Commissioner of Income Tax (Central), Ludhiana and Others vs Amritsar Transport Company Private Limited and Another

B.P. JEEVAN REDDY, J.—This appeal is preferred against the judgment and order of the Punjab and Haryana High Court dismissing an application filed by the Revenue u/s 256(2) of the Income Tax Act. The question which the Revenue wanted to raise reads thus:

Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the receipt of Rs. 1,38,577/- realised @1/- per bilty per customer through the bills and credited to a separate account called 'DHARMADA' was not assessable to tax as revenue receipt?

The case of the Revenue briefly stated is to the following effect: the assessee is a private Ltd. company engaged in the business of transport. During the accounting period ending January 31, 1970 relevant to the assessment year 1970-71, the respondent collected an amount of Rs. 1,38,577/- on account of DHARMADA. The Income Tax Officer called upon the respondent-assessee to explain why the said amount should not be treated as its trading receipt. The respondent's case was that according to the custom prevailing in the transport business, he collected, Re.1/- per bilty for spending on charitable purposes. He stated that out of this amount collected, a major portion was spent on charity and that balance of Rs.8,871/- was carried over in the separate account kept for DHARMADA. His case was that this amount was never credited to his income account and it always constituted a distinct account. This explanation was not accepted by the Income Tax Officer who included the said amount of Rs. 1,38,577/ - in the business income of the respondent. On appeal, the Appellate Assistant Commissioner accepted the respondent's contention and deleted the said addition. The Tribunal confirmed the same. However, says the counsel, the true state of affairs is disclosed from the assessees' own letter extracted in the assessment order. When called upon to explain the collection of the said amount and its purpose, the assessee submitted a reply in writing stating as under:

It is customary in the Transport business to collect/charge DHARMADA, at the rate of Re. 1/- per Bilty. Not only this but also all the Transport Companies, charge/collect this customary Dharmada.

This amount is meant for distribution to the poor relatives of labourers working in the business premises and also to give at the time of marriages of girls in their families. This is just to get full cooperation from them.

The company has nothing to do with this collection as it has to distribute the same.

It is thus evident, says the counsel for the Revenue, that the amount though collected in the name of Dharmada was neither meant for charity nor was it ever spent on charitable purposes. Distribution of the said money among the "poor relatives of the labourers working in the business premises (of the assessee) and also to give at the time of marriages of girls in their families" cannot be called a charitable purpose. Indeed, according to the respondent, himself these amounts were distributed among them with a view "to get full cooperation from them." According to learned counsel, the assessee is really using the money collected in the name of Dharmada for his own business purposes. In the above circumstances, says the counsel, the High Court ought to have directed the Tribunal to state the aforesaid question u/s 256(2) of the Act.

So far as inclusion of amounts collected as Dharmada which are kept in a separate account and are utilised for charitable purposes is concerned, there can be no dispute that they are not liable to be included in the income of the assessee vide Commissioner of Income Tax (Central), New Delhi Vs. Bijli Cotton Mills (P.) Ltd., but the Revenue's case herein is that though collected in the name of Dharmada, these amounts were neither meant for any charitable purpose nor were they spent on charitable purposes. In support of the same they rely upon the aforesaid written reply of the respondent-assessee itself.

In our opinion this was a proper case where the High Court ought to have directed the Tribunal to state the said question u/s 256(2) of the Act. We do not think it necessary to say more than this on this occasion, lest it may prejudice the case of the parties at the hearing of the reference.

The appeal is accordingly allowed, the judgment and order of the High Court is set aside and the application filed by Revenue u/s 256(2) is allowed. The Tribunal shall state the aforesaid question for the opinion of the High Court u/s 256(2) of the Act. No order as to costs.

CIVIL APPEAL NO.3522(NT)/79, 1368(NT)/ 82, 5987-88(NT)/90 AND SLP (C) NO. 83 53/85.

These appeals and SLP pertain to the very same assessee who is the respondent in Civil Appeal No.2456(NT) of 1978. For the reasons given hereinabove, leave is granted in SLP (C) No.8353 of 1985 and all these appeals are allowed in the same terms as the appeal No.2456(NT) of 1976.

S.L.P. (C) NOS.3257-3265 OF 1979

The facts in these Special Leave Petitions are identical to the facts in Civil Appeal No.2456(NT) of 1978, though the assessee is different. This assessee too is engaged in transport business. No separate argument is addressed in these matters. Leave granted in all these Special Leave Petitions. For the reasons stated in the judgment in Civil Appeal No.2456(NT) of 1978, these appeals too are allowed and the Tribunal is directed to state the following question for the opinion of the High Court u/s 256(2) of the Act.

Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding the sums of Rs.5506/-, Rs.26,039/-, Rs.33,385/-, Rs.49,634/-and Rs.57,902/- charged in 'bilties' in the assessment years 1967-68 to 1971-72 are not assessable to tax as revenue receipts.

No costs.