemed to be an assessee under the said Act; and (iii) every person who is deemed to be an assessee in default under the said Act.

' Assets ', under the said Act, includes property of every description, movable or immovable, but does not include-

(1) in relation to the assessment year commencing on the 1st day of April, 1969, or any earlier assessment year:

(i) agricultural land and growing crops, grass or standing trees on such land ; and (ii) any building owned or occupied by a cultivator, or the receiver of rent or revenue out of, agricultural land; provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of rent or revenue by reason of his connection with the land requires as a dwelling house or a store-house or an out-house ; (iii) animals ; (iv) a right to any annuity in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant ; and (v) any interest in property where the interest is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee ;

(2) In relation to the assessment year commencing on the 1st day of April, 1970, or any subsequent assessment year, (i) animals ; (ii) a right to any annuity in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant; (iii) any interest in property where the interest is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee:

2. Provided that in relation to the assessment year commencing on the 1st day of April, 1981, or any subsequent assessment year this sub-clause shall have effect subject to the modification that for item (1) thereof, the following item shall be substituted, namely:--

(i)(a) agricultural land other than land comprised in any tea, coffee, rubber or cardamom plantation ;

(b) any building owned or occupied by a cultivator of, or receiver of rent or revenue out of, agricultural land other than land comprised in any tea, coffee, rubber or cardamom plantation :

3. Provided that the building is on or in the immediate vicinity of the land and is a building which the cultivator or the receiver of the rent or revenue by reason of his connection with the land requires as a dwelling house or store house or an out-house ;

(c) animals.

4. Provided further that in relation to Jammu and Kashmir, this sub-clause shall have effect subject to the modification that for the assets specified in item (1) of this sub-clause, the assets specified in items (i) to (iii) of Sub-clause (1) shall be substituted and the other provisions of the said Act shall be construed accordingly.

5. Section 3 of the said Act is the charging section and lays down that subject to the other provisions contained in the said Act, there shall be charged for every assessment year commencing on and from the 1st day of April, 1957, a tax which is referred to as wealth-tax, in respect of the net wealth on the corresponding valuation date of every individual, HUF and company at the rate or rates specified in Schedule I.

6. ' Company ', under the said Act, means a company formed and registered under the Companies Act, 1956, and includes: (i) a company formed and registered under any law relating to companies formerly in force in any part of India and also includes those companies or corporations as mentioned in Clauses (ii) and (iii) of the said Section 2(h).

7. Section 4 of the said Act makes provisions for inclusion of certain assets in the net wealth. Clause (b) of Section 4(1) lays down that where the assesseeis a partner in a firm or a member of an association of persons not being a co-operative housing society, the value of his interest in the firm or association determined in the prescribed manner. Section 14 of the said Act postulates the filing of a return of wealth and Sub-section (2) thereunder specifies that if the WTO is of the opinion that any person is assessable under the said Act, whether in respect of his net wealth or the net wealth of any other person, then notwithstanding anything contained in Sub-section (1), he may serve a notice upon such person requiring him to furnish within such period, not being less than 30 days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner, setting forth along with such other particulars as may be required by the notice, the net wealth of such person as on the valuation date mentioned in the notice.

8. This rule, initially without any interim order, was obtained on March 21, 1977, against notices dated January 28, 1977, issued under Section 17 of the said Act, for the assessment years 1968-69 to 1975-76 and the notice dated January 28,1977, issued under Section 14(2) of the said Act, for the assessment year 1976-77 by the WTO, 'B' Ward-VIII, resp. No. 1, claiming those notices to be illegal, invalid, inoperative, void and without jurisdiction. On May 12, 1977, after hearing the learned advocates appearing, it was directed that an interim order be issued to the effect that the respondents would be at liberty to complete the assessment proceeding, but they should not communicate or enforce the final order against the petitioner till the disposal of the rule. The petitioner in this case, M/s. Royal Calcutta Turf Club (hereinafter referred to as the said club'), which amongst others has been stated to be an association established to hold horse races. It has also been stated that the said club was all throughout treated for the purpose of income-tax as an 'association of persons' and the same consists of members, who are admitted to the membership of the said club according to their rules. A copy of the rules with notice to the other side was produced at the time of the hearing and from the same, it appeared that there are two classes of members of the said club, viz., club members and stand members and, furthermore, subject to any limit that may be fixed by the resolution at the general meeting, the number of said members is unlimited. The stewards may, at any time, limit the number of stand members. Those stand members, on payment of admission fees, are entitled to all the privileges on race days which are available to club members in the club stands and, except in balloting for boxes, club members shall have preference over all stand members as regards the lower tiers and preference over stand members elected after March 31, 1975, as regards all boxes in the upper tier of the club. But they would not be entitled to any other rights or privileges of club members. The rules as produced also showed how admission of members, viz., club members and stand members, is to be effected. The said rule further provided for entrance fees, subscription and also cessation of membership. The said rule further makes provisions for management of the said club in Rule 31. It has been categorically stated that the affairs of the said club should be managed by five club members, who shall be called stewards. The stewards shall be elected in the manner following the first annual general meeting, and shall hold office from the 1st April next following the election till 31st March in the following year. The manner of the election of the stewards has also been indicated. That apart, it has been indicated in Rule 33 that stewards shall have control over the funds and of all the property of the club; they shall have the entire management of, and control over, the Calcutta Race Course, stands and enclosures, and they may make such regulation in respect thereof as they think fit apart from having power to, (a) appoint a secretary in such establishment as they consider necessary for the proper management of the club; (b) decide any matter which they are empowered to decide under the rules of racing, and their decision shall be final ; (c) (order) any person off the Calcutta Race Course or any premises on which the club have control, and to take any legal measure necessary to enforce their orders ; and (d) extend to gentlemen visiting Calcutta the privilege of using the club house, club stand and enclosures. Those stewards, under Rule 35 of the Rules, are required to keep a proper account of the income and disbursement of the club from all sources, a minute book of their proceedings, a record of all the referred and disputed cases, which they decide and such other books as may be necessary, to show the position of the club with reference to its property or the number of its members. Apart from the above, the stewards have also the right, duty and obligation to call two general meetings annually, as soon as possible after the 31st January and 1st April, respectively and they may further, on the requisition of not less than seven club members, call a general meeting for special business, provided that a statement of the proposition, which it is intended to bring forward, accompanies the requisition, after giving due notice.

