1993 (3) TMI 318 - SC - Income Tax

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? Held that - Appeal allowed. 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 - the judgment and order of the High Court is set aside and the application filed by Revenue under Section 256(2) is allowed.

Summary

Issues:
1. Interpretation of Section 256(2) of the Income Tax Act regarding the assessability of receipts under the name of 'DHARMADA' as revenue.
2. Determination of whether amounts collected as 'DHARMADA' were utilized for charitable purposes or for the business's own benefit.
3. Application of legal precedent regarding the inclusion of amounts kept in a separate account and used for charitable purposes in the assessee's income.
4. Granting of leave and direction for stating questions under Section 256(2) in related appeals and special leave petitions.

Analysis:
The Supreme Court considered an appeal against the Punjab and Haryana High Court's decision on the assessability of receipts under the name of 'DHARMADA' by the Revenue under Section 256(2) of the Income Tax Act. The Revenue contended that the amount collected was not meant for charity but for the business's own purposes, based on the assessee's written reply. The Court noted that amounts collected as 'DHARMADA' for charitable purposes and kept in a separate account are not taxable. However, in this case, the Revenue argued that the collected amounts were not utilized for charity. The Court held that the High Court should have directed the Tribunal to state the question under Section 256(2) for further consideration, allowing the appeal and setting aside the High Court's decision.

In related appeals and special leave petitions involving the same assessee, the Court granted leave and directed the Tribunal to state questions under Section 256(2) for opinion. The Court emphasized the need for clarity on whether the amounts charged in 'bilties' in various assessment years were assessable as revenue receipts. The judgments in these matters aligned with the decision in the initial appeal, allowing the appeals and petitions in the same terms.

The Court's analysis focused on the distinction between amounts collected for charitable purposes and those utilized for business interests. It underscored the importance of proper interpretation of tax laws and adherence to legal precedents. By granting leave and directing the Tribunal to address specific questions under Section 256(2), the Court aimed to ensure a thorough examination of the issues raised by the Revenue regarding the assessability of the collected amounts. The judgments in all related matters reflected a consistent approach in addressing the legal complexities surrounding the taxation of receipts under the name of 'DHARMADA' in the transport business.