Dr. Amaresh Kumar, Secretary General: Sports Law India

Dec 30 2003 | 4:12 PM

AIR 1954 Supreme Court 85**
(Vol. 41, C.N. 24)
(From : Bombay)*
26th October 1953.
Patanjali Sastri C.J.I., S.R. DAS, Vivian Bose, Ghulam Hasan and Bhagwati, JJ.
Commr. of Income-tax, Bombay City, Appellant v. Royal Western India Turf Club Ltd., Respondent.
Civil Appeal No. 165 of 1951.
Income-tax Act (11 of 1922), S.10(1), S.10(6) - Turf Club dealing with its members.
Income-tax Reference No. 30 of 1947, Reversed.

There was an incorporated company authorised to carry on an ordinary business of a race course company and that of licensed victuallers and refreshment purveyors and in fact was carrying on such a business. The dealings of the company with nonmembers took place in the ordinary course of business @page-SC86 carried on with a view to earning profits as in any other commercial concern. The company gave to its members the same or similar amentiies as it gave to non-members, namely, the use of an unreserved seat in a stand, the facility to watch the races and to bet on the horses in the races, use of the totalisator in that stand and the facility for refreshment. The company recevied large sums of money on admission tickets from members as well as from non-members, besides other moneys on other accounts. The company claimed that in computing its total income, the following four items of receipts should be excluded:

• Season admission tickets from members,
• Daily admission gate tickets from members,
• Use of private boxes by members and
• Income from entries and forfeits received from the members whose horses did not run in the races during the season.

Held that there was no mutual dealing between the members, 'inter se' and no putting up of a common fund for discharging the common obligations to each other undertaken by the contributors for their mutual benefit. All the four items of receipts from members must be taken into account in computing the total income of the company. The fact that the company had so long enjoyed exemption from taxation was neither here nor there, for there can be no question of acquiring any prescriptive right to exemption from taxation. All the items of receipts from members were received by the company from businesswith its members within the meaning of S. 10(1) and none of them was received by the company as a trade, professional or similar association within the meaning of S. 10(6). The company was not a "trade association." Case Law discussed. Proposition in AIR 1921 Lah 208 held to be widely stated. (Paras 14, 23, 24, 25)
Anno : Income-tax Act, S. 10 N. 2, 17.
Shri. M. C. Setalvad, Attorney-General for india (Shri G. N. Joshi, Advocate, with him), instructed by Shri G. H. Rajadhyaksha, Agent, for Appellant; Shri B. J. M. Mackenna, Senior Advocate. (Shri P. N. Mehta, Advocate, with him), instructed by Shri Rajinder Narain, Agent for Respondent.

Where a company collects money from its members and applies it for their benefits not as shareholders but as persons who put up the fund the company makes no profit. In such cases where there is identity in the character of those who contribute and of those who participate in the surplus, the fact of incorporation may be immaterial and the incorporated company may well be regarded as a mere instrument, a convenient agent for carrying out what the members might more laboriously do for themselves. But it cannot be said that incorporation which brings into being a legal entity separate from its constituent members is to be disregarded always and that the legal entity can never make a profit out of its own members. What kinds of business other than mutual insurance may claim exemption from tax liability under section 10(1) of the Act under the principles of --- 'Styles' case (A)', need not be here considered; it is clear to us that those principles cannot apply to an incorporated company which carries on the business of horse racing and realise money both from the members and from non-members for the same consideration, namely, by the giving of the same or similar facilities to all like in course of one and the same business carried on by it.

AIR 1957 Supreme Court 699
(S) (V 44 C 107 Oct.)
9th April, 1957
S.R. DAS, C.J.I., Venkatarama Ayyar, Sinha, S.K. Das and Gajendragadkar, JJ.
Civil Appeal No. 134 of 1956.
State of Bombay, Appellant v. R.M.D. Chamarbaugwala and another, Respondents: Advocate-General of Mysore Intervener.

(From: (S) A.I.R. 1956 Bom. 1)

(a) Constitution of India, Art.245 and Art.246 - Constitutional validity of Statutes -Tests.
When the validity of an Act is called in Question, the first thing for the Court to do is to examine whether the Act is a law with respect of a topic assigned to the particular Legislature which enacted it. If it is, then the Court is next to consider whether, in the case of an Act passed by the Legislature of a Province (now a state) its operation extends beyond the boundaries of the Province or the State, for under the provisions conferring legislative powers on it such Legislature can only make a law for its territories or any part thereof and its laws cannot, in the absence of a territorial nexus, have any extra-territorial operation. If the impugned law satisfies both these tests, then finally the Court has to ascertain if there is anything in any other part of the Constitution which places any fetter on the legislative powers of such Legislature. The impugned law has to pass all these three tests. (Para 14) Anno. AIR Com. Const. of India, Art. 245 N. 16.

(b) Bombay Lotteries and Prize Competitions control and Tax Act (54 of 1948), S.2(1)(d) - As amended by Act 30 of 1952 - Interpretation of - Prize competitions envisaged by definition do not include innocent prize competitions

Interpretation of Statutes - Word "or" when can be read as "and";
Civil P.C. (5 of 1908), Pre.
The amendments made by Bombay Act 30 of 1952 in the definition of 'prize competition' contained in S.2 (1)(d) of the Bombay Lotteries and Prize Competitions Control and Tax Act, 1948, have not the effect of including within its rope innocent prize competitions i.e. Competitions which are not of a gambling nature.

A competition in order to avoid the stigma of gambling must depend to a substantial degree upon the exercise of skill. Therefore, a competition success wherein does not depend to a substantial degree upon the exercise of skill, is now recognised to be of a gambling nature. (Para 18)

Considering the nature, scope and effect of the impugned Act, there is no doubt whatever that the first category of prize competition does not include any innocent prize competitions. Such is the clear intention of the Legislature as expressed in the impugned Act read as a whole and to give effect to this obvious intention the Court has perforce to read the word 'or' a appearing in the qualifying clause after the word 'promoter' and before the word 'for' as 'and'. Well known canons of construction of statutes permit this to be done. (Para 20)

Seeing that prize competitions have been clubbed together with lotteries and dealt with in the same Act and seeing that the second category of the definition of "prize competition" is sandwiched in between the other two categories which are clearly of a gambling nature and in view of the other provisions of the impugned Act and in particular S. 3 and the taxing sections, the definition of 'prize competition' on a proper construction of the language of S. 2 (1) (d) in the light of the other provisions of the Act read as a whole comprises only prize competitions which are of the nature of a lottery in the wider sense, that is to say, of the nature of gambling. (1945) 2 All E.R. 624, Ref, (Para 22)

(c) Constitution of India, Sch.7, List 2, Entry 24 - Betting and gambling.
Bombay Lotteries and Prize Competitions Control and Tax Act (54 of 1948), S.2(1)(d) - Act falls under Entry 24.

