Law: Wealth Tax Act, 1957

Section: 27(1),21AA,3,167A

Wealth tax--- ---- Members' club---Club providing facilities for games like tennis, badminton, etc.---In return for paying membership fee, members get access to facilities offered by club---No member of club entitled to any portion of property or income of club---Income or property to be applied solely towards promotion of objects of club---On dissolution of the club any income or property remaining after satisfaction of debts and liabilities of club to be transferred to institution having similar objects---Club not' liable to be assessed as individual under S.3---Section 21-AA also not applicable to club---Indian Wealth Tax Act, 1957, Ss.3 & 21-AA. The assessee, a members' club, provided facilities for games such as tennis, badminton, billiards. cards, chess, pingpong, etc. For the assessment years 1975-76 to 1983-84, the Wealth Tax Officer held that the assessee-club fell within the meaning of "individual" in section 3 of the Wealth Tax Act, 1957. The Commissioner (Appeals) had held that the club was an association of persons and hence not a taxable entity under section 3 and set aside the assessments for the assessment years 1979-80 to 1983-84. This was followed by the Deputy Commissioner (Appeals) who cancelled the assessments for the assessment years 1975-76 to 1978-79. The Revenue contended before the Tribunal that the assessee-club was an association of persons which had been formed for the purpose of making gain or profit or for acquiring properties and by virtue of the provisions contained under section 21-AA of the Wealth Tax Act, 1957, inserted by the Finance Act, 1981, with effect from April 1, 1981, the assessments for the years 1981-82 to 1983-84 had to be sustained. The Tribunal rejected the contention of the Revenue and held that the assessee was only an association of persons and it did not fall within the ambit of section 3 and, therefore, was not liable to be assessed as an individual to wealth tax for any of the assessment years. On a reference the question arose whether the introduction of section 21-AA in the Act had made any change in the legal position, thereby making the assessee-club liable for being assessed under the Act: Held,…

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