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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