9911796707
TMI Blog1996 (6) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... r it could be understood as the business income of the assessee-firm and consequently as to whether the Income-tax Appellate Tribunal was justified in directing the Income-tax Officer to exclude these amounts from the income of the assessee. To be precise the questions are as follows : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the Income-tax Officer was not justified in including the amount of Rs. 2,08,400 as the business income of the assessee and was the Tribunal right in law in directing the Income-tax Officer to exclude this amount from the income of the assessee ? 2. Whether, on the facts and in the circumstances of the case, the contribution to Muthoottu Char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows : " From the amount forgone by the successful bidder five per cent. will be set apart to meet the chitty expenses and from the balance amount, 25 per cent. will be given to Muthuttu Charitable Trust and the remaining amount will be distributed among all the subscribers. " A bare reading of the said clause would show that from and out of the amount --- the margin of discount --- forgone by the successful bidder or subscriber, five per cent. is set apart to meet the chitty expenses, 25 per cent. from the remaining balance is to be given to the Muthuttu Charitable Trust leaving the remaining balance for distribution amongst all the members, commonly known in common parlance as the bonus or commission of the subscriber. The question is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and two annas per bale of cotton, being particular in seeing that the collection was set apart separately in an account also described as " Dharmada ". The first appellate authority considered the position in the light of certain positions declared by the Supreme Court in regard to this process of realisation of the amount on account of " Dharmada ". Some of the factors taken into consideration by the Supreme Court show that the payments were earmarked for charity right from the inception of the receipt thereof. The other aspect revealed that the payments could not be regarded as part of the price or a surcharge on the price of goods purchased by the customers and payments were undoubtedly in addition to the price, emphasizing that purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to the effect that the amounts would have to be understood as the income of the firm. However, the question was considered by the Income-tax Appellate Tribunal in a different way altogether. The Tribunal has observed that when the subscribers of the chitties pay their instalments to the assessee-firm they are not paying any part of such instalments towards charity but subscribers' payment towards charity is reflected in the reduction of the discount-veethapalisa (by 25 per cent. of the discount forgone by the successful subscriber). The Tribunal observed that clause 6 of the agreement (thalavariyola) imposed an obligation on the subscribers (successful subscribers in the context) to forgo 25 per cent. from the margin or discount amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, with a direction of modification of the assessment in accordance therewith. In our judgment, the relations of the concerned parties get governed by the terms and conditions of the agreement. The agreement is more than specific. It emphasises that the first instalment, full amount without reduction of interest would become the property of the foreman, i.e., assessee-firm. The agreement is also more than specific that with regard to auction proceedings amongst the members of the concerned series, only the successful bidder with regard to the amounts becomes the concern of the source of obligation in regard thereto. 5 per cent. gets set apart for chitty expenses and 25 per cent. for Muthuttu Charitable Trust and it is only the remainin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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