9911796707
|
Home
Issues:
1. Whether the amount collected by the assessee for charitable purposes constitutes its income liable to tax? Analysis: The case involved a registered firm engaged in the purchase and sale of utensils, which collected dharmada from its constituents during the assessment year 1972-73. The total collections amounted to Rs. 4,625, out of which the firm disbursed Rs. 5,370 for charitable purposes, including donations to various institutions. The firm contended that the collections were not income but customary collections meant for charitable purposes. However, the Income Tax Officer (ITO) disallowed the claim, leading to appeals. The first appeal before the Appellate Assistant Commissioner (AAC) was dismissed on the grounds that the collected amounts were not entirely spent for charitable purposes. Subsequently, the firm appealed to the Income-tax Appellate Tribunal, which also ruled against the firm. The Tribunal held that since the firm had full control over the collected money and could spend it as desired, the principle laid down by the Supreme Court in CIT v. Sitaldas Tirathdas was not applicable. The definition of "charitable purpose" under section 2(15) of the Income Tax Act was considered, which includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not for profit. The High Court noted that the donations made by the firm did not involve any profit-seeking activity. It was emphasized that even donations to entities like employees' unions or political parties could be considered charitable if they served a general public utility purpose. The High Court referred to the Supreme Court's decision in CIT v. Bijli Cotton Mills (P.) Ltd., emphasizing that the nature of the payments, even if customary, did not transform them into trading receipts. The Court highlighted that the firm maintained a separate charity account and the amounts were never credited to the trading account or profit and loss statement. Therefore, the Tribunal's view that no trust was created by the customers in respect of the collected amounts was deemed erroneous. In conclusion, the High Court ruled in favor of the assessee, holding that the collected amounts for charitable purposes were not to be considered as income liable to tax. The judgment was made based on the wide definition of charitable purposes and the specific circumstances of the case, overturning the decisions of the lower authorities.
|
