Full Judgment Text
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PETITIONER:
COMMISSIONER OF INCOME TAX (CENTRAL), LUDHIANAETC. ETC.
Vs.
RESPONDENT:
AMRITSAR TRANSPORT COMPANY PRIVATE LIMITED ANDANR.
DATE OF JUDGMENT31/03/1993
BENCH:
JEEVAN REDDY, B.P. (J)
BENCH:
JEEVAN REDDY, B.P. (J)
VENKATACHALA N. (J)
CITATION:
1993 SCR (2) 874 1993 SCC Supl. (3) 546
JT 1993 (3) 647 1993 SCALE (2)373
ACT:
Income tax Act, 1961:
Section 256(2)--Assessee collecting amounts for
charity--Whether to be added as revenue receipts-Question
fit to be referred to High Court--Direction to Tribunal.
HEADNOTE:
The question involved in these appeals was whether the
amounts collected for spending on charity and kept in a
separate account for Dharmadha could be included in the
business income of the assessee. The explanation that these
amounts were distributed among the poor relatives of the
labourers and to the girls in their families at the time of
marriage, was not accepted by the Income-tax Officer as a
charity. He added the entire dharmadha amounts to the
business income of the appellant-assessees. On appeal the
Appellate Assistant Commissioner deleted the said additions,
and the Tribunal confirmed the deletions. Revenue filed ap-
plications before the High Court for reference. The High
Court having dismissed the applications, Revenue preferred
the present appeals contending that the assessees were using
the amounts collected in the name of dharmadha for business
purposes.
Allowing the appeals, this Court,
HELD:1. So far as the inclusion of amounts collected as
Dharmada which are kept in a separate account and are
utilised for charitable purposes is concerned, there can be
no dispute that they are not liable to be included in the
income of the assessee. The Revenue’s case is that though
collected in the name of Dharmada, these amounts were
neither meant for any charitable purpose nor were they spent
on charitable purposes. In these circumstances, the High
Court ought to have directed the Tribunal to state the
question under Sec.256(2) of the Income tax Act,
875
1961, as to whether such amounts could be assessed to tax as
revenue receipts. The Tribunal is directed to do so. [877
A-C]
JUDGMENT:
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3522(NT) of
1979.
From the Order dated 24.1.1979 of the Punjab and Haryana
High Court in Income Tax Case No.50 of 1978.
WITH
(C.A. NOS. 2456(NT)/78, 5987-88(NT)/90,1368(NT)/82,1549-
57(NT)/93 & 1558(NT)/93.
G.Vishwanatha Iyer, C. Ramesh, T.V. Ratnam and Ayyam
Perumal for P. Parmeswaran for the Appellants.
C.S. Aggarwal for B.V. Desai for the Respondents.
The Judgment of the Court was delivered by
B.P. JEEVAN REDDY, J. Civil Appeal No.2456(NT) of 1978.
This appeal is preferred against the judgment and order of
the Punjab and Haryana High Court dismissing an application
filed by the Revenue under Section 256(2) of the Income Tax
Act. The question which the Revenue wanted to raise reads
thus:
"Whether on the facts and in the circumstances
of the case, the Tribunal was right in holding
that the receipt of Rs.1,38,577 realised @1
per bilty per customer through the bills and
credited to a separate account called
’DHARMADA’was not assessable to tax as revenue
receipt?"
The case of the Revenue briefly stated is to the following
effect: the assessee is a private Ltd. company engaged in
the business of transport. During the accounting period
ending January 31, 1970 relevant to the assessment year
1970-71, the respondent collected an amount of Rs.1,38,577
on account of DHARMADA. The Income Tax Officer called upon
the respondent- assessee to explain why the said amount
should not be treated as its trading receipt. The
respondent’s case was that according to the custom
prevailing in the transport business, he two collected Re.1
876
per bilty for spending on charitable purposes. He stated
that out of this amount collected, a major portion was spent
on charity and that the balance of Rs.8,871 was carried over
in the separate account kept for DHARMADA. His case was
that this amount was never credited to his income account
and it always constituted a distinct account. This explana-
tion was not accepted by the Income Tax Officer who included
the said amount of Rs.1,38,577 in the business income of the
respondent. On appeal, the Appellate Assistant Commissioner
accepted the respondent’s contention and deleted the said
addition. The Tribunal confirmed the same. However, says
the counsel, the true state of affairs is disclosed from the
assessees’ own letter extracted in the assessment order.