Section 2 (1)(d) of the Bombay Lotteries and Prize Competitions Control and Tax Act, 1948, on a true construction, covers only gambling prize competitions and the Act is a law with respect to betting and gambling under Entry 34. (B) A.I.R. 1956 Bom. 1 affirmed on this point. (Para 22)

(d) Bombay Lotteries and Prize Competitions Control and Tax Act (54 of 1948), S.12A - Validity- Tax imposed by S.12A is valid under Sch. VII, List II, Entry 62.
Constitution of India, Art.245, Art.246, Art.276(2), Sch.7, List 2, Entry 26, Entry 34, Entry 60 and Entry 62.
Govt. of India Act (1935), (26 Geo. V. and 1 Edw. VIII, C.2, S.99, S.100, S.142A, Sch.VII, List 2, Entry 27, Entry 36, Entry 46 and Entry 50.
Interpretation of Statutes.

(S) A.I.R. 1956 Bom. 1, Reserved.
The contention that although the Act may come under Entry 34, the taxing provisions of S. 12A cannot be said to impose a tax on betting and gambling under Entry 62 but imposes a tax on trade under Entry 60 cannot be accepted. Once it is held that the impugned Act is on the topic of betting and gambling under Entry 34, the tax imposed by such a statute, would be a tax on betting and gambling under Entry 62. (Para 23)

Entry 62 talks of taxes on betting and gambling and not of taxes on the men who bet or gamble. It is necessary therefore, to bear in mind the real @page-SC700 nature of the tax. The tax imposed by S.12A is, in terms, a percentage of the sums specified in the declaration made under S. 15 by the promoter or a lump sum having regard to the circulation and distribution of the newspaper or publication in the State. Under S. 15 the promoter of a prize competition carried on in a newspaper or publication printed and published outside the State is to make a declaration in such form and at such period as may be prescribed. Form 'J' prescribed by R.11 (c) requires the promoter to declare, among other things, the total number of tickets-coupons received for the competitions from the State of Bombay and the total receipts out of the sale of the tickets- coupons from the State of Bombay. The Percentage under S. 12A is, to be calculated on the total sums specified in the declaration. It is clear, therefore, that the tax sought to be imposed by the impugned Act is percentage of the aggregate of the entry fees received from the State of Bombay. On ultimate analysis it is a tax on each entry fee received from each individual competitor who remits it from the State of Bombay. (Para 23)

The tax on gambling is a well recognised group of indirect taxes. It is a kind of tax which is demanded from the promoter in the expectation and intention that he shall indemnify himself at the expense of the gamblers who sent entrance fees to him. That is the general tendency of the tax according to common understanding of men.
If taxation on betting and gambling is to be regarded as a means of controlling, betting and gambling activities, then the easiest and surest way of doing so is to get at the promoters who encourage and promote the unsocial activities and who hold the gamblers', money in their hands. To collect the tax from promoters is not to tax the promoters but is a convenient way of imposing the tax on betting and gambling and indirectly taxing the gamblers themselves. It is to be noted that the tax here is not on the profits made by the petitioners but it is a percentage of the total sum received by them from the State of Bombay as entrance fees without the deduction of any expense. This circumstance also indicates that it is not tax on a trade. (Para 23)

There are marked distinctions between a tax on gross collection and a tax on income which for taxation purposes means gains and profits. Similar consideration may apply to tax on trade. There is yet another cogent reason for holding that the tax imposed by S. 12A is a tax on betting and gambling. In enacting the statute the Legislature was undoubtedly making a law with respect to betting and gambling under Entry 34. By the amending Act XXX of 1952 Legislature by deleting the concluding words of the definition of 'prize competition' namely, "but does not include etc. etc." extended the operation of the Act to prize competitions carried on in newspapers printed and published outside the State of Bombay. They knew that under Art. 276 which reproduced S. 142A of the Government of India Act, 1935, they could not impose a tax exceeding the sum of Rs. 250 on any trade or calling under Entry 60. If the tax can be referable either to Entry 60 or Entry 62, then in view of the fact that S. 12A will become at least partially, if not wholly, invalid as a tax on trade or calling under Entry 60 by reason of Art. 176 (2) the Court must, in order to uphold the section, follow the well established principle of construction and hold that the Legislature must have been contemplating to make a law with respect to betting and gambling under Entry 62, for there is no constitutional limit to the quantum of tax which can be imposed by a law made under that Entry. For reasons stated above S. 12A is supportable as a valid piece of Legislation under Entry 62 (S) A.I.R. 1956 Bom. 1, Reversed.(Para 23)

(e) Constitution of India, Art.245 - Territorial extent of legislative power- Doctrine of territorial nexus- Principles.
Bombay Lotteries and Prize Competitions Control and Tax Act (54 of 1948).
Act not invalid on ground of extra-territorial operation.
The doctrine of territorial nexus is well established and if there is a territorial nexus between the person sought to be charged and the State seeking to tax him the taxing statute may be upheld. Sufficiency of the territorial connection involves a consideration of two elements, namely, (a) the connection must be real and not illusory and (b) the liability sought to be imposed is or may be altogether disproportionate to the territorial connection. In other words, if the connection is sufficient in the sense mentioned above, the extent of such connection affects merely the policy and not the validity of the legislation. The question whether in a given case there is sufficient territorial nexus is essentially one of fact. (Para 24)

