9911796707
TMI Blog1978 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... annas per bale of cotton. In the bills issued to the customers these amounts were shown in a separate column headed dharmada. The assessee did not credit the amounts of dharmada so realised by it in its trading account but it maintained a separate account known as the "dharmada account" in which realisations on account of dharmada were credited and payments made out were debited from time to time. It appears that at a meeting of the board of directors of the assessee-company held on January 15, 1945, the board passed a resolution that the monies standing in the "dharmada account" be treated as trust fund of which Lala Nawal Kishore and Lala Ram Babulal, two directors of the company, be the trustees and it was further declared that all the monies realised in future by the company on sale of yarn from the purchasers at the rate of one anna per bale or at such rate as may be decided in future be handed over to the trustees for being utilised in such altruistic, religious and charitable purposes as may be decided upon by them, and that the trustees shall in particular utilise such funds for the advancement of education and the alleviation of misery and sickness of the public in genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a confirmation of the fact that the amounts were held in trust by the assessee and that the deed dated October 3, 1950, was merely a declaration of the acceptance of the trust by the two trustees mentioned therein; in other words, it was contended that the customers of the assessee created a trust by paying the amounts as dharmada and, the amounts having been earmarked for charitable purposes only they were not the assessee's income liable to tax. The Tribunal negatived the claim of the assessee on two grounds, first, that the amounts in question could not be regarded as having been received or held by the assessee under a trust for charitable purposes, the trust being void for vagueness and uncertainty and, secondly, that the realisations partook of the character of trading receipts. At the instance of the assessee, the matter, was carried to the High Court by way of two references, Income-tax Reference No. 329 of 1964 being in relation to the amounts concerned in the two assessment years 1951-52 and 1952-53 and Income-tax Reference No.454 of 1965 being in relation to the amount concerned in the assessment year 1953-54. In the former reference, the High Court approached the ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customers' point of view must be regarded as a part of the consideration or price for the goods purchased by them from the assessee. He urged that such compulsory levy would be in the nature of a premium or surcharge on the price and as such will have to be regarded as a trading receipt. In that behalf reliance was placed upon two decisions, one of the Andhra Pradesh High Court in Poosarla Sambamurthi v. State of Andhra [1956] 7 STC 652 and the other of Madras High Court in N. S. Pandaria Pillai v. State of Madras [1973] 31 STC 108, where similar amounts charged by the assessee as and by way of dharmam in the former case and mahimai in the latter case were held to be part of the price includible in the taxable turnover of the assessee. Secondly, he contended that it is well settled that a gift for dharmam or dharmada is void for vagueness and uncertainty and, therefore, when the dharmada amounts were paid by the customers and received by the assessee these amounts could not be regarded as "property held under trust or other legal obligation for charitable purposes" within the meaning of s. 4(3)(i) of the Act and in this behalf strong reliance was placed upon the meanings given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recognised. He further urged that the compulsory nature of the payment did not affect or alter the initial character of the receipts which were earmarked for charity and, therefore, such receipts could not be regarded as trading receipts, not being any part of the price nor even a surcharge on the price. In support of his contentions counsel strongly relied upon the decision of this court in CIT v. Tollygunge Club Ltd. [1977] 107 ITR 776 (SC). Having regard to the rival contentions noted above, it seems to us clear that there are two aspects that are required to be considered for determining the question raised in these appeals but in a sense the two aspects are so inter-related that they would represent the two sides of the same coin. The one aspect is what is the true nature or character of these receipts, whether they constitute a part of the price received by the assessee while effecting sales of yarn or cotton and are, therefore, trading receipts of the assessee ? The other aspect is whether these realisations are property held under trust or other legal obligation for charitable purposes or not ? And this depends upon whether the earmarking of these payments for dharmada cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept of dharmada as vague or uncertain as the concept of dharma? The two allied concepts of dharma and dharmada will have to be considered together. It is true that as early as in 1899, the Privy Council in Ranchordas Vandravandas v. Parvatibai [1899] LR 26 IA 71; ILR 18 Bom 725, declared a bequest or a gift to dharma (dharm) simpliciter to be void, the concept being vague and uncertain and in that behalf the Privy Council relied upon the meaning of that expression as given in Prof. Wilson's Glossary of Judicial and Revenue Terms, where the expression is stated to mean "law, virtue, legal or moral duty", derived from the Sanskrit verb dhri meaning "to hold" that which keeps a man in the right path. Accepting the aforesaid meaning of the expression dharma, the Privy Council observed thus: "In Wilson's Dictionary 'Dharam' is defined to be law, virtue, legal or moral duty ... The objects which can be considered to be meant by that word are too vague and uncertain for the administration of them to be under any control." By this decision, the Privy Council gave its imprimatur to the view which prevailed in the Presidencies of Bombay and Calcutta for the past 50 years that gifts to dhar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 