9. It has been stated by the said club that the respondent, WTO, issued several notices as impeached, under Section 17 of the said Act, in respect of the assessment years 1968-69 to 1975-76, whereby he called upon them to file returns of the net wealth in respect of the said several assessment years as the said officer was alleged to have reasons to believe that the net wealth of the said club chargeable to tax for the relevant assessment years had escaped assessment within the meaning of Section 17 of the said Act. Section 17 of the said Act lays down that if the WTO-

(a) has reason to believe that by reason of the omission or failure on the part of any person to make a return under Section 14 of his net wealth or the net wealth of any other person in respect of which he is assessable under this Act, for any assessment year or to disclose fully and truly all material facts necessary for assessment of his net wealth or the net wealth of such other person for that year, the net wealth chargeable to tax has escaped assessment for that year, whether by reason of under-assessment or assessment at too low a rate or otherwise; or

(b) has, in consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is referred to in Clause (a), that the net wealth chargeable to tax has escaped assessment for any year, whether by reason of under-assessment or assessment at too low a rate or otherwise ;

he may, in cases falling under Clause (a) at any time within eight years and in cases falling under Clause (b) at any time within four years of the end of that assessment year, serve on such person a notice containing all or any of the requirements which may be included in a notice under sub- Section (2) of Section 14, and may proceed to assess or reassess such net wealth, and the provisions of this Act shall, so far as may be, apply as if the notice had issued under that sub-section.

(2) Nothing contained in this section limiting the time within which any proceeding for assessment or reassessment may be commenced shall apply to an assessment or reassessment to be made on such person in consequence of or to give effect to any finding or direction contained in an order under Section 23, 24, 25, 27 or 29 :

Provided that the provisions of this sub-section shall not apply in any case where any such assessment or reassessment relates to an assessment year in respect of which an assessment or reassessment could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any provision limiting the time within which any action for assessment or reassessment may be taken,

and by those notices the said club was also informed that respondent No. 1 has proposed to assess the net wealth, which had escaped assessment. The notices as impeached have also been addressed to M/s. Royal Calcutta Turf Club.

10. Other notice, as impeached, was in respect of the assessment year 1976-77. The same was dated January 24, 1977, and was issued under Section 14(2) of the said Act, which is to the following effect:

' 14. (2) If the Wealth-tax Officer is of the opinion that any person is assessable under this Act, whether in respect of his net wealth or the net wealth of any other person, then, notwithstanding anything contained in Sub-section (1), he may serve a notice upon such person requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be required by the notice), the net wealth of such person as on the valuation date mentioned in the notice.'

11. By that notice the said club was called upon to prepare a true and correct statement of assets and debts as on the relevant valuation dates and the same was issued on the basis that the said club was liable to be assessed under the said Act.

12. It was pointed out on behalf of the said club that since in the income-tax assessment they have been assessed in the status of ' association of persons ', they have no liability to wealth-tax in view of the fact that Section 3 of the said Act imposes a charge of wealth-tax, upon an individual, an HUF and company, but not on an ' association of persons '. It was also pointed out that the notices as served were illegal, invalid and inoperative and, in issuing them, respondent No. 1 had acted in excess of his jurisdiction, power and competence. However, it has been stated that without prejudice to their rights and contentions, the said club, through their letter of March 2, 1977, filed the returns under the said Act, for the relevant assessment years, under protest.

13. It was the specific claim and contention of the said club, all throughout and before this court now, that an ' association of persons ' is not an entity chargeable under the said Act, and Section 3 imposes a charge upon specified classes (of assessees) and the said club not being included in any one of the classes, had no liability in the instant case. It was claimed that under the I.T. Act, 1961, a charge is imposed upon the income of every person which includes, an individual, an HUF, a company, a firm, an 'association of persons ' or a body of individuals whether incorporated or not, a local authority and every artificial juridical person not Jailing within any of the classes as mentioned above which was not the case under the said Act, which imposes a charge only upon the net wealth of an individual, an HUF and a company. As such, it was also and specifically or categorically claimed, that an ' association of persons ' would not be an entity, liable to be charged under the said Act. It was further claimed that it would also be evident that if an individual is a member of an ' association of persons', under Section 4(1)(b) of the said Act, the value of his share in the association is to be included in the net wealth of the said individual and such value of the share of an individual as mentioned above, to be determined in the prescribed manner, which is prescribed under Rule 2 of the W.T. Rules, 1957, as quoted hereunder :

' (1) The value of the interest of a person in a firm of which he is a partner or in an association of persons of which he is a member, shall be determined in the manner provided herein. The net wealth of the firm or the association on the valuation date shall first be determined. That portion of the net wealth of the firm or association as is equal to the amount of its capital shall be allocated among the partners or members in the proportion in which capital has been contributed by them. The residue of the net wealth of the firm or association shall be allocated among the partners or members in accordance with the agreement of partnership or association for the distribution of assets in the event of dissolution of the firm or association, or, in the absence of such agreement, in the proportion in which the partners or members are entitled to share profits. The sum total of the amounts so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the firm or association.

(2) Where the net wealth of a firm or association computed in accordance with Sub-rule (1) includes the value of any assets located outside India, the value of the interest of any partner or member in the assets located in India shall be determined having regard to the proportion which the value of the assets located in India diminished by the debts relating to those assets bears to the net wealth of the firm or association.

(3) Where the net wealth of a firm or association computed in accordance with Sub-rule (1) includes the value of any assets referred to in Section 5(2) of the Act, the value of the interest of a partner or member shall be deemed to include the value of his proportionate share in the said assets, and the provisions of Section 5(2) of the Act shall be applied to him accordingly. '

14. It was further claimed that under Section 4(2) of the said Act, in making any rules as to the valuation of the interest of a member of an ' association of persons', the Board shall have regard to the law for the time being in force, relating to the manner in which accounts are to be settled between the members of such association on dissolution. In view of the above, it was finally claimed that no tax could be charged upon an 'association of persons' in respect of its net wealth under the provisions of the said Act, and that too when such 'association of persons' is not an entity which is chargeable to net wealth under the provisions of the said Act. It was stated that it is only the individual, who is the member of such an association, which would be chargeable, if at all, under the provisions of the said Act.

