http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4 PETITIONER: COMMISSIONER OF INCOME TAX (CENTRAL), LUDHIANAETC. ETC. Vs. RESPONDENT: AMRITSAR TRANSPORT COMPANY PRIVATE LIMITED ANDANR. DATE OF JUDGMENT31/03/1993 BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) VENKATACHALA N. (J) CITATION: 1993 SCR (2) 874 1993 SCC Supl. (3) 546 JT 1993 (3) 647 1993 SCALE (2)373 ACT: Income tax Act, 1961: Section 256(2)--Assessee collecting amounts for charity--Whether to be added as revenue receipts-Question fit to be referred to High Court--Direction to Tribunal. HEADNOTE: question involved in these appeals was whether amounts collected for spending on charity and kept in separate account for Dharmadha could be included in business income of assessee. explanation that these amounts were distributed among poor relatives of labourers and to girls in their families at time of marriage, was not accepted by Income-tax Officer as charity. He added entire dharmadha amounts to business income of appellant-assessees. On appeal Appellate Assistant Commissioner deleted said additions, and Tribunal confirmed deletions. Revenue filed ap- plications before High Court for reference. High Court having dismissed applications, Revenue preferred present appeals contending that assessees were using amounts collected in name of dharmadha for business purposes. Allowing appeals, this Court, HELD:1. So far as inclusion of amounts collected as Dharmada which are kept in separate account and are utilised for charitable purposes is concerned, there can be no dispute that they are not liable to be included in income of assessee. Revenue s case is that though collected in name of Dharmada, these amounts were neither meant for any charitable purpose nor were they spent on charitable purposes. In these circumstances, High Court ought to have directed Tribunal to state question under Sec.256(2) of Income tax Act, 875 1961, as to whether such amounts could be assessed to tax as revenue receipts. Tribunal is directed to do so. [877 A-C] JUDGMENT: http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3522(NT) of 1979. From Order dated 24.1.1979 of Punjab and Haryana High Court in Income Tax Case No.50 of 1978. WITH (C.A. NOS. 2456(NT)/78, 5987-88(NT)/90,1368(NT)/82,1549- 57(NT)/93 & 1558(NT)/93. G.Vishwanatha Iyer, C. Ramesh, T.V. Ratnam and Ayyam Perumal for P. Parmeswaran for Appellants. C.S. Aggarwal for B.V. Desai for Respondents. Judgment of Court was delivered by B.P. JEEVAN REDDY, J. Civil Appeal No.2456(NT) of 1978. This appeal is preferred against judgment and order of Punjab and Haryana High Court dismissing application filed by Revenue under Section 256(2) of Income Tax Act. question which Revenue wanted to raise reads thus: "Whether on facts and in circumstances of case, Tribunal was right in holding that receipt of Rs.1,38,577 realised @1 per bilty per customer through bills and credited to separate account called DHARMADA was not assessable to tax as revenue receipt?" case of Revenue briefly stated is to following effect: assessee is private Ltd. company engaged in business of transport. During accounting period ending January 31, 1970 relevant to assessment year 1970-71, respondent collected amount of Rs.1,38,577 on account of DHARMADA. Income Tax Officer called upon respondent- assessee to explain why said amount should not be treated as its trading receipt. respondent s case was that according to custom prevailing in transport business, he two collected Re.1 876 per bilty for spending on charitable purposes. He stated that out of this amount collected, major portion was spent on charity and that balance of Rs.8,871 was carried over in separate account kept for DHARMADA. His case was that this amount was never credited to his income account and it always constituted distinct account. This explana- tion was not accepted by Income Tax Officer who included said amount of Rs.1,38,577 in business income of respondent. On appeal, Appellate Assistant Commissioner accepted respondent s contention and deleted said addition. Tribunal confirmed same. However, says counsel, true state of affairs is disclosed from assessees own letter extracted in assessment order. When called upon to explain collection of said amount and its purpose, assessee submitted reply in writing stating as under: "It is customary in Transport business to collect/charge DHARMADA, at rate of Re.1 per Bilty. Not only this but also all Transport Companies, charge/collect this customary Dharmada. 2. This amount is meant for distribution to poor relatives of labourers working in business premises and also to give at time of marriages of girls in their families. This is just to get full cooperation from them. 3. company has nothing to do with this collection as it has to distribute same." It is thus evident, says counsel for Revenue, that amount though collected in name of Dharmada was http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4 neither meant for charity nor was it ever spent on charitable purposes. Distribution of said money among "poor relatives of labourers working in business premises (of assessee) and also to give at time of marriages of girls in their families" cannot be called charitable purpose. Indeed, according to respondent, himself these amounts were distributed among them with view "to get full cooperation from them." According to learned counsel, assessee is really using money collected in name of Dharmada for his own business purposes. In above circumstances, say counsel, High Court ought to have directed Tribunal to state aforesaid question under Sec.256(2) of Act, 877 So far as inclusion of amounts collected as Dharmada which are kept in separate account and are utilised for charitable purposes is concerned, there can be no dispute that they are not liable to be included in income of assessee vide CL T. v. Bijli Cotton Mills (P) Ltd., 116 I.T.R. 60 but Revenue s case herein is that though collected in name of Dharmada, these amounts were neither meant for any charitable purpose nor were they spent on charitable purposes. In support of same they rely upon aforesaid written reply of respondent-assessee itself. In our opinion this was proper case where High Court ought to have directed Tribunal to state said question under Section 256(2) of Act. We do not think it necessary to say more than this on this occasion, lest it may prejudice case of parties at hearing of reference. appeal is accordingly allowed, judgment and order of High Court is set aside and application filed by Revenue under Section 256(2) is allowed. Tribunal shall state aforesaid question for opinion of High Court under Section 256(2) of Act. No order as to costs. CIVIL APPEAL NO.3522(NT)179, 1368(NT)182, 5987-88 (NT)190 AND S.L.P. (C) No.8353185. These appeals and Special Leave Petition pertain to very same assessee who is respondent in Civil Appeal No.2456(NT) of 1978. For reasons given hereinabove, leave is granted in S.L.P. (C) No.8353 of 1985 and all these appeals are allowed in same terms as appeal No.2456(NT) of 1976. S.L.P. (C) NOS-3257-3265 OF 1979. facts in these Special Leave Petitions are identical to facts in Civil Appeal No.2456(NT) of 1978, though assessee is different. assessee too is engaged in transport business. No separate argument is addressed in these matters. Leave granted in all these Special Leave Petitions. For reasons stated in judgment in Civil Appeal No.2456(NT) of 1978, these appeals too are allowed and Tribunal is directed to state following question for opinion of High Court under Section 256(2) of Act. 878 "Whether on facts and in circumstances of case, Appellate Tribunal is right in Law in holding of Rs.5506, Rs.26,039, Rs33,385, Rs.49,634 and Rs.57,902 charged in bilties in assessment years 1967-68 to 1971-72 are not assessable to tax as revenue receipts. it No costs. http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4 G.N. Appeals allowed. 879 Commissioner of Income-tax (Central), Ludhiana Etc. v. Amritsar Transport Company Private Limited