Judgment

BHAGWATI, J. - This is an appeal on a certificate of fitness granted by the High Court of Calcutta under S.66-A, sub-s. (2) of the Indian Income tax Act, 1922. The facts giving rise to the appeal are few and may be briefly stated as follows.

2. The assessee is Tollygunge Club Ltd., a company limited by guarantee, and it owns a social and sports club one of whose activities consists of conducting Gymkhana races, that is, horse races with amateur riders. It charges for admission into the enclosure of the Club at the time of the races, admission fee to the guests introduced by the members of the Club as well as to the members of the public. There is no dispute between the parties that the admission fee received by the assessee constitute trading receipt in the hands of the assessee exigible to tax. But it appears that on 28th February, 1945, a resolution was passed at the meeting of the General Body of the Club for levying a surcharge of eight annas over and above the admission fee, the proceeds of which were to go to the Red Cross Fund. This resolution was subsequently varied by another resolution dated 30th January, 1950 and the new resolution provided that the surcharge of eight annas on entrance ticket should be earmarked "for local charities and not solely for the Indian Red Cross". The assessee accordingly issued to every entrant to the enclosure on the race course two tickets, one an admission ticket for admission to the enclosure of the Club and the other, a separate ticket in respect of the surcharge of eight annas for local charities. The slip in respect of the surcharge of eight annas was in the following terms :

"Surcharge on admission to The Tolygunge Gymkhana Races for Local Charities Rs. 4/8; Enclosure Surcharge As. -/8/-:"

The receipts from the surcharge were not credited to the profit and loss account but they were carried directly to a separate account styled Charity Account. These receipts on account of surcharge were not treated as trading receipts of the assessee and were not brought to tax as income of the assessee in the assessment years prior to the assessment year 1960-61. But while making assessment for the assessment year 1960-61, the I.T.O. took the view that receipts on account of surcharge were revenue receipts in the hands of the assessee and they could not be excluded from the total income of the assessee merely on the ground that they were applied for charitable purposes. It may be pointed out at this stage that it was not disputed before the Revenue Authorities that the amounts realised by way of surcharge had been disbursed to local charities and in fact a list was filed showing the local charities in whose favour such disbursement had been made. The I.-T. O. treated the disbursement of the amounts received on account of surcharge as application of the income belonging to the assessee and he accordingly included these receipts in the total income of the assessee, but allowed rebate under S. 158 on the amounts actually disbursed in favour of local charities during the accounting year. This view taken by the I.-T. O. was affirmed on appeal by the Appellate Asst. Commr. who held that a person who wished to gain admission to the enclosure of the Club on any racing day had to pay the surcharge whether he was willing to contribute to the charity or not and as such the amount of the surcharge was a part of the price charged by the assessee for admission to the enclosure and it was, therefore, a revenue receipt in the hands of the assessee. This was followed by a further appeal to the Tribunal and this time the assessee was successful. The Tribunal held that the surcharge was levied on admission tickets for the purpose of charity and hence the receipts in respect of the surcharge were not income of the assessee at the point of time when they reached its hands and being "earmarked for charity", they "never belonged to the assessee" and were hence not includible in the taxable income of the assessee.