15. Such being the position, it was claimed on behalf of the said club that the respondent, WTO, had no jurisdiction, competence or authority to initiate the proceedings under Section 17 of the said Act against the said club which was nothing but an 'association of persons' and was not chargeable to wealth-tax under the said Act. It was also claimed that the said respondent No. 1 could have no material on which he could have reason to believe that the said club was chargeable to tax under the provisions of the said Act, or that their net wealth chargeable under the said Act, escaped assessment. The said club also claimed that there could be no information whatsoever in the possession of the respondent, WTO, in consequence whereof, he could entertain any belief that any wealth chargeable to tax in the hands of the said club had escaped assessment for any of the assessment years. Such being the position, the said club further contended that the respondent, WTO, was purporting to assume jurisdiction under Section 17 of the said Act for assessing the net wealth of the club for the relevant years as an 'association of persons' and such an action, on his part, was patently illegal, void and in excess of jurisdiction, competence and power. In fact, it was claimed that there was neither any, reason to believe nor any material to form an opinion in support of the claim that the net wealth chargeable to tax in the hands of the said club had escaped assessment and the enquiry as sought to be initiated in the instant case was a mere pretence or a cloak for a roving and fishing investigation, not authorised in law.

16. Shri Kanai Lal Dey, the WTO, being respondent No. 2 filed the affidavit-in-opposition, dated March 25, 1980, on behalf of respondents Nos. 1 to 3. He has admitted that the said club has been assessed to income-tax for the assessment years 1968-69 to 1976-77, in the status of an 'association of persons' and has stated further that notices under Section 17 of the said Act, as impeached, were duly served on the said club in respect of the assessment years in question and he had reasons to believe that the net wealth of the said club chargeable to tax for the relevant assessment years had escaped assessment within the meaning of Section 17 of the said Act. It was his further case that the other notice under Section 14(2) of the said Act, for the assessment year 1976-77, was also issued duly, bona fide and appropriately.

17. The deponent has stated that under the said Act, wealth-tax is imposable on an assessee in the status, inter alia, of 'individual'. According to him, although the expression 'association of persons' has not been specifically mentioned in the charging section or denned in the said Act, the expression 'individual' would be wide enough to include an 'association of persons' and such expression would also cover both natural and juridical persons as well as ' association of persons'. In short, the deponent has claimed that the notices under Sections 17 and 14(2) of the said Act as impeached, were issued lawfully, validly, bona fide, and in proper use of jurisdiction, authority and competence. It has been denied that the deponent had no materials on which, he could have reasons to believe that the said club was chargeable to wealth-tax under the provisions of the said Act, or that their net wealth under the said Act, had escaped assessment. In fact, it was claimed that there were due and necessary information in the possession of the deponent, in consequence whereof, he could entertain the necessary belief that the net wealth chargeable to tax of the said club had escaped assessment for the assessment years in question. In any event, the deponent has denied that he had assumed jurisdiction under Section 17 of the said Act, for assessing the net wealth of the said club for the relevant years as an 'association of persons' and that such action on his part was illegal, invalid and without authority and jurisdiction, as claimed. He has further stated that the assumption of jurisdiction by him was not a mere pretence or a cloak for a roving and fishing enquiry, not authorised under the law. It was the case of the said deponent that as per the balance-sheet of the said club, the net assets far exceeded the minimum taxable limit prescribed under the said Act, for the years involved and, as such, it was not correct to say or even suggest that there was no material for initiation of the proceedings, as made. It has further been stated by the said deponent that it would be obvious from the balance-sheet of the said club that the net wealth chargeable to wealth-tax had escaped assessment within the meaning of Section 17 of the said Act, and so the deponent has claimed to have sufficient materials in his possession, on the basis whereof he could have reason to believe that net wealth of the said club had escaped assessment and, as such, the proceedings in the instant case, were said to be initiated duly, on issue and service of notices under Section 17 of the said Act.

18. The deponent has denied that the notices and proceedings as issued and initiated were illegal, invalid and inoperative, apart from denying that conditions precedent for the assumption of jurisdiction, in the instant case, were not satisfied. He has specifically stated that in view of the reasons as disclosed in the affidavit, it would be clear that the deponent had ample materials in his possession for initiation of the concerned proceedings, by the issue of notices and that the conditions precedent for the assumption of jurisdiction by the issue and service of the notices were duly satisfied. In any event, the deponent has stated that the issue of those notices should not be construed as threats. It was also the case of the said deponent that there was or has been no contravention of the provisions of the said Act, by the issue of the concerned notices and whatever steps he has taken, were due, legal, bona fide and with jurisdiction apart from being proper. He has categorically claimed that since the notices issued by him were legal, valid and justified in law, the said club was bound and obliged to comply with the requirements of those notices, for completing the assessment under the said Act. It was also stated by the deponent that no ground has been made out by the said club to make any interference by this court and that too, without taking due exceptions to the proceedings. In that view of the matter, the application as filed at this stage, has been claimed to be not maintainable, misconceived and premature.

19. The reply to the above affidavit-in-opposition was, dated April 21, 1980, and the same was filed through Major Pol Raj Kumar Jakob, the secretary of the said club. Such reply was an usual one, denying the material allegations and repeating and reiterating the statements as made earlier in the petition. It has further been stated that the fact of assets appearing in the balance-sheet of the said club, exceeding the maximum non-taxable limit prescribed under the said Act, would have no relevance whatsoever, in view of the specific contentions raised by the said club, that they, being an 'association of persons', would not be an assessable entity at all under the said Act.

