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TMI Blog1974 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... as the machinery and furniture of the assessee's cinema house run under the name and style of Jamshedpur Talkies, which was located in Karimia Mansion. In the past, the assessee claimed that the income derived from the running of the Jamshedpur Talkies was the income of the trust and not his. The trust was wholly for charitable purposes and as such the income was exempt from tax under section 4(3)(i) of the Income-tax Act. The assessee's claim was rejected by the departmental authorities. The Tribunal upheld the rejection of the assessee's claim. It accepted that the trust was created in respect of other properties but did not hold the cinema business to be covered by it. Income of the cinema business, therefore, was taxed in the hands of the assessee. The matter was finally brought on reference to this court, but it was decided against the assessee. In this reference we are concerned with the assessment year 1957-58. The corresponding accounting year of the assessee is the financial year 1956-57. The amount of Rs. 97,685 under consideration formed part of the assessee's collection as entertainment tax in the calendar year 1956, that is, from January 1, 1956, to December 31, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well within the year in question. It has been rightly taxed as the income of the assessee and no portion of the sum of Rs. 97,685 can escape assessment to income-tax. On the peculiar facts of this case the point for determination is not free from difficulty. The facts are uncommon and are not near enough to those of any decided case in order to enable us to hold that the ratio of any case squarely covers the instant one. After having expressed my view with reference to the peculiar facts of this case, I shall endeavour to lend support to it by pressing into service the principles of law decided by one or two cases and shall distinguish some of the decisions cited by the learned counsel for the department. The liability to pay entertainment tax under the Act is on the proprietor of an entertainment. In this case, the assessee was the proprietor of the Jamshedpur Talkies. Section 4 of the Act provides that "entertainment tax shall be levied and paid on all complimentary tickets issued by the proprietor of an entertainment for any performance". Method of levy is provided in section 5. I shall read section 5 in full : "5(1) Save as otherwise provided by this Act, no person ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with the provisions contained in the Act would indicate that the compounding agreement, ordinarily and generally, has to be arrived at before realisation of the entertainment tax. But that apart, the order contained in annexure "B" read with the certificate granted in Form V would indicate that on 25th of March, 1957, the order for both the halves of 1956 was passed and the certificate was issued on 26th of March, 1957. It would thus be seen that it was not a compounding order issued strictly in accordance with the provisions of section 5(2) of the Act. Obviously, it was not an order under section 10 or section 11 of the Act. Substantially, it was an order under section 5(2) as it purported to be, but with this difference that it was made at a time when the entertainment tax had already been collected and collected to the extent of Rs. 1,17,685. The Commissioner of Commercial Taxes, on behalf of the State of Bihar, agreed to take only Rs. 20,000 out of the said sum leaving the balance of Rs. 97,685 to the assessee out of the money which at the time of collection was earmarked as entertainment tax. The statements in the application (annexure "A") were that S. T. Karim had creat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax from the assessee in the year 1956, much larger amount had already been realised. At the time of realisation it was not the income of the assessee. After the passing of the order, it was money in the hands of the trustee for the purposes of the charitable object of the trust. If the assessee was the owner of the money realised in the form of entertainment tax at the time the order dated March 25, 1957, was made, then on the facts and in the circumstances of this case a constructive or implied trust was created by the assessee, not after accrual of the income to him but before its accrual ; rather, the remission was obtained after a declaration that the money will be utilised for charitable purposes. If the surplus amount can be said to belong to the Government as it has been realised as entertainment tax separately and as earmarked, then the Government of Bihar permitted the assessee to make use of this amount for charitable purpose. In any view of the matter the amount was impressed with the trust before, in the eye of law, it would be deemed to be an accrual of income to the assessee. The Tribunal has been conscious of this fact that if express conditions would have been laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax v. Punjab Distilling Industries Ltd., General Fibre Dealers Ltd. v. Commissioner of Income-tax and H. R. Sugar Factory (P.) Ltd. v. Commissioner of Incone-tax. In the case of Raghuvanshi Mills Ltd., the assessee-company had insured its mills with certain insurance companies and also had taken out certain policies of the type known as "consequential loss policy" which insured against loss of profits, standing charges and agency commission. The mills were completely destroyed as a result of fire and a certain amount was paid to the assessee by the insurance companies. The question was whether this amount which was treated as paid on account of loss of profits was assessable to income-tax. It was held by the Supreme Court that it was an assessable income of the assessee. It will be noticed from the discussion at pages 488 and 489 that the money was held to be received in the course of business. The receipt was inseparably connected with the ownership and conduct of the business and arose during its course. It was for that reason that it was held to be income. The facts of the instant case are too dissimilar to attract the ratio of the Supreme Court case in the decision of Raghuvan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tune of Rs. 5,00,000 and odd formed part of the price which the appellant before the Supreme Court received for the sale of the hessian cloth. It was held to be so and, therefore, it was held to be the income of the assessee-appellant. One of the questions before the Allahabad High Court in the case of H. R. Sugar Factory (P.) Ltd. was whether the sum of Rs. 40.000 and odd received by the assessee-company for early start of crushing of sugarcane was a capital receipt or a revenue receipt. On the facts it was held to be a revenue receipt. In my opinion, neither of these two cases can help the revenue in the instant case. On a careful consideration of the matter, I have come to the conclusion that on the facts and in the circumstances of the case the sum of Rs. 97,685 could not be treated as income of the assessee taxable in his hands under the Act. That being so, I need not discuss the other question whether a part of it could be excluded from the income of the assessment year 1957-58. I may, however, reiterate that before the order dated March 25, 1957, was made by the Commissioner of Commercial Taxes the money in no sense was the income of the assessee. If at all it could be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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