1978 (11) TMI 1 - SC - Income Tax

Whether a gift to dharmada is void on grounds of vagueness or uncertainty ?

Whether because of the compulsory nature of the levy the impugned amounts charged to the customers and received by the assessee could be regarded as a part of the price or a surcharge on the price as contended by the counsel for the revenue ?

Held that:- A gift to dharmada or dharmadaya both in common parlance as well as by the customary meaning attached thereto among the commercial and trading community cannot be regarded as void or invalid on account of vagueness or uncertainty, and it is, therefore, clear that when the customers or brokers paid the impugned amounts to the assessee earmarking them for dharmada it must be held that these payments were validly earmarked for charitable purposes. Thus right from inception these amounts were received and held by the assessee under an obligation to spend the same for charitable purposes only, with the result that these receipts cannot be regarded as forming any income of the assessee.

It is true that without payment of dharmada amount the customer may not be able to purchase the goods from the assessee but that would not make the payment of dharmada amount involuntary inasmuch as it is out of his own volition that he purchases yarn and cotton from the assessee. The dharmada amount is, therefore, clearly not a part of the price, but a payment for the specific purpose of being spent on charitable purposes. It is true that the assessee did not keep these amounts in a separate bank account but admittedly a separate dharmada account was maintained in the books in which every receipt was credited and payment made thereout on charity was debited and the High Court has clearly found that these amounts were never credited in the trading account nor were carried to the profit and loss statement. Having regard to this position, it seems to us clear that the Tribunal's finding that no trust could be said to have been created by the customers in respect of the impugned amounts will have to be regarded as erroneous. Appeal dismissed.