20. Dr. Pal appearing in support of the rule, after placing the different definitions under the said Act, as mentioned hereinbefore, claimed that net wealth, which is defined in Section 2(m) of the said Act, is charged on such wealth of the assessee and the same means the amount by which the aggregate value of all the assets, wherever located, belonging to the asses-see on the valuation date, exceeds the aggregate value of all its debts and certain assets are required by the said Act, to be included in the assets of the assessee even though they do not belong to him on the valuation date in terms of Section 4 of the said Act. It was claimed by him that Chap. II of the said Act, which contains Section 3, which again is the charging section, and on the basis of the terms of that section it follows that the charge of wealth-tax is levied in respect of the 'net wealth' of the assessee if it exceeded on the valuation date (the taxable limit) and the assessee, whose net wealth would be so charged are, (i) every individual, (ii) every HUF, and (iii) every company. From and after the assessment year 1960-61, a moratorium has been imposed on the taxation of companies. It was also claimed that in respect of the net wealth of an individual, undivided family and company, wealth-tax is chargeable only in respect of the above-mentioned assessable entities and the Finance Act, 1972, has included with effect from April 1, 1972, the interest in converted property into HUF under Section 4(1)(a) and an individual flat owner in a co-operative housing society under Section 4(7) in determining the net wealth. It was also pointed out by him that levy of wealth-tax on companies has been suspended from April 1,1960, in terms of Section 13 of the Finance Act, 1960, and, therefore, companies are to be regarded as unit of assessment only for three assessment years 1957-58, 1958-59 and 1959-60. Such charge of wealth-tax on HUF has been held to be constitutional as entry 86, List I of the Seventh Schedule of the Constitution is comprehensive enough to include a body of individuals known as HUF. It has been observed in the case of Banarsi Dass v. WTO : [1965]56ITR224(SC) , that Section 3 of the said Act, in so far as it levied a charge of wealth-tax in respect of the net wealth of the HUF is intra vires as Parliament was competent to legislate on that subject. It was also claimed by Dr. Pal that as an individual being a member 'of a body of persons' was the owner of assets of single individual, there would be no difficulty in perceiving his liability to wealth-tax in respect of that assessment and such liability is directly enacted in Section 3 of the said Act. But he has stated that difficulty would arise when the assessment in question would belong to a group of individuals other than those mentioned in Section 3, viz., (i) a firm, (ii) an association of persons, and (iii) a body of individuals. In respect of members belonging to a firm and an association of persons, he stated that Section 4(1)(b) levies a charge of wealth-tax by including in the net wealth of each member, the value of his interest in the firm or association and the Act does not similarly provide for a charge in respect of the assets held by a member in a ' body of individuals '. He, of course, stated that Section 3 of the said Act does not restrict the description of the individual as assessable to tax. In the case of Jogendra Nath Naskar v. CIT , it has been observed that there is no reason why the word 'individual' should be restricted to human beings alone and not to juristic entities. In that case, it was observed that under the Indian I.T. Act of 1922, a Hindu deity would come within the word 'individual' and can be treated as a unit of assessment under Section 3 of that Act.

21. It was the specific submission of Dr. Pal, that the trustees of a club, here, in this case, the stewards of the said club, are to be regarded as a body of individuals, and, therefore, if at all, they would be assessable as 'individual'. In any event, he claimed that since the notices, in the instant case, were served not on the stewards as individuals, but on the said club considering the same to be an assessee, the notices as impeached in the proceedings as sought to be initiated thereon were improper, without jurisdiction, invalid and void as the said club, which is admittedly an association of persons, cannot be treated as an assessee under the said Act, in view of the definitions as mentioned hereinbefore and so also the provisions as contained in the charging section.

22. In support of his submissions, Dr. Pal first referred to the determination of the Gujarat High Court in the case of Orient Club v. WTO : [1980]123ITR395(Guj) . In that case, it has been observed that under Rule 2(1) of the W.T. Rules, 1957, read with Section 4(1)(b), the Legislature has given a clear indication that an association of persons is not an assessable entity covered by the word 'individual' in Section 3 of the W.T. Act, 1957. Just as Sections 5 and 21 give a positive indication that the word 'individual' covers trustees of a trust, Section 2(h)(iii) and Section 4(1)(b) read with Rule 2 of the W.T. Rules, give a negative indication that the word 'individual' in Section 3 does not cover a 'body of individuals' or ' association of persons'. Such findings and observations were made on the basis of the contentions of the petitioner, in that case, that under, the said Act, the only assessable entities are individual, HUF and company, while under the I.T. Act, by way of contrast, every person is an assessable entity; any person includes, according to the definition in Section 2(31) of the I.T. Act, an individual, an HUF, a company, a firm and an association of persons or a body of individuals, whether incorporated or not, local authority and every artificial juridical person, not falling within any of the preceding sub-clauses. In fact, on the basis of the above, the petitioner in that case, contended that under the said Act, there are only a limited number of assessable entities as against a larger number of such entities under the I.T. Act. It was also contended in that case that an association of persons or a body of individuals, whether incorporated or not, is not specifically made an assessable entity, but a company has been made as such, under the said Act.