The newspaper "Sporting Star" printed and published in Banglore is widely circulated in the State of Bombay. The petitioners have set up collection depots within the State to receive entry forms and the fees. They have appointed local collectors. Besides the circulation of the copies of the "Sporting Star" the petitioners print over 40,000 extra coupons for distribution which no doubt are available from their local collectors. The most important circumstance in these competitions is the alluring invitation to participate in the competition where very large prizes amounting to thousands of rupees and some times running into a lakh of rupees may be won at and for a paltry entrance fee of say 4 annas per entry. These advertisements reach a large number of people resident within the State. The gamblers euphemistically called the competitors, fill up the entry forms and either leave it along with the entry fees at the collection depots set up in the State of Bombay or send the same by post from Bombay. All the activities that the gambler is ordinarily expected to undertake take place, mostly if not entirely, in the State of Bombay and after sending the entry forms and the fees the gamblers hold their soul in patience in great expectations that fortune may smile on them:
Held that the standing invitations, the filling up of the forms and the payment of money take place within the sate, which is seeking to tax only the amour, received by the petitioners from the State of Bombay. The tax is on gambling although collected from the promoters. All these constitutes sufficient territorial nexus which entitles the State of Bombay to impose a tax on the gambling that takes place within its boundaries and the law cannot be struck down on the ground of extra-territoriality. (Para 24)
Anno: A.I.R. Com. Const. of India, Art.245 N. 15.

(f) Constitution of India, Art.19(1)(g), Art.19(6) and Art.301, Art.302, Art.303, Art.304, Art.305 - Scope - Freedom of trade, commerce and intercourse - Extent of.

Articles 19 (1) (g) and 301 are two facts d the same thing the freedom of trade. Article 19 (1) (g) looks at the matter from the point of view of the individual citizens and protects their individual right to carry on their trade or business. Article 301 looks at the matter from the point of view of the country's trade and commerce as a whole, as distinct from the individual interests of the citizens and @page-SC701 it relates to trade; commerce or intercourse both with and within the State. (Para 27)

The scheme of our Constitution, is to protect the freedom of each individual citizen to carry on his trade or business. That it does by Art. 19 (1) (g). This guaranteed right is, however, subject to Art. 19 (6) which protects a law which imposes, in the interest of general public, reasonable restrictions on the exercise of the fundamental right guaranteed by Art. 19(1) (g). Our Constitution also proclaims by Art. 301 the freedom of trade, commerce and intercourse throughout the territory of India subject to the provisions of Arts. 301-305 which permit the imposition of reasonable restrictions by Parliament and the State Legislatures. The underlying idea in making trade, commerce and intercourse with, as well as within, the States free undoubtedly was to emphasise the unity of India and to ensure that no barriers might be set up to break up the national unity. The language used in Art. 19 (1) (g) and Art. 301 is quite general and the provisions for restricting the exercise of the fundamental right and the declared freedom of the country's trade, commerce and intercourse are made separately e.g. by Art. 19 (6) and Arts. 302-305. (Para 36)

Quaere:- Whether restrictions as contemplated by Art. 19 (6) and Art. 304 (b) may extend to total prohibition? (Para 45)
Anno: A.I.R Com. Const. of India, Art. 19, N. 72.

(g) Constitution of India, Pre. and Art.391 - American and Australian decisions - Use of, in interpreting Constitution.

In construing the provisions of our Constitution the decisions of the American Supreme Court on the commerce clause and the decisions of the Australian High Court and of the Privy Council on S. 92 of the Australian Constitution should be used with caution and circumspection. Our Constitution differs from both the American and Australian Constitutions. (Difference between the various constitutions, pointed out): AIR 1952 S C 366, Ref. (Para 35)
Anno: A.I.R. Com. Const. of India, Pre. N. 8.

(h) Constitution of India, Art.19(1)(g), Art.19(6), Art.301 and Art.304 - 'Trade, business or commerce', meaning of - Gambling, prize competitions, whether can be regarded as trade or commerce - Bombay lotteries and Prize Competitions Control and Tax Act (54 of 1948) - Object - Act in pith and substance relates to betting and gambling - Whether violates Arts. 19 (1) (g) and 301.
Words and Phrases.

(S) AIR 1956 Bom.1 Reversed.
The words 'trade' or 'business' or 'commerce' should not be read in their widest amplitude as meaning any activity which is undertaken or carried on with a view to earning profit. There are certain activities, which can under no circumstance be regarded as trade or business or commerce although the usual forms and instruments are employed therein. To exclude those activities from the meaning of those words is not to cut down their meaning at all but to say only that they are not within the true meaning of those words. (Para 36)

Gambling activities from their very nature and in essence are extra-commercium although the external forms, formalities and instruments of trade may be employed and they are not protected either by Art. 19 (1) (g) or Art. 301 of the constitution. These activities which have been condemned in this country from ancient times appear to have been equally discouraged and looked upon with disfavour in England, Scotland, the United States of America and in Australia. It is difficult to accept the contention that those activities which encourage a spirit of reckless propensity for making easy gain by lot or chance, which lead to the loss of the hard earned money of the undiscerning and improvident common man and thereby lower his standard of living and drive him into a chronic state of indebtedness and eventually disrupt the peace and happiness of his humble home could possibly have been intended by our Constitution makers to be raised to the status of trade, commerce or intercourse and to be made the subject-matter of a fundamental right guaranteed by Art. 19 (1) (g). (Para 42)

The fact that regulatory provisions have been enacted to control gambling by issuing licences and by imposing taxes does not in any way after the nature of gambling which is inherently vicious and pernicious. (1953) 345 U.S. 22 & (1955) 348 U.S. 419 Ref. (Para 43)

Held that in point of fact the prize competitions run by the petitioners under the name of R.M.D.C. Crosswords' partake of a gambling nature and, therefore, fall within the definition and are to be governed by the regulatory and taxing provisions of the Act. The prize competitions in question being of a gambling nature, they cannot be regarded as trade of commerce and as such the petitioners cannot claim any fundamental right under Art. 19 cannot claim any fundamental right under Art. 301 (Paras 46, 47)

When Art. 19 (1) (g) guarantees or Art. 301 declares the freedom of trade they describe human activities in a specific aspect. They single out attributes which the act of transaction may wear and make the freedom, which they confer, depend upon those attributes. The freedom secured by the two Articles implies that no unreasonable restrain or burden shall be placed upon an act falling under that description because it is trade or commerce or intercourse. (Para 44)