When called upon to explain the collection of the said
amount and its purpose, the assessee submitted a reply in
writing stating as under:
"It is customary in the Transport business to
collect/charge DHARMADA, at the rate of Re.1
per Bilty. Not only this but also all the
Transport Companies, charge/collect this
customary Dharmada.
2. This amount is meant for distribution to
the poor relatives of labourers working in the
business premises and also to give at the time
of marriages of girls in their families. This
is just to get full cooperation from them.
3. The company has nothing to do with this
collection as it has to distribute the same."
It is thus evident, says the counsel for the Revenue, that
the amount though collected in the name of Dharmada was
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neither meant for charity nor was it ever spent on
charitable purposes. Distribution of the said money among
the "poor relatives of the labourers working in the business
premises (of the assessee) and also to give at the time of
marriages of girls in their families" cannot be called a
charitable purpose. Indeed, according to the respondent,
himself these amounts were distributed among them with a
view "to get full cooperation from them." According to
learned counsel, the assessee is really using the money
collected in the name of Dharmada for his own business
purposes. In the above circumstances, say the counsel, the
High Court ought to have directed the Tribunal to state the
aforesaid question under Sec.256(2) of the Act,
877
So far as inclusion of amounts collected as Dharmada which
are kept in a separate account and are utilised for
charitable purposes is concerned, there can be no dispute
that they are not liable to be included in the income of the
assessee vide CL T. v. Bijli Cotton Mills (P) Ltd., 116
I.T.R. 60 but the Revenue’s case herein is that though
collected in the name of Dharmada, these amounts were
neither meant for any charitable purpose nor were they spent
on charitable purposes. In support of the same they rely
upon the aforesaid written reply of the respondent-assessee
itself.
In our opinion this was a proper case where the High Court
ought to have directed the Tribunal to state the said
question under Section 256(2) of the Act. We do not think
it necessary to say more than this on this occasion, lest it
may prejudice the case of the parties at the hearing of the
reference.
The appeal is accordingly allowed, the judgment and order of
the High Court is set aside and the application filed by
Revenue under Section 256(2) is allowed. The Tribunal shall
state the aforesaid question for the opinion of the High
Court under Section 256(2) of the Act. No order as to
costs.
CIVIL APPEAL NO.3522(NT)179, 1368(NT)182, 5987-88 (NT)190
AND S.L.P. (C) No.8353185.
These appeals and Special Leave Petition pertain to the very
same assessee who is the respondent in Civil Appeal
No.2456(NT) of 1978. For the reasons given hereinabove,
leave is granted in S.L.P. (C) No.8353 of 1985 and all these
appeals are allowed in the same terms as the appeal
No.2456(NT) of 1976.
S.L.P. (C) NOS-3257-3265 OF 1979.
The facts in these Special Leave Petitions are identical to
the facts in Civil Appeal No.2456(NT) of 1978, though the
assessee is different. The assessee too is engaged in
transport business. No separate argument is addressed in
these matters. Leave granted in all these Special Leave
Petitions. For the reasons stated in the judgment in Civil
Appeal No.2456(NT) of 1978, these appeals too are allowed
and the Tribunal is directed to state the following question
for the opinion of the High Court under Section 256(2) of
the Act.
878
"Whether on the facts and in the circumstances
of the case, the Appellate Tribunal is right
in Law in holding the of Rs.5506, Rs.26,039,
Rs33,385, Rs.49,634 and Rs.57,902 charged in
‘bilties’ in the assessment years 1967-68 to
1971-72 are not assessable to tax as revenue
receipts. it
No costs.
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G.N. Appeals allowed.
879