23. Then, a reference was made by Dr. Pal to the observations of the Bombay High Court in the case of Orient Club v. CWT : [1982]136ITR697(Bom) . In that case, the points at issue as in this case were specifically in issue and it has been observed that reading the provisions of Sections 3 and 4 and the definition of 'company ' in Section 2(h) of the Act, the position which emerges is that while a firm or association of persons is not treated as a taxable unit, and the member of an association of persons or a partner in the case of a partnership firm is individually taxable as a taxable unit, some institutions, associations or bodies which may be included within the definition of ' company ' by virtue of a general or special order to be made by the CBDT, could be treated as taxable units. An unincorporated members' club is a society of persons each of whom contributes to the funds out of which the expenses of conducting the society are paid. The contribution is generally made by means of entrance fees or subscriptions or both. The society is not a partnership because the members are not associated with a view to share profits. It is not recognised as having any legal existence apart from the members of which it is composed. Every club is governed by rules which generally specify the purposes for which it is instituted and make provision as to the admission of members, payment of entrance fees and subscriptions, resignation and expulsion of members, the management of the affairs of the club, ordinary and extraordinary general meetings of members, alteration of the rules and making new rules, etc. The rules of the club form part of the contract between members in the case of a members' club and the rights and duties of the members as between themselves and the internal arrangements for carrying it on depend upon the rules. Members are entitled to enjoy the use of the club premises, if any, and other privileges of the society in accordance with the rules, so long as they duly pay the subscriptions and continue to be members. In an unincorporated members' club, there are usually trustees appointed in pursuance of the provisions in the rules in whom the property and assets of the club are vested in trust for the members for the time being and who are given power to invest the funds of the club, sometimes at their own discretion and sometimes according to the directions of the committee. In a non-proprietary club, the members for the time being are jointly entitled to all the property and funds and it is only on dissolution that the individual interest of the members becomes capable of realisation. On the dissolution of a members' club, the property and assets are sold and realised and after the discharge of the debts and liabilities of the club, the surplus is divisible equally amongst the members for the time being other than the honorary members subject to any provisions in the rules to the contrary. Therefore, a members' club is a voluntary association resulting from persons coming together in accordance with the rules and bye-laws of the club for enjoying certain facilities or for certain purposes. In that case it was further observed that the corporate identity of a members' club or an unincorporated members' club is not to be confused with corporate status. A club is not a juristic entity, but is merely an association of persons who come together for social intercourse and recreation but not for gain. Apart from holding that though in the case of an association of persons as a taxable entity under the I.T. Act, the association must be one the object of which is to produce income, profits or gains, it is immaterial for the purposes of the W.T. Act as to whether such an association was formed with a view to earn wealth, but since the tax under the W.T. Act is charged on the net wealth, an association of persons relevant for the purpose of the W.T. Act must be an association of persons which owns wealth though such an association may not have expressly come into being with the object of owning wealth. Having regard to the manner in which an unincorporated members' club comes into being and the manner in which the membership of the club is acquired, such a club is an association of persons. The members of such a club come to own wealth as an incidence of membership when they join the club though the object of joining the club is not the acquisition of wealth, nor is their activity directed at acquisition of wealth. It is an incidence of membership that if and when the club is dissolved and if they continue to be members on the date of dissolution, the property of the club will be distributed amongst the members for the time being. It has also been observed in that case that 'body of individuals' is a recognised concept in taxation and is of very wide amplitude and the concept is entirely different from the concept of an 'association of persons' which is of a restricted nature. The history of taxing statutes in India highlights the difference between a 'body of individuals' and an 'association of persons' because if there was no difference between these two concepts, redundancy would have to be attributed to the Legislature when it enacts a taxing statute specifying a 'body of individuals' and an ' association of persons' as separate taxable entities. The definition of a ' person ' in the I.T. Act, 1961, clearly brings out this difference and the difference between the two concepts, viz., an 'association of persons' and a 'body of individuals' is, therefore, well recognised for the purpose of taxation. Therefore, when Section 4 of the W.T. Act refers to an 'association of persons' it cannot be equated with or treated as a 'body of individuals'. An individual may also mean a 'body of individuals' but merely on that account to hold that wherever, in a statute, 'individual' is mentioned, it must be construed as including a 'body of individuals', would not be justified. The meaning of the word 'individual' in Section 4 would have to be ascertained after considering the scheme of the Act, the other provisions of the Act and the context in which that word has been used, apart from holding further that merely because co-trustees have been treated as a single unit, it does not necessarily follow that an association of persons formed by the members of a club must also be treated as an 'individual'. Therefore, it has been concluded that a members' club being an association of persons is not an individual and, hence, is not an assessable entity for the purpose of the W.T. Act and is not chargeable to wealth-tax under the Act, and the principles governing the construction and scope of a legislative entry to determine the width of the legislative field would be wholly different from that governing the construction of a word occurring in a statute. Where a particular word has been used in a statute, while it may be one of the principles of construction that the word must be given its natural grammatical meaning, it is also equally well established that whether a particular meaning can be given to a word or not has to be ascertained under the scheme of the Act and in the context and the purpose for which the said word has been used. It is a well-known canon of construction of taxing statutes that unless a subject falls well within the four corners of the statute, the subject cannot be taxed.

24. After this, Dr. Pal also made a reference to another determination of the Bombay High Court in the case of Willingdon Sports Club v. C. B. Patil, 3rd Addl. WTO : [1982]137ITR83(Bom) , where, following the earlier decision in Orient Club v. CWT : [1982]136ITR697(Bom) , it has been observed that in an unincorporated members' club, the property of the club vests in the members for the time being, even if the properties of such a club are vested in the trustee it would not make the trustee the owner of the properties and an unincorporated members' club is, therefore, an association of persons and an association of persons is not treated as a taxable unit under the said Act. As such, a club is not an ' individual' as contemplated by the charging provision in Section 3 of the said Act, and an unincorporated members' club is not liable to wealth-tax under Section 3 of the said Act.

25. Relying on the ratio of the above determinations, which, according to Dr. Pal, have duly laid down the law, on interpretation of the different provisions of the said Act, that an unincorporated members' club would not be liable to wealth-tax under the said Act, which submission again he wanted to support on the basis of the contents of the rules of the said club. Dr. Pal finally claimed that thus and when wealth-tax could be imposable on the assets belonging to persons and not on an association of persons as in this case, which again has been appropriately left out, the issue of the notices and the initiation of proceedings as sought to be made on the basis thereof, was, as mentioned hereinbefore, void, inoperative, improper without jurisdiction and a nullity. He also wanted to supplement his above submissions and that too on the basis of the observations in Orient Club v. CWT : [1982]136ITR697(Bom) , that, in the instant case, property of the said club belonged to the general body of the members and the said club was not a juristic entity, so under the scheme and context of the said Act, they were not also liable to pay any wealth-tax under the said Act. Dr. Pal claimed that the scheme of the said Act has been laid down in Section 21, which deals with assessment, when assets are held by courts of wards, administrator-general, etc., and, according to him, the context is in Section 5 of the said Act, which deals with some exemptions in respect of certain assets. It was also claimed by him that while dealing with a case of a club like the said club as in this case, their character should be found out from the rules and, according to him, from the rules of the said club as produced, there would be no ambiguity in finding that the said club was an association of persons.

26. On the question or position of joint trustees in the matter of assessment and whether they should be regarded as one unit of assessment, because of the indications given in Sections 5 and 21 of the said Act, and if the word 'individual' would govern the trustees of a trust, reference was made by Dr. Pal to the case of Suhashini Karuri v. WTO : [1962]46ITR953(Cal) , apart from relying on the determinations in the case of Trustees of Gordhandas Govindram Family Charity Trust v. CIT : [1973]88ITR47(SC) , where, on facts, it has been found that the word 'individual' in Section 3 of the said Act would include individuals, and the trustees of the trust constituted an assessable unit under the said Act. In fact, in view of the above decision, it would appear that the trustees are to be covered by the word ' individual', because ' individual' means a body of individuals and there are indications in Sections 5 and 21 of the said Act, that such body of individuals, viz., trustees of a trust, are intended to be covered by the said Act. That apart, while on this point, a further reference was made to the case of Orient Club v. WTO : [1980]123ITR395(Guj) , the relevant findings whereof have been indicated hereinbefore. From those determinations or on the basis of them read and considered along with the determinations in the case of CIT v. Ajax Products Ltd. [1965] 53 ITR 741 and those made in CIT v. Kulu Valley Transport Co. P. Ltd. : [1970]77ITR518(SC) , it was contended by Dr. Pal that the said club or the stewards of the same, had no liability in the matter and none of them could be treated or considered to be an assessee under the said Act.

