Law:

Section:

Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under - Assessment year 1963-64 - Whether racing does not confer any public benefit since betting on horses is one of essential concomitants of activity of racing and, hence, income of assessee, a race club, was not exempt from income-tax under section 11 - Held, yes Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1963-64 - Assessee-race club entered into agreement with another race club whereunder assessee undertook to conduct races and to bear losses, if any - During relevant accounting period assessee paid certain sum to said club as loss incurred in running races and claimed deduction of it - Whether payment in question was for legal obligation incurred and, thus, an item of expenditure incurred by assessee in respect of its own racing activity was allowable as deduction under section 37 - Held, yes FACTS The objects for which the assessee-company, a race club at Bangalore was established were, inter alia, to carry on the business of a race club in all its branches and to enter into any arrangement with any person, association or company carrying on or engaged in any business or transaction which the assessee was authorised to carry on or engage in. It entered into an agreement with the Maharaja of Mysore and another agreement with the Mysore Race Club, and, to undertake to conduct races at Mysore and to bear the losses, if any. During the accounting period relevant to the assessment year 1963-64, the assessee paid a sum of Rs. 24,222 to the Mysore Race Club as loss incurred in running races at Mysore. It claimed deduction of the said sum as an expenditure deductible from the gross profits of the assessee, which was rejected by the assessing authority, the Appellate Assistant Commissioner and the Tribunal. The Tribunal had rejected the claim on ground that it was a gratuitous payment and that the activity of running races at Mysore through the Mysore Race Club was beyond the scope of the objects of the assessee-company. On reference : HELD As regards exemption under section 11, the Tribunal…

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