The same result can be arrived at by applying the doctrine of pith and substance. The Act does not purport directly to interfere with trade, commerce or intercourse as such, for the criterion of its application is the specific gambling nature of the transaction which it restricts. The purpose of the Act is not to restrict anything which brings the transactions under the description of trade, commerce or intercourse. In other words the Act is in pith and substance and substance an act with respect to betting and gambling. To control and restrict betting and gambling is not to interfere with trade, commerce or intercourse as such but to keep the flow of trade, commerce and intercourse free and unpolluted and to save it from anti-social activities. Hence the impugned Act deals with gambling which is not trade, commerce or business and, therefore the validity of the Act has not to be decided by the yardstick of reasonableness and public interest laid down in Arts 19 (6) and 304. The appeal against the stringency and harshness, if any of the law does not lie to a court of law. (S) AIR 1956 Bom.1, Reversed. (Para 44)


AIR 1957 Supreme Court 768
(S) (V44 C 115 Nov.)
23rd May 1957
Bhagwati, Veni Katarama Ayyar and Kapur, JJ.
Civil Appeal No. 165 of 1954.
Commissioner of Income-tax West Bengal, Calcutta, Appellant v. Benoy Kumar Sahas Roy, Respondent.

"The expression "agricultural land" means any land used as arable, meadow, or pasture ground only, cottage gardens exceeding one-quarter of an acre, market gardens, nursery grounds, orchards or allotments, but does not include land occupied together with a house as a park, gardens other than as aforesaid pleasure grounds or any land kept or preserved mainly or exclusively for purposes of sports or recreation or land used as a race course"

AIR 1958 Supreme Court 328
(V 45 C 54)
20th December 1957.
N.H. BHAGWATI, T.L. Venkatarama Ayyar, S.K. Das, A.K. Sarkar and Vivian Bose JJ.
Civil Appeal No. 167 of 1954.
Bombay Dyeing & Manufacturing Co. Ltd., Appellants v. The State of Bombay and others, Respondents.
(From : Misc. Appln. No. 267 of 1953, D/- 14-9-1953 - Bom.)

3. Then, there is S. 3, which runs as follows:

(1) "There shall be constituted a fund called the Bombay Labour Welfare Fund and, notwithstanding anything contained in any other law for the time being in force, the sums specified in sub-s.
(2) shall be paid into the Fund.
The Fund shall consist of -

• all fines realised from the employees;
• all unpaid accumulations;
• any voluntary donations;
• any fund transferred under sub-s. (5) of S. 7; and
• any sum borrowed under S. 8.

(3) The sums specified in sub-s. (2) shall be collected by such agencies and in such manner and the accounts of the Fund shall be maintained and audited in such manner as may be prescribed." Section 7 (1) provides that "the Fund shall vest in and be held and applied by the Board as Trustees subject to the provisions and for the purposes of this Act." Sub-section (2) of S. 7 is very material, and is as follows:
"Without prejudice to the generality of sub-s. (1) the moneys in the Fund may be utilized by the Board to defray expenditure on the following:

• community and social education centers including reading rooms and libraries;
• community necessities;
• games and sports;
• excursions, tours and holiday homes;
• entertainment and other forms of recreations;
• home industries and subsidiary occupations for women and unemployed persons;
• corporate activities of a social nature;
• cost of administering the Act including the salaries and allowances of the staff appointed, for the purposes of the Act; and
• such other objects as would in the opinion of the State Government improve the standard of living and ameliorate the social conditions of labour:

Provided that the Fund shall not be utilized in financing any measure which the employer is required under any law for the time being in force to carry out; @page-SC332
Provided further that unpaid accumulations and fines shall be paid to the Board and be expended by it under this Act notwithstanding anything contained in the Payment of Wages Act, 1936 (4 of 1936), or any other law for the time being in force."
Section 11 provides for the appointment of an officer called the Welfare Commissioner, and defines his powers and duties. Section 17 enacts that,
"Any sum payable into the Fund under this Act, shall, without prejudice to any other mode of recovery, be recoverable on behalf of the Board as an arrear of land revenue."
Section 19 authorises the State Government to make rules to carry out the purposes of this Act. Section 23 provides that,
"In S. 8 of the Payment of Wages Act, 1936 (4 of 1936), to sub-s. (8) the following shall be added, before the Explanation, namely:
"but in the case of any factory or establishment to which the Bombay Labour Welfare Fund Act, 1953 (Bom. 40 of 1953), applies all such realisations shall be paid into the Fund constituted under the said Act."


AIR 1958 Supreme Court578
(V. 45 C. 83)
19th March, 1958
N.H. Bhagwati, B.P. Sinha, Jafer Imam, J.L. Kapur and P.B. Gajendragadkar, JJ.
Petns. Nos. 91, 99, 100, 101, 103 and 116 to 118 of 1957.

• Express Newspaper (Private) Ltd., and another (In Petn. No. 91 of '57).
• Press Trust of India and another (In Petn. No. 99 of '57).
• Indian National Press and another (In Pten. No. 100 of '57).
• Shri Kanayalal Nanabhai Desai and others (In Petn. No. 101 of '57).
• M/s. Hindustan Times Ltd. (In Pten. No.103 of '57).
• Loksatta Karyalaya and another (In Pten. No. 116 of '57).
• Sandesh Ltd. and another (In Petn. No. 117 of '57) and
• Jansatta Karyalaya and another (In Petn. No. 118 of '57) Petitioners.

v.
The Union of India and others Respondents (In all the Petitions.)
Civil Appeals Nos. 699-703 of 1957.

• Express Newspapers (Private) Ltd. and another (In C. A. No. 699 of '57)
• Press Trust of India Ltd. and another (In C. A. No. 700 of '57).
• Indian National Press (Bom.) Private Ltd. and another (In C. A. No. 701 of '57).
• Shri Kanayalal Nanabhai Desai and others (In C. A. No. 702 of '57) and @page-SC579
• M/s. Hindustan Times Ltd. (In C. A. No. 703 of '57) Appellants.

v.
The Union of India and others Respondents (In All the Appeals).
20. Working Journalists employed in Newspapers Establishments should be grouped as follows :
(a) Full time employees :

• Group I : Editor

• Group II : Assistant Editor, Leader Writer, News Editor, Commercial Editor, Sports Editor, Film or Art. Editor, Feature Editor, Literary Editor, Special Correspondent, Chief Reporter, Chief Sub-Editor and Cartoonist.
• Group III : Sub-Editors and Reporters of all kinds and full time correspondents not included in Group (II); news photographers and other journalists not covered in the groups.
• Group IV : Proof Readers.