27. Mr. Bhattacharjee, who assisted Mr. Sengupta, claimed and submitted, that 'individuals' in Section 3 of the said Act, may include 'association of persons' and, since, at the time when the notices under Section 17 were issued and so also the notice under Section 14(2), the Gujarat and Bombay High Court judgments, as mentioned above, were not available, steps in this case were taken on the basis of the law as was in force at the time or prior to it, on the basis of judicial pronouncements, and as such, the actions as taken, on the basis of the law as was existing at that relevant time, must not be interfered with. He specifically claimed that when action was taken on the basis of the law as prevalent, the same must not be interfered with by this court, even if such law has been changed on the basis of judicial pronouncements, subsequently, as in this case.

28. In support of his submissions on the law as existing prior to the Gujarat and Bombay High Court judgments, Mr. Bhattacharjee, first referred to the case of CIT v. Sodra Devi : [1957]32ITR615(SC) , where, the meaning of the word 'individual' occurring in Section 16(3) of the Indian I.T. Act, 1922, was considered by the Supreme Court and it has been observed that (p. 620): 'the word 'individual' has not been defined in the Act and there is authority for the proposition that the word 'individual' does not mean only a human being but is wide enough to include a group of persons forming a unit. It has been held that the word 'individual' includes a corporation created by a statute, e.g., a university or a Bar Council, or the trustees of a baronetcy trust incorporated by a Baronetcy Act.'

29. Thereafter, a reference was made to the case of Suhashini Karuri v. WTO [1962] 46 ITR 953 (Cal), where the word 'individual' under the said Act, in the context of a body of trustees, was considered. Then, a reference was made by Mr. Bhattacharjee to the case of Banarsi Dass v. WTO : [1965]56ITR224(SC) , where the validity of the said Act, in relation to an HUF was challenged on the ground that the word 'individual' in entry 86 of List I of Schedule VII covered an HUF and it was contended, in that case, that such entry merely covered tax on individuals and not on groups of individuals and on companies. It was also claimed that an HUF consists of different coparceners, who are, no doubt, individuals, but inasmuch as the provisions of the said Act purported to levy wealth-tax on the capital value of assets of the HUF as such, the tax was not levied on individuals, but on groups of individuals and, therefore, was outside the scope of entry 86. It would appear that on such facts and pleadings, it was observed in that case, that entries in Schedule VII confer powers of the widest amplitude on the Legislature and the entries in Schedule VII should be given the widest scope at the time of considering the validity of the concerned legislation. In that case, it has also been observed that the word 'individual' in entry 86, List I of Schedule VII, would include groups of individuals like an HUF. A reference was also made by Mr. Bhattacharjee to the decision of the Bombay High Court in the case of Abhay L. Khatau v. CWT : [1965]57ITR202(Bom) , where also, like the determinations in Suhashini Karuri's case : [1962]46ITR953(Cal) , the meaning of the word 'individual' in the context of a body of trustees, was in issue. Then, Mr. Bhattacharjee relied on the case of V. Venugopala Ravi Varma Rajah v. Union of India : [1969]74ITR49(SC) , in which case, the provisions of the Expenditure-tax Act were challenged on the ground of discrimination between the HUF and the Muslim Mappilla families of Kerala, both of whom were governed by Marumakkattayam law, but because of the HUF being specifically mentioned in that Act, it was contended that the incidence of expenditure-tax was heavier in their case than in the case of a Mappilla family, which was not a family of Hindus. It was pointed out, in that case, that under the charging section of the Expenditure-tax Act, tax was imposed on individuals and HUFs. An undivided family, which consists of Hindus alone, may be treated as a unit or an association and members of an undivided family whose members were not Hindus will be assessed and taxed as individuals. It has also been observed in that case (p. 57):

'Parliament in the present case having made the Expenditure-tax Act applicable to Hindus governed by the law of the joint family, but not including Mappilla families, who are governed by the Mappilla Marumakkattayam Act, has not made any discrimination and the charging section is not liable to be struck down on the ground that the Mappilla family may have to pay tax at a lower rate, whereas a Hindu undivided family, by reason of the amalgamation of the expenditure of all the members of the family, may have to pay tax at a higher rate.'

30. Thus, members of a Mappilla family would be left to pay expenditure-tax, not on the basis of aggregation but on the basis of the expenditure of the individual members of the family, not on the aggregate of all expenditure but on expenditure of each individual member of the family.

