Bangalore Club gets wealth tax reprieve | Bengaluru News – Times of India


NEW DELHI: The over 150-year-old Bangalore Club, which in 1899 had put then Lieutenant Winston Churchill’s name in the defaulters list, got a big relief on Tuesday when it secured a wealth tax exemption order from the Supreme Court after a two-decade legal battle.
The club, through senior advocate Nikhil Nayyar, had challenged an assessment order of March 3, 2000, by the wealth tax officer, Bengaluru, which said “the number of members and the date of dissolution are all uncertain and variable and therefore indeterminate, as a result of which the club was liable to be taxed under the Wealth Tax Act”. The Income Tax Appellate Tribunal had ruled that the club was not liable to pay wealth tax, but the HC reversed ITAT decision.
HC ruled in favour of revenue dept
Though ITAT had ruled that the club was not liable to pay wealth tax but the Karnataka HC had ruled in favour of the revenue department and reversed the ITAT decision. After hearing Nayyar and additional solicitor general Vikramjit Banerjee, a bench of Justices R F Nariman, Navin Sinha and Indira Banerjee said, “It is clear that in order to be an association of persons attracting Section 21AA of the Wealth Tax Act, it is necessary that persons band together with some business or commercial object in order to make income or profits.”
Writing the 32-page judgment, Justice Nariman said, “Bangalore Club is an association of persons and not the creation, by a person who is otherwise assessable, of one among a large number of associations of persons without defining the shares of the members so as to escape tax liability. For all these reasons, it is clear that Section 21AA of the Wealth Tax Act does not get attracted to the facts of the present case.”
Before elaborating on the intricacies of the case, Justice Nariman gave a historical perspective to the club. The opening paragraph of the judgment read, “In the year of grace 1868, a group of British officers banded together to start the Bangalore Club. In the year of grace 1899, one Lt WLS Churchill was put up on the club’s list of defaulters, which numbered 17, for an amount of Rs 13 being for an unpaid bill of the club. The ‘bill’ never became an ‘Act’. Till date, this amount remains unpaid. Lt WLS Churchill went on to become Sir Winston Leonard Spencer Churchill, prime minister of Great Britain. And the Bangalore Club continues its mundane existence, the only excitement being when the tax collector knocks at the door to extract his pound of flesh.”
Examining the applicability of two sub-sections of Section 21AA to Bangalore Club, the bench said, “First and foremost, sub-section (2) begins with the words ‘any business or profession carried on’ by an association of persons. No business or profession is carried on by a social members club. Further, the association of persons mentioned in sub-section (1) must be persons who have banded together for a business objective – to earn profits – and if this itself is not the case, then sub-section (2) cannot possibly apply.”
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Sagar Biswas

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