AIR 1959 Supreme Court 894
(V 46 C 124)
(From Mysore: ILR (1956) Mys. 22)
16th January 1959
S.R. DAS, C.J.I., S.K. DAS, P.B. GAJENDRAGADKAR, K.N. WANCHOO AND M. HIDAYATULLAH, JJ. Y. V. Srinivasamurthy and others, Appellants v. The State of Mysore and another, Respondents. Civil Appeals Nos. 280 to 286 and 288 of 1956. @page-SC895
(a) Mysore Cinematograph Shows Tax Act (16 of 1951), S.3 - Tax on cinema shows - Nature and validity - Not a tax on profession - Limit prescribed under Art. 276 (2) not applicable.

Constitution of India, Art.276(2), Sch.7, List 2, Entry 60, Entry 62.
Section 3 of the Mysore Cinematograph Shows Tax Act, 1951 which authorises the levy of tax on cinematograph shows calculated at rates therein mentioned is a law with respect to the matters enumerated in Entry 62 of List II of the Seventh Schedule of the Constitution and not a law made with respect to matters enumerated in entry 60 of List II which provides for "Taxes on professions trades, callings and employments". That being the true position, the argument that the amount of tax under S. 3 cannot exceed the amount permitted by Art. 276 (2) of the Constitution is not correct: AIR 1959 SC 582, Foll. (Para 2)

Anno: AIR Com., Const. of India, Art. 276 N. 3, 4; List II, Entry 60 N. 1; Entry 62 N. 3, 5.
(b) Mysore Cinematograph Shows Tax Act (16 of 1951), S.3 - Tax on cinema shows - Validity - Tax covered by List II Entry 62 - Amusement includes cinema.
Constitution of India, Sch.7, List 2, Entry 62, Entry 33, List 1, Entry 60
Words and Phrases - Amusements.

The argument that law made with respect to entry 62 cannot permit imposition of taxes on cinemas, for the word "cinemas" mentioned in entry 33 has been omitted from entry 62, is without any substance. The words "entertainments" and "amusements" in Entry 62 are wide enough to include theatres, dramatic performances, cinemas, sports and the like. If this argument is correct, then, on a parity of reasoning, the State Legislature will have no competence to enact a law imposing a tax on theatres or dramatic performances or sports, for none of those words are mentioned in entry 62. This is sufficient to repel the argument. The truth of the matter is that "cinema" had to be specifically mentioned in entry 33 of the List II in order to avoid any possible conflict between it and entry 60 in List I. (Para 3)
Anno: AIR Com., Const. of India, Sch. VII List II Entry 33 N. 1 and Entry 62 N. 3.


3. It is only necessary, here to refer to an additional argument that was advanced by learned counsel for the appellants before us in support of his contention. He drew our attention to entry 33 of List II of the Seventh Schedule to the Constitution which runs as follows: "Theatres and dramatic performances; cinemas subject to the provisions of entry 60 of List I; sports, entertainments and amusements." He contends that that entry covers laws made with respect to each of the items as a separate subject, but points out that entry 62, which has been quoted above, permits imposition of tax only on luxuries including taxes on entertainments, amusements, betting and gambling. Learned counsel concludes that that law made with respect to entry 62 cannot permit imposition of taxes on cinemas, for the word "cinemas" mentioned in entry 33 has been omitted from entry 62. We do not think there is any substance in this argument. Learned counsel agrees that the words 'entertainments" and "amusements" are wide enough to include theatres, dramatic performances, cinemas, sports and the like. If his argument is correct, then, on a parity of reasoning, the State Legislature will have no competence to enact a law imposing a tax on theatres or dramatic performances or sports, for none of those words are mentioned in entry 62. This is sufficient to repel this argument. The truth of the matter is that cinema" had to be specifically mentioned in entry 33 of List II in order to avoid any possible conflict between it and entry 60 in List I.

AIR 1962 Supreme Court 1589
(V 49 C 230)
(From Bombay: AIR 1957 Bom.83)
1 st May 1062
B.P. Sinha, C.J.I., K. Subba Rao, N. Rajagopala Ayyangar, J.R. Mudholkar and T.L. Venkatarama Ayyar, JJ.
Laxman Balwant Bhopatkar (since deceased), by another trustee Dr. Dhananjaya Ramchandra Gadgil and others Appellants v. Charity Commissioner, Bombay Respondent, State of Maharashtra intervener.

4. It would be seen from the above narrative that the entire question raised by the appeal is concerned with whether the Kesari & Mahratta Trust was a "public Trust" within the meaning of the Act so as to justify the order of the Assistant Charity Commissioner requiring the trustees to have the institution registered. Section 2 of the Act which contains definitions defines a public Trust in cl. (13) thus:
"an express or constructive trust for either a public, religious or charitable purpose or both. .. .. .. ." to read only the portion relevant for this appeal. The other material provision is S.9 of the Act which defines "charitable purpose." The purposes defined include:

• exclusively to sports, or
• exclusively to religious teaching or worship."

There are certain other provisions of the Act to which our attention was drawn during the course of the arguments but as both their construction as well as their constitutional validity which were the subject of debate before us would arise only if the Trust were a public charitable Trust within the definition in S. 2(13) read with S. 9, we propose immediately to proceed to consider the submissions made by learned Counsel in relation to this crucial point.


36. Bal Gangadhar Tilak executed a will on April 5, 1918 and died on August 1, 1920. On August 16, 1920 his two sons and the executor appointed by him under the will executed a trust deed, Ex. 12, in respect of two newspapers "The Kesari" and "The Mahratta," and the property and the machinery pertaining thereto. The question is whether the trust created under the said document is a public trust within the meaning of the Bombay Public Trusts Act, 1950 (Bombay Act XXIX of 1950), hereinafter called the Act. The material provisions of the Act read:
"Section 2. (13) 'public trust' means an express or constructive trust for either a public, religious or charitable purpose or both and includes a temple, a math, a wakf, a dharmada or any other religious or charitable endowment and a society formed either for a religious or charitable purpose or for both and registered under the Societies Registration Act 1860."
"Section 9. For the purpose of this Act, a charitable purpose includes --

1. relief of poverty or distress,
2. education,
3. medical relief, and
4. the advancement of any other object of general public utility but does not include a purpose which relates---

• exclusively to sports, or
• exclusively to religious teaching or worship."