144, the Bombay High Court has taken the view that where instead of dharma the testator used the English word "charity" that word without any qualifications or limitations denoted public charity and as such the bequest was held to be a valid charitable bequest falling within the definition of "charitable purposes" in s. 4(3)(i) of the Act. Turning to the concept of dharmada (which is the same as dharmadaya) the question is whether that concept could be said to be as vague as the concept of dharma. In Prof. Wilson's Glossary the expression dharmada or dharmadaya is stated to be the vernacular equivalent of the Sanskrit expression dharmadan or dharmadayam and the expression dharmada is explained thus: "Dharmadao, Corruptly, Dharmadow (from Dan or Daya, donation). An endowment, grant of food, or lands, or funds, for religious or charitable purposes." Two other allied expressions, namely, dharmakhaten and dharmarth are explained thus: "Dharmakhaten (Marathi). The head of accounts under which pious or charitable gifts are entered." "Dharmarth (Sanskrit). Any thing given for charitable or pious purposes." In Molesworth's Dictionary (Marathi-English), Second Edition, reprinted 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression "Dharmada" (Dharmadaya) and as such in our view a gift to dharmada or payment for dharmada must be regarded as a gift or payment for religious or charitable purposes and such a gift or payment would not be invalid for vagueness or uncertainty. Apart from the fact that the concept of dharmada or dharmadaya in common parlance means anything given in charity or for religious or charitable purposes, it cannot be disputed that among the trading or commercial community in various parts of this country a gift or payment for dharmada is by custom invariably regarded as a gift to charitable purposes. In Thakur Das Shyam Sundar v. Addl. CIT [1974] 93 ITR 27, a Full Bench decision of the Allahabad High Court, the question was whether when the assessee, who carried on business as a commission agent, charged on every transaction of sale of goods worth Rs. 100 a sum of 15 paise from the person to whom goods were sold and 10 paise from the person whose goods were sold as dharmada and credited the amounts thus collected in a separate dharmada account which was held by him to be utilized specifically and exclusively for charitable purposes, the amounts so collected by him were liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the custom of collecting dharmada amounts by traders from their customers or constituents which casts an obligation on the traders to spend the same only on some charitable purpose. In other words, a gift or payment for dharmada is by commercial or trading custom invariably regarded as a gift for charitable purposes and as such there is no question of there being any vagueness or uncertainty about the object for which such gift or payment has to be utilized. Counsel for the revenue sought to contend that the custom referred to in Thakur Das Shyam Sunder's case [1974] 93 ITR 27 (All) [FB] should be regarded as being prevalent only in the district of Shahjahanpur from which the case arose. It is not possible to accept this contention, for, it is common knowledge that such customary levy for dharmada is frequently collected by traders from their customers in several parts of the country. A similar custom creating the obligation to spend the dharmada amounts exclusively on charitable purposes was invoked or resorted to by the Punjab and Haryana High Court in the case of CIT v. Gheru Lal Bal Chand [1978] 111 ITR 134, where the assessee who carried on business in districts of Abohar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent's receipts from the surcharge levied on admission tickets for purposes of charity could not be included in the respondent's taxable income. On further appeal, this court held, confirming the decision of the High Court, that the surcharge was not a part of the price for admission but was a payment made for the specific purpose of being applied to local charities. At page 780 of the report, this court has observed thus: "The surcharge is undoubtedly a payment which a race-goer is required to make in addition to the price of admission ticket if he wants to witness the race from the club enclosure, but on that account it does not become part of the price for admission. The admission to the enclosure is the occasion and not the consideration for the surcharge taken from the race-goer. It is true that but for this insistence on payment of the surcharge at the time of admission to the enclosure, the race-goer might not have paid any amount for local charities. But that does not render the payment of the surcharge involuntary, because it is out of his own volition that he seeks admittance to the enclosure and if he wants such admittance, he has to pay not only the price of the admiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent from the above discussion that none of the aspects are such as would lend support to the inference drawn by the Tribunal. We have already dealt with the alleged compulsory nature of the levy and have pointed out that the dharmada amounts cannot be said to have been paid involuntarily by the customers and in any case the compulsory nature of the payments, if there be any, cannot impress the receipts with the character of being trading receipts. Further, it is not possible to accept the submission that the customers being illiterate did not appreciate that they were paying the amounts with a view to create a trust, especially when it has been found that such payments were made pursuant to a custom which obtained in the commercial and trading community; indeed, being a customary levy the constituents or customers, whether literate or illiterate, would be knowing that the additional payments over and above the price were meant for being spent by the assessee for charitable purposes. Further, the fact that the assessee would be having some discretion as regards the manner in which and the time when it should spend the dharmada amounts for charitable purposes would not detract from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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