1993 (3) TMI 5 - 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 at Re. 1 per bilty per customer through the bills and credited to a separate account called Dharmada was not assessable to tax as revenue receipt

Summary

Issues:
1. Assessment of amount collected as Dharmada by transport company for charitable purposes.
2. Interpretation of whether amounts collected as Dharmada were used for charitable purposes or business purposes.
3. Direction to Tribunal to state questions under section 256(2) of the Income-tax Act.

Analysis:
The Supreme Court addressed the issue of assessing an amount collected as Dharmada by a transport company for charitable purposes. The Revenue contended that the collected amount was used for business purposes rather than charity. The respondent argued that the amount was collected as per industry custom for charitable distribution. The Income-tax Officer included the amount in business income, but the Appellate Assistant Commissioner and Tribunal ruled in favor of the respondent. However, the Court noted the respondent's written explanation that the money was distributed to gain cooperation, not for charity. The Court held that the High Court should have directed the Tribunal to state the question under section 256(2) of the Act for clarification.

Regarding the interpretation of whether the amounts collected as Dharmada were used for charitable or business purposes, the Court referred to a previous judgment stating that amounts kept in a separate account and utilized for charitable purposes are not taxable. However, in this case, the Revenue argued that the collected amounts were not used for charity based on the respondent's written reply. The Court found that the High Court should have directed the Tribunal to clarify the matter under section 256(2) of the Act to determine the true nature of the collected amounts.

The Court allowed the appeal, set aside the High Court's judgment, and directed the Tribunal to state the question under section 256(2) for clarification. Additionally, the Court addressed related appeals and special leave petitions involving similar issues with different parties engaged in the transport business. The Court granted leave in the special leave petitions and allowed all appeals in the same terms as the initial appeal, emphasizing the need for clarification on the assessment of amounts charged in 'bilties' for various assessment years.