38. Before doing so, it would be convenient to consider the scope of S. 9(4) of the Act for it is agreed that the trust is not covered by the other clauses of the section. It is common place to observe that where the language of an Act is clear and explicit, we must give effect to it, for the words of the statute speak the intention of the Legislature. When the words of a statute are unambiguous, it would be safe to consider them without reference to cases. The words of cl. (4) of S. 9 of the Act are of the widest amplitude and are free from any ambiguity. The key-words are "general public utility." @page-SC1604 ''General" means pertaining to a whole class; "public" means the body of the people at large, including any class of the public; "utility" means usefulness. Therefore, the advancement of any object of usefulness or benefit to the public or a section of the public, as distinguished from an individual or group of individuals, is a charitable purpose. The clause excludes expressly two purposes, namely, a purpose which relates exclusively to sports and a purpose which relates exclusively to religious teaching or worship, from the purposes mentioned in cl. (4) indicating thereby that all objects of general public utility, except those expressly excluded therefrom, are included in the general words used in cl. (4). Whenever a question arises whether a particular purpose is a charitable one within the meaning of that clause, one has to ask the question whether its object is to benefit the public.


AIR 1964 Supreme Court 1823
(V 51 C 257)
(From : Mysore)*
29th January, 1964
B.P. Sinha C.J.I., K. Subba Rao, Raghubar Dayal, N. Rajagopala Ayyangar and J.R. Mudholkar, JJ. (1) R. Chitralekha (In C. A. No. 1056 of 1963) (2) Venkatesubba Reddy (In C. A. No. 1057 of 1963), Appellants v. State of Mysore and others. (In both the appeals) Respondents.

12. So too, highly qualified educationists were appointed to the Selection Committee for the Engineering Colleges. By notification dated July 6, 1963, in respect of the Engineering Colleges and a similar notification issued in respect of the Medical Colleges, the Government prescribed that in addition to the examination marks in optional subjects there should be an interview of students for which the maximum marks prescribed shall be 25 per cent. of the maximum marks of the optional subjects. The Selection Committee has to allot marks, having regard to general knowledge, aptitude and personality, previous academic career, including special distinctions etc., N.C.C., A.C.C. etc., extra-curricular activities including sports, social service, debating, dramatics etc. It is, therefore, clear that the Government by its order not only laid down a clear policy and prescribed definite criteria in the matter of giving marks at the interview but also appointed competent men to make the selection on that basis. The order of the Government does not in any way contravene Art. 14 of the Constitution.

12. So too, highly qualified educationists were appointed to the Selection Committee for the Engineering Colleges. By notification dated July 6, 1963, in respect of the Engineering Colleges and a similar notification issued in respect of the Medical Colleges, the Government prescribed that in addition to the examination marks in optional subjects there should be an interview of students for which the maximum marks prescribed shall be 25 per cent. of the maximum marks of the optional subjects. The Selection Committee has to allot marks, having regard to general knowledge, aptitude and personality, previous academic career, including special distinctions etc., N.C.C., A.C.C. etc., extra-curricular activities including sports, social service, debating, dramatics etc. It is, therefore, clear that the Government by its order not only laid down a clear policy and prescribed definite criteria in the matter of giving marks at the interview but also appointed competent men to make the selection on that basis. The order of the Government does not in any way contravene Art. 14 of the Constitution.

25. Even assuming for the time being that the Government of Mysore had the power both under the Constitution and under a law enacted by the Legislature to prescribe qualifications for admission to any Colleges in the State, including colleges imparting technical or professional education, the first question is whether there was in fact a Government Order justifying the course adopted by the Selection Committee. It may be mentioned that the document which was filed in the High Court as being the Government Order was merely a communication addressed on behalf of the Government by one of its Secretaries to the Selection Committee and signed by an Under Secretary. But this document only refers to the interview prescribed for making selections of candidates for admission to Engineering Colleges. At the hearing in this Court the Attorney-General who appeared for the State of Mysore stated that there was a Government Order also as regards admission to Medical Colleges, that it was actually brought to the notice of the High Court and that he may be permitted to produce that order. Leave was granted by us to him to do so. On December 20, 1963, that is, after judgment has been reserved, Mr. Achar, Assistant Government Advocate, placed on record, what according to the State, is the Government Order. This document, however, was not a part of the record of the writ petitions and the only manner in which the so-called Government Order relating to admission to Medical Colleges was brought to notice of the High Court was by specifying in Dr. Dharmaraj's affidavit, the number of the letter addressed by a Secretary to the Government to the Selection Committee dealing with admissions to the Medical Colleges. It is desirable to reproduce in extenso the document which has been filed now in this Court. It runs thus :-
"Government of Mysore
Confidential : Mysore Government Secretariat,
Vidhana Soudha,
No. PLM 351 MMC 63 Bangalore, dated 12th July, 63.
SE 1885
From
The Secretary to Government of Mysore, PH,
Labour and Munl. Admn. Department,
Bangalore.
To
The Chairman, Selection Committee and Dean,
Medical College, Mysore.
Sir,
Subject : Award of marks for the interview of the candidates seeking admission to Medical Colleges in the State.
I am directed to state that Government have decided that 25% of the maximum marks for the examination in the optional subjects taken into account for making the selection of candidates for admission to Medical Colleges, shall be fixed as interview marks.
I am further to state that the Selection Committee is authorised to allot marks for the interview of the candidates as fixed above, having regard to the following factors :

• General Knowledge.
• Aptitude and personality.
• Previous academic career including special distinction, etc.
• N. C. C., A. C. C. etc.
• Extra curricular activities including sports, social service, debating, dramatics etc.

I am also to state that Government have decided that students with exceptional merit in games and sports-State and inter-State standard-may be selected upto a maximum of two percent of the total number of seats.
Yours faithfully,
Sd. L. G. Desai
Under Secretary to Government,
PH. Labour and Munl. Administration. Dept.
Attested
Sd/- H. L. Lingaraj Urs,
Dy. Secretary to Govt.
PH. Lb. & ML. Admn."