31. The decision in Suhashini Karuri's case : [1962]46ITR953(Cal) and Abhay L. Khatau's case : [1965]57ITR202(Bom) , rested upon the meaning of the word ' individual' as mentioned above, in the context of a body of trustees and it would appear from the case of Trustees of Gordhandas Govindram Family Chanty Trust v. CIT : [1973]88ITR47(SC) , to which reference was also made by Mr. Bhattacharjee, that the trustees, in that case, were considered to be covered by the word 'individual'. The reasons for such observations have been indicated hereinbefore. Then a specific and categorical reference was made by Mr. Bhattacharjee to the determination in the case of CWT v. Hyderabad Race Club : [1978]115ITR453(AP) . In that case, the assessee, ' Hyderabad Race Club', was registered as a 'society' under the Societies Registration Act and the memorandum of association of the same amongst others contained, (1) encouragement and promotion of scientific breeding and training of horses, ponies and mules; (2) organisation of race meetings; (3) carrying on the business of race club in all its branches ; (4) devoting some money for charitable and worthy causes of giving awards, prizes, or cups, etc., to any association, club or organisation which has among its objects playing of games, racing sport; and (5) establishment of schools, institutions for training of jockeys and riders, both professional and amateur. The club filed a ' nil ' return under the W.T. Act, 1957, and claimed exemption from tax on the ground that the members do not have any interest in the assets held by the club and as the properties were held by the club only for discharging a legal obligation for a public purpose of a charitable nature, the club is not liable for wealth-tax. The WTO rejected the plea and assessed the club to wealth-tax. The AAC, following the decision of the High Court in regard to the liability of the club to pay general tax to the Hyderabad Corporation under the Hyderabad Municipal Corporation Act, 1955, held that the club is not liable for tax under the W.T. Act. The appeal preferred by the Department was dismissed by the Appellate Tribunal and on a reference at the instance of the Revenue, it has been held that in order to attract exemption under Section 5(1)(i) of the W.T. Act, the assets must be held, firstly, in trust or other legal obligation and, secondly, for a public purpose of a charitable nature. Unless both these ingredients are satisfied, the assessee is not entitled to exemption in respect of the assets held by him. Under the W.T. Act, holding of the asset itself rendered the person liable for tax and if such asset is held for a public purpose which was both charitable and non-charitable in nature, the assets held by the assessee are liable for tax, irrespective of whether it is applied solely for charitable purpose or for non-charitable purpose (as well). The decision rendered under the I.T. Act, which lays down that the dominant intention of the trust and mode of application of income for charitable purposes, should be the criterion for judging the taxability of income, has no application to the cases under the W.T. Act. In that case, it has also been held that some of the objects of the club are undoubtedly meant for public purpose of a charitable nature. But, equally, some of the objects are not, while some other objects are not necessarily so, being capable of being pursued both for charitable and for non-charitable purposes. For instance, scientific breeding of horses may be for a public purpose, but it may be with a view to encourage its business. So also the profits earned by holding race meetings may be used for charitable as well as non-charitable purposes. The board of stewards have got full discretion to spend the income earned either for charitable or for non-charitable purposes and in the event of spending income for public purposes of non-charitable nature, they will not be violating any of the clauses of the memorandum and articles of association of the club and as at least some of the objects of the club mentioned in its memorandum of association are non-charitable in nature, the assessee is not entitled to exemption under Section 5(1)(i) of the W.T. Act, apart from holding that the mere fact that some of the assets are used solely for the benefit of the members of the club and on its dissolution the assets would pass on to clubs having similar aims and objects will not entitle the club to exemption from wealth-tax on the principle of mutuality. A reference was further made by Mr. Bhattacharjee to the case of CWT v. Kripashankar Dayashanker Worah : [1971]81ITR763(SC) , where the claim was that the trustees could not be assessed under the said Act as Section 21(1) provides for assessing the trustees who hold the trust property ' on behalf of' others, as, in law, a trustee does not hold the trust property 'on behalf of' others. It was thus contended that the trustees cannot be assessed to tax under the said Act. Such contentions were not, of course, accepted by the Supreme Court. In that case, of course, it was not contended that the trustees did not come within the scope of the charging provisions under Section 3 of the said Act, and the case proceeded on the footing that the trustees can be assessed to wealth-tax in respect of the trust property, of which they were trustees. Finally, Mr. Bhattacharjee made a categorical reference to the determination in the case of ITO v. Textile Mills Agents P. Ltd. : [1981]130ITR733(Cal) , which was a determination, dated March 18, 1974, and has been made an appendix, to the case of Jiyajeerao Cotton Mills Ltd. v. ITO : [1981]130ITR710(Cal) , which was a decision dated August 16, 1979. It appeared that, in the latter case, the appellant derived profits from three industries one of which qualified for special rebate under Para. F of Pt. I of Schedule I to the Finance Act, 1965, for the assessment year 1966-67. In granting the special rebate, the ITO computed the profits and gains attributable to that industry without deducting development rebate granted to the appellant. Thereafter, the ITO sought to rectify the mistake under Section 154 of the I.T. Act, 1961, by recomputing the profits by deducting the development rebate. The appellant filed a writ petition for quashing the notice of rectification and a single judge of the High Court dismissed the petition, and there, on facts, the court had occasion to deal with the principle of retrospective legislation and the effect thereof and it has been observed that the principle of retrospective legislation is not applicable to the decisions of the Supreme Court declaring the law or interpreting a provision in a statute. The law is laid down or a provision in a statute is interpreted by the Supreme Court, only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on the provision of a statute among the different High Courts of India which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate, doubt or conflict of judicial opinion is resolved and settled by the Supreme Court, it does not obliterate the existence of such debate, doubt or conflict prior to such decision. Allowing the writ petition, it has also been held that it could not be said that on a plain reading of the provisions of Para. F of Pt. I of Schedule I to the Finance Act, 1965, no two views were possible on the question whether the development rebate had to be deducted in computing the profits and gains of the qualifying industry and that, therefore, there could not be said to be a mistake which could be corrected under Section 154. It was true that Section 80E was in pari materia with Para. F of Pt. I of Schedule I to the Finance Act, 1965, the correct interpretation whereof was laid down by the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT : [1978]113ITR84(SC) and, therefore, the profits and gains attributable to the business of manufacture or production of the articles or things specified in Pt. III of Schedule I to the Finance Act, 1965, which qualified for the special rebate under Para. F of Pt. I of Schedule I to the Finance Act, 1965, could not be gross or commercial profits or gains but were the net or taxable profits or gains computed after allowing all allowable deductions and rebates including the development rebate, but without allowing the special rebate under Para. F of Pt. I of Schedule I to the Finance Act, 1965. However, the course of the Cambay Electric Supply's case : [1978]113ITR84(SC) , up to the High Court clearly showed that there was a debate on the question of interpretation of Section 80E. The Supreme Court decision related to the subsequent assessment year 1967-68. The fact that the Supreme Court had resolved the conflict did not obliterate the conflict in views existing prior to the decision. The ITO had no jurisdiction to rectify and the notice issued under Section 154 had to be quashed. In the earlier case, the learned judges observed and on which reliance was placed, that in order to determine whether the ITO had jurisdiction to issue the impugned notice, we must consider the facts as they were on the date when the impugned notice was issued. In that view of the matter and the state of law, Mr. Bhattacharjee claimed the actions as taken, on the basis of the law as existing prior to the determination of the Gujarat and Bombay High Courts, must succeed, as actions as impeached now were duly taken on the basis of the then existing law and that too on the basis of the determination and judicial pronouncements.

