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Issues:
1. Taxability of 'laga receipt' collected by the assessee. Analysis: The judgment pertains to the taxability of 'laga receipt' collected by the assessee firm during the sale of cotton. The Income Tax Officer (ITO) added the amount of laga receipt to the assessee's income, but the Appellate Assistant Commissioner (AAC) excluded it from taxable income. The Tribunal, following a decision of the Allahabad High Court, upheld the exclusion of laga receipts from the assessee's income. The Tribunal found that the laga receipts were collected under a custom obligating the assessee to spend the amount on charity alone, thus not constituting income. The Tribunal noted that the facts of the case were similar to the Allahabad High Court decision and concurred with the AAC's decision to exclude laga receipts from income. Moreover, the judgment references the Supreme Court case of CIT v. Tollygunge Club Ltd., where a similar question arose regarding an additional fee for charity imposed by a club. The Supreme Court held that if an obligation in the nature of trust was created before the amount reached the assessee, it would not constitute income. Applying this principle to the present case, the High Court found that the nature of the 'gam laga' impost, not challenged by the revenue, imposed an obligation in the nature of trust at the time of payment. Therefore, the High Court concluded that the laga receipts were diverted for charity before becoming income, and thus, were not taxable. The High Court rejected the reference made by the Commissioner in favor of the assessee, with costs to be paid by the Commissioner.
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