(5) Extra curricular activities including sports, social service, debating, dramatics etc. While the first and the third of these matters would be of some relevance in deciding who should be allowed a chance to be future doctors what relevance the other three matters have it is difficult to appreciate. Further "aptitude and personality" would be a matter entirely for the subjective satisfaction of the selector and is in itself quite vague. Then again the total marks under these heads are as high as 75 and there is no allocation of marks under the different heads. Thus if the selectors choose @page-SC1842 to allocate say 30 or 40 marks for "personality" many meritorious candidates may go far down in the list prepared on the basis of the total of marks at the interview and the P.U.C. Examination. Since the number of marks for the interview is high and according marks for interviews and allocating marks under different heads is left entirely for the Selection Committee to decide, the impact of the alleged directive on the central field must necessarily be regarded as heavy. For, its effect would be to lower further the already alarmingly low standards in our educational institutions.


AIR 1965 Supreme CourtT 1107
(V 52 C 177)
(From Calcutta)*
14th December 1964
A.K. Sarkar, K. Subba Rao, Raghubar Dayal, N. Rajagopala Ayyangar, and J.R. Mudholkar, JJ.
The Corporation of Calcutta and another, Appellants v. Liberty Cinema, Respondent.
(i) Ajoy Kumar Mukherjee (ii) The State of Assam, Interveners.

68. We are thus left with the assistance afforded to us by the scheme underlying the provisions of the Act for determining whether the levy permitted by S. 548 (2) is of the nature of a tax. The submission of Mr. Pathak was that Part IV, no doubt, dealt with rates and @page-SC1133 taxes but merely on that account one cannot draw the conclusion that taxes are not dealt with or permitted to be imposed by other provisions of the Act.

No doubt, if a power to make a levy occurred in a part outside Part IV and it clearly, and unequivecally pointed to the imposition being a tax its effectiveness could not be denied merely because the provision did not appear in Part IV. But on the scheme of the Act we have at least to start with a presumption that Part IV is exhaustive of the taxes which are permitted to be levied by the Corporation. In this connection Mr. Pathak laid some stress on the fact that the nomenclature employed to designate taxes in Part IV was not uniform and that a tax was sometimes called a consolidated rate (vide S. 165) and, though called a tax in the case of taxes on carriages and animals under Ss. 208 and 216, a licence was granted on the payment of a tax, it was called a fee under S. 218 in the case of tax on professions, trades and calling, and similarly in the case of scavenging tax under S. 222, was designated as a fee and a licence fee on advertisements by S. 229. In the face of this difference in the terminology employed learned Counsel stressed that the framers of the Act did not proceed on the differentiation that every fee permitted to be imposed for the grant of a licence was always not a tax. Learned Counsel is, no doubt, right in the submission that Part IV headed 'Taxes' uses the expression "fee" to designate taxes to be imposed upon particular articles or activities but the provisions of the Act and the way the relevant sections are framed make it clear that what is permitted to be charged by these provisions in Part IV is really in the nature of a tax. Besides, in the case of all these imposts, whether, called a tax or a fee, except in the case of a fee on advertisements under S. 229 either the amount of the tax was prescribed or criteria laid down on the basis of which the rate of the levy was to be determined.

In some cases, as the case of profession tax, tax on carts etc., the tax to be imposed is determined by the Act itself. In the case of others like the consolidated rate the maximum percentages are fixed and what is felt to be determined by the Municipal authorities are the fixation of the percentages within the maxima prescribed and the determination of the annual value of the premises for fixing which elaborate procedure is laid down which includes appeals value of the premises for fixing which elaborate procedure is laid down which includes appeals to Court where persons are aggrieved by action of the municipal authorities. One exception to this method of prescribing the tax or its permitted limits is, as already pointed out, S. 229. It is called a licence fee on advertisements but in the context, gives no room for controversy as to whether, it is a tax or a fee.

We are satisfied that an examination of the provisions to which we have referred makes three matters abundantly clear: (1) that is draws a sharp and clear distinction between taxes properly so called and fees, (2) The division into Parts and chapters is logical and clear cut and no matter which properly falls under a subject set out under a Part or chapter-heading is dealt with in any other. Mr. Pathak was not able to point to any instance in which a subject which fell under one Part or even chapter was included in and dealt with in another, and (3) that taxes, by whatever designation they might be called, are all comprehended and dealt with by Part IV and by Part IV alone and that what is permitted to be imposed by S. 548 (2) is only a fee as distinguished from a tax. If one has reference to the entries in the legislative list in schedule VII, what is permitted to be imposed under S. 548 (2) is a fee "in respect of the matters in the list" viz., Entry 5, Entry 6-Public Health and Sanitation, 16-Prevention of cattle trespass, 24 - Industries, 28-Markets and Fairs, 33-Sports, entertainments and amusements. In this view as admittedly there is no correlation between the fee charged and the service rendered in the sense discussed earlier, we must hold that the impugned levy was not authorised and that the learned Judges of the High court were right in granting relief to the respondent.


AIR 1968 Supreme Court 418
(V 55 C 92)
(From Bombay: ILR (1962) Bom 732)
J.C. Shah and J.M. Shelat, JJ.
The Municipality of Taloda, Appellant v. The Charity Commissioner, Bombay and others, Respondents.
Civil Appeal No. 72 of 1965, D/- 28-9-1967.

Section 9 of the Bombay Public Trusts Act provides :
"For the purposes of this Act, a charitable purpose includes-

1. relief of poverty or distress,
2. education,
3. medical relief, and
4. the advancement of any other object of general public utility,

but does not include purpose which relates-

• exclusively to sports, or
• exclusively to religious teaching or worship."

AIR 1968 Supreme Court 554
(V 55 C 118)
(From Industrial Tribunal Madras)*
M. Hidayatulai, V. Bargava and C.A. Vaidialingam, JJ.
The Secretary Madras Gymkhana Club Employees' Union Appellant v. The Management of the Gymkhana Club Respondent.
Civil Apple No. 572 of 1966. D/-3-10-1967

(J) Industrial Disputes Act (14 of 1947), S.2(J) and S.2(K) - Madras Gymkhana Club -Constitutes only a member's self-serving institution - It is not an industry.
AIR 1956 Cal 545 and AIR 1956, Cal 550, Overruled.