32. Section 17 of the said Act is in the same line and in terms of Section 148 of the I.T. Act, 1961. Section 14 of the said Act postulates the time-limit within which return should be filed for original assessment proceedings of net wealth and Section 17 specifies the time-limit, within which proceedings for escapement of assessment of net wealth should be commenced. Sub-section (1) of Section 17 deals with the grounds on which the escaped net wealth could be brought to charge and later, it fixes the time-limit in relation to those grounds and relating to grounds, the language of Section 17(1) clearly resembles that of Section 147 of the I.T. Act, 1961, and the three grounds in fact are specified, viz., (1) the assessee has omitted or failed to make a return of his net wealth; (2) the assessee has not disclosed truly and fully all material facts ; and (3) the WTO has received information of escape of net wealth. The word ' failure ' means non-fulfilment of an obligation imposed on the assessee by law or by statute. In the case of absence of obligation of the assessee, such non-filing would be an act of omission and as 'omission' is mentioned as an element, the result would be, whenever there is an absence of a return or an absence of disclosure, it would be unnecessary to enquire whether or not an obligation lay on the assessee to file a return or to make a disclosure. Before the WTO serves a notice for the assessment of net wealth, which has escaped assessment, on account of the omission or failure on the part of an assessee, thus, (1) he must have reason to believe that wealth has escaped assessment, and that (2) such escapement is by reason of an omission or failure on the part of any person to make a return or to disclose fully and truly all material facts necessary for the assessment during the relevant assessment year. The expression 'reason to believe' has been explained in the case of S. Narayanappa v. CIT : [1967]63ITR219(SC) , to which reference was also made by Mr. Bhattacharjee to be the belief that must be held in good faith and it cannot be merely a pretence. To put it differently, it is open to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. Such belief, of course, should be the belief of an honest and reasonable man, based upon reasonable grounds and the officer concerned may act under the section on direct or circumstantial evidence, but not on mere suspicion, gossip or rumour. It should be remembered that the words used are 'reason to believe' and not 'reason to suspect'and as such, powers under the section are wide but not plenary. Such being the position, it was claimed by Mr. Bhattacharjee that steps in the instant case were taken on due exercise of power. In terms of Sub-section (1)(b), the WTO must receive information subsequent to the assessment and in consequence of such information, he should have reason to believe that wealth has escaped assessment. The word 'information', in terms of the observations of the Supreme Court in the case of CIT v. A. Raman and Co. : [1968]67ITR11(SC) , to which reference was also made by Mr. Bhattacharjee, means 'instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment'. Any 'information' justifying action under Clause (b) is not limited to factual information but includes information leading to the belief as to the true and correct state of law and as such also Mr. Bhattacharjee claimed that as the action in this case was taken on the basis of the correct state of law as was prevalent at the time relevant for the issue of the notices, so, interference should not be made on the basis of the law as subsequently declared by the judgments as mentioned hereinbefore.

33. The fundamental question in dispute which is to be decided in this case is whether the said club is an assessee and as such assessable under the said Act. They claimed not to be so, while their adversaries contended otherwise. The Gujarat and Bombay decisions as referred to and indicated hereinbefore, as was contended by Dr. Pal, would be a complete answer to such question and the answer must be, on application of the principles as indicated, not only in those judgments but also on consideration of the other cases as cited at the Bar and the provisions of the said Act, in favour of the petitioner, viz., the said club. It is needless to point out that entries in the Constitution must not only be given the widest possible interpretation and the said Act, having application throughout the country, and other determinations, must, unless dissented from, on good and cogent reasons, should be preserved and maintained. In fact, I do not find any justification to hold a different view on the point as indicated above than what the Gujarat and Bombay High Courts have held and followed. These apart, I find that the decisions as cited by Mr. Bhattacharjee and as reported in CIT v. Sodra Devi : [1957]32ITR615(SC) , Suhashini Karuri v. WTO : [1962]46ITR953(Cal) , Banarsi Das v. WTO : [1965]56ITR224(SC) , Abhay L. Khatau v. CWT : [1965]57ITR202(Bom) , V. Venugopala Ravi Varma Rajah v. Union of India : [1969]74ITR49(SC) and Trustees of Gordhandas Govindram Family Chanty Trust v. CIT : [1973]88ITR47(SC) , would not be of much assistance, as in these determinations of the Gujarat and Bombay High Courts, they have in fact been considered, looked into and noted. The determinations in the case of CWT v. Hyderabad Race Club : [1978]115ITR453(AP) , being a decision about a club, which was registered as a 'society' under the Societies Registration Act, would be enough to distinguish the same from this case, when the said club was not so registered, and which is just an association, established to hold horse races and has all throughout been treated as an 'association of persons' by the I.T. authorities and is deemed to be composed of members, who are admitted to such membership according to the rules of the said club. That apart, claims in the Hyderabad Race Club's case : [1978]115ITR453(AP) , were different. It should be noted that, in this case, the said club has claimed that they cannot be deemed or considered to be an assessee and treated as assessable as such, and on the basis of such specific and categorical claims, the determinations in the case of CIT v. Assam Oil Co. Ltd. : [1982]133ITR204(Cal) , to which reference was also made by Mr. Bhattacharjee, would be distinguishable. In the said case, it has also not been determined that an unincorporated club, like the said club, is liable to be assessed under Section 3 of the said Act, and there the specific question was not whether the Assam Oil Co. Ltd. was an assessee which incidentally was the specific issue in this case. On the submissions as made at the Bar, the provisions of the said Act, and the decisions as referred to hereinbefore, the said club, which is an unincorporated members' club and a society of persons, where each of whom contributes to the funds, out of which the expenses of conducting the said club are paid, even if taxable under any other statute, would not be an assessee under the said Act, and as such, taxable and that too also in view of the specific provisions of the charging section in Section 3, furthermore, when such a members' club, being an association of persons, would not be an individual entity for the purpose of the said Act, and, as such, not chargeable to wealth-tax under the said Act. On the basis of their formation and the other incidents and character, the said club should be held and found not to be a juristic entity, but the same would only be an association of persons, who come together for social intercourse and recreation, and not absolutely for gain. As observed in the case of Orient Club v. CWT : [1982]136ITR697(Bom) , the corporate identity of a members' club or an unincorporated members' club must not be confused with corporate status.

34. The submission of Dr. Pal and the rule thus succeed and the same is made absolute. There will be no order as to costs.


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