1977 (1) TMI 17 - HC - Income Tax

Summary

Issues:
Whether the receipts on account of mandir, gaushala, and dharmada were trading receipts in the hands of the assessee.

Analysis:
The judgment delivered by the High Court of Allahabad addressed the question of whether the receipts on account of mandir, gaushala, and dharmada were considered trading receipts in the hands of the assessee. The assessee, a commission agency, levied charges for dharmada, mandir, and gaushala on its constituents. The Income-tax Officer disallowed the claim that these receipts were exempt and brought them to tax. However, the Tribunal, relying on previous court decisions, upheld the assessee's claim. The Tribunal found that these charges were not treated as trading receipts or surcharge on the sale price, but rather were specifically paid by customers for the mentioned purposes. The Tribunal inferred that a trust was created, and the assessee held these receipts in trust for the intended purposes. The court agreed with the Tribunal's findings and held that these receipts did not form part of the price of the commodities sold.

The Tribunal referred the question of law to the High Court, which had previously addressed a similar issue in the case of Thakur Das Shyam Sunder v. Additional Commissioner of Income-tax. The High Court had held that receipts under the head dharmada were not trading receipts and were not taxable. The court noted that the principle applied to the receipts under mandir and gaushala as well. This decision was followed by the Punjab and Haryana High Court in a similar case, where receipts held for charitable purposes were not considered as income.

The revenue contended that the assessee had sometimes diverted part of the collected monies for other purposes like political contributions. However, the court found that such diversions did not change the initial nature and character of the receipts. It was also noted that even if the firm had less cash than the total balances under the three heads, it did not affect the true nature of the receipts. The court ultimately held that the receipts on account of mandir, gaushala, and dharmada were not trading receipts and therefore not taxable in the hands of the assessee. The assessee was awarded costs for the case.