The Madras Gymkhana Club which was admittedly a member's club and not a proprietary club, had, at the time of dispute, a membership of 1200. The object of the club was to provide a venue for sports and games and facilities for recreation and entertainment. As part of its latter activities it arranges dance, dinner and other parties and runs a catering department, which provides food and refreshments not only generally but also for dinners and parties on special occasions. The club employs six officers, twenty clerks and a large number of peons, stewards, butlers, gate" attendants, etc. in all 194 employees :
Held, the club was only a member's dub and a member's self-serving institution and not an industry. No doubt the material needs or wants of a section of the community were catered for but that was not enough as it was not done as part of trade or business or as an undertaking analogous to trade or business. AIR 1956 Cal 545 and AIR 1956 Cal 550, Overruled. Case law fully discussed. (Paras 34, 35)

Cases Referred : Chronological Paras
(1964) AIR 1964 SC 903 (V 51) : 1964-2 SCR 458, Harinagar Cane Farm v. State of Bihar 15, 21
(1963) AIR 1963 SC 1873 (V 50) : 1964-2 SCR 703, University of Delhi v. Ram Nath 16, 21
(1962) AIR 1962 SC 1080 (V 49) = 1962 Supp 3 SCR 157, National Union of Commercial Employees
v. M. R. Meher 14
(1961)1 AIR 1961 SC 484 (V 48) : (1961) 2 SCR 480, Ahmedabad Textile Industry Research Association v. State of Bombay 13
(1960) AIR 1960 SC 610 (V 47) : (1960) 2 SCR 866, State of Bombay v. Hospital Mazdoor Sabha 12
(1960) AIR 1960 SC 675 (V 47) : (1960) 2 SCR 942, Corporation of City of Nagpur v. Its Employees 10
(1957) AIR 1957 SC 110 (V 44) = 1957-1 Lab LJ 8, Baroda Borough Municipality v. Workmen 7, 26
(1956) AIR 1956 Cal 545 (V 43) = 60 Cal WN 856, Bengal Club Ltd. v. Santi Ranjan Somaddar 30
(1956) AIR 1956 Cal 550 (V 43) = 60 Cal WN 1035, Royal Calcutta Golf Club Mazdoor Union v. State of West Bengal 30
(1953) AIR 1953 SC 58 (V 40) = 1953 SCR 302, D. N. Banerji v. P. R. Mukhrejee 6, 7, 24, 26
41 Com LR 569, Federated State School Teachers' Association v. State of Victoria 12
26 Com LR 508, Federated Municipal and Shire Council Employees of Australia v. Melbourne Corporation 6, 21
M /s. B. R. Dolia E. C. Agrawala, Champat Rai, Kartar Singh Sun, Ambrish Kumar and P. C:
Agrawala, Advocates for Appellant; Mr. H. R. Gokhale, Senior Advocate, (M/s. M. R. Narayanaswamy Iyer and R. Ganapathy Iyer, advocates, with him) for Respondent.

HIDAYATULLAH, J. :- The Industrial Tribunal, Madras by its award, September 2, 1964 has held that the management of the Gymkhana Club, Madras is not liable to pay bonus to its workmen for the year 1962, as the Club is not 'an industry'. The Madras Gymkhana club Employees Union now appeals to this Court by special leave.
2. The Madras Gymkhana Club is admittedly a members' club and not a proprietary club. On December 31, 1962 its membership was about 1,200 with 800 active members. The object of the club is to provide a venue for sports and games and facilities for recreation and entertainment. For the former, it maintains a golf course, tennis courts, rugby and football grounds and has made arrangement for billiards, pingpong and other indoor games. As part of the latter activities it arranges dance, dinner and other parties and runs a catering department' which provides food and refreshments not only generally but also for dinners and parties on special occasions. The club employs ax officers (a Secretary, a Superintendent and four Accountants and Cashiers), twenty clerks and a large number of peons, stewards, butlers, gate-attendants, @page-SC557 etc. Its catering department has a separate managerial, clerical and other staff. Altogether there are 194 employees. The affairs of the club are managed by a Committee elected annually. Two of the members of the Committee work as Hony. Secretary and Hony. Treasurer respectively.

35. It is said that the case of the club is indistinguishable from the Hospital case. That case is one which may be said to be on the verge. There are reasons to think that it took the extreme view of an industry. We need not pause to consider the Hospital case because the case of a members' club is beyond even the confines established by that case. In our judgment the Madras Gymkhana Club being a members' Club is not an industry and the Tribunal was right in so declaring.


AIR 1968 Supreme Court 1379
(V 55 C 269 )
(From Andhra Pradesh: AIR 1968 Andh Pra. 165)
J.C. Shah, V. Ramaswami and G.K. Mitter, JJ.
State of A.P. and another, Appellants v. P. Sagar, Respondent.
G. Latchanna, Intervener.
Civil Appeal No. 1336 of 1967, D /-27-3-1968.

2. The State of Andhra Pradesh is divided into areas-Telangana and Andhra areas. In 'the Telangana area there are two Medical Colleges having in the aggregate 270 seats for entrants to the medical degree course. In Andhra area there are four Medical Colleges having in the aggregate 550 seats for new entrants. In admitting candidates for the medical degree course by Government Orders Nos. 1135 & 1136-Health Housing and Municipal Administration Department dated June 16, 1966, seats were reserved for Central Government nominees, for N.C.C., A.C.C., President Scouts and Guides, for candidates with sports and extra-curricular proficiency for children of ex-service army personnel, for children of displaced goldsmiths, for candidates from Scheduled Castes and Tribes, for women candidates, for candidates appearing from H.S.C. Multipurpose I. S C. and P.U.C. Examinations and for candidates who had secured the M. Sc. and B. Sc degrees. By Government Order No. 1880 dated July 29, 1966, twenty per cent of the total number of seats were reserved for backward classes in each area, and pursuant thereto the Telangana Rules were amended by G.O. M.S. No. 1784-Health and the Andhra Rules were amended by G.O. M. S. No. 1786-Health dated August 2, 1966 The validity of the Government Orders Nos. 1135 and 1136 was challenged on the ground that they infringed the fundamental freedoms guaranteed under Articles 15 (4), 16 (4) and 29 (2) of the Constitution. The High Court held that in reserving seats for nominees of the Central @page-SC1381 Government and from other States for cultural scholars, for women, for graduates and for students from H.S.C. and P.U.C. Courses, no fundamental rights were infringed, but the reservations for members of the backward classes described in the list prepared by the Governments of Andhra Pradesh were invalid.