1969 (11) TMI 4 - HC - Income Tax

Amounts paid by the customers of the assessee on account of dharmada or charity - fact that it was a compulsory levy does not, ipso facto, impress the same with the character of a trading receipt - money received were never his income, hence not liable to tax

Issues Involved:
1. Whether the sum of Rs. 21,898 was the assessee-company's income liable to tax in the assessment year 1951-52.
2. Whether the sums of Rs. 17,242, Rs. 4,010, and Rs. 904 were the assessee-company's income liable to tax in the assessment year 1952-53.

Detailed Analysis:

Issue 1: Taxability of Rs. 21,898 for Assessment Year 1951-52
The primary issue was whether the amount of Rs. 21,898 collected by the assessee-company as dharmada (charity) from its customers constituted taxable income. The company did not credit these amounts to its trading account but maintained a separate "dharmada account." The Tribunal held that the amounts could not be regarded as held in trust for charitable purposes and partook the character of trading receipts. The Tribunal concluded that the amounts were akin to a surcharge on the price of goods, thus making them taxable.

However, the High Court referenced the case of Agra Bullion Exchange Ltd. v. Commissioner of Income-tax, where it was held that amounts collected as dharmada were not the income of the assessee but were held for charity. The court observed that the amounts were credited in a separate account and were never treated as trading receipts. Following this precedent, the High Court held that the amounts collected by the assessee were not its income and were merely passed on for charitable purposes.

Issue 2: Taxability of Rs. 17,242, Rs. 4,010, and Rs. 904 for Assessment Year 1952-53
Similar to the first issue, the sums of Rs. 17,242, Rs. 4,010 (interest), and Rs. 904 (collected from brokers) were also added to the assessee's income by the Income-tax Officer. The Tribunal upheld this addition on the grounds that these amounts were not held in trust and were trading receipts.

The High Court again referred to the Agra Bullion Exchange Ltd. case, reiterating that such amounts collected for dharmada were not part of the assessee's income. The court emphasized that the amounts were specifically credited to a separate dharmada account and not treated as trading receipts. The court also noted that the compulsory nature of the levy did not automatically render it a trading receipt.

Additional References and Distinctions:
- The court distinguished this case from Kanpur Agencies Private Ltd. v. Commissioner of Income-tax, where the amounts were not specifically earmarked for charity.
- The court also differentiated the present case from Commissioner of Income-tax v. Thakur Das Bhargava, where the amount was deemed professional income.
- The decision of the Bombay High Court in East India Chamber of Commerce Ltd. v. Commissioner of Income-tax was also considered, but it was noted that the facts and claims in that case were different.

Conclusion:
The High Court concluded that the amounts collected as dharmada did not constitute the income of the assessee. Consequently, both questions were answered in the negative and in favor of the assessee. The Commissioner of Income-tax was directed to pay Rs. 200 as costs to the assessee.

Summary:
The High Court of Allahabad ruled that the amounts collected by the assessee-company as dharmada (charity) were not taxable income. The court held that these amounts were not trading receipts but were held for charitable purposes, following the precedent set in Agra Bullion Exchange Ltd. v. Commissioner of Income-tax. Both issues were resolved in favor of the assessee, and the Commissioner of Income-tax was ordered to pay costs.

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