TMI Blog1977 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... he members of the club as well as to the members of the public. There is no dispute between the parties that the admission fee received by the assessee constitutes trading receipt in the hands of the assessee exigible to tax. But it appears that on 28th February, 1945, a resolution was passed at the meeting of the general body of the club for levying a surcharge of eight annas over and above the admission fee, the proceeds of which were to go to the Red Cross Fund. This resolution was subsequently varied by another resolution dated 30th January, 1950, and the new resolution provided that the surcharge of eight annas on entrance ticket should be earmarked " for local charities and not solely for the Indian Red Cross ". The assessee accordingly issued to every entrant to the enclosure on the race course two tickets, one an admission ticket for admission to the enclosure of the Club and the other, a separate ticket in respect of the surcharge of eight annas for local charities. The slip in respect of the surcharge of eight annas was in the following terms : " Surcharge on admission to The Tollygunge Gymkhana Races for Local Charities Rs. 4/8 Enclosure Surcharge As. -/8/- " The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total income of the assessee. The Commissioner then moved the Tribunal for stating a case to the High Court on the question of law which arose out of the order of the Tribunal. The Tribunal was of the opinion that a question of law did arise out of its order and hence it formulated a question in the following terms : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee's receipts from the surcharge levied on admission tickets for purposes of charity could not be included in the assessee's taxable income for the assessment year 1960-61 ? ", and referred it to the High Court for its opinion. The High Court agreed with the view taken by the Tribunal and held that since the surcharge on admission tickets was charged by the assessee and paid by the race-goers for the specific purpose of being applied to local charities pursuant to the resolution passed by the general meeting of the assessee, there was, at the time of receipt of the amounts in respect of the surcharge, a legally enforceable obligation on the assessee to apply them to local charities and these amounts, accordingly, did not reach the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h he is required to contribute to charity--and we are deliberately using the word "required" because otherwise he would not be able to secure admittance to the Club enclosure--is part of the price for admission ? The surcharge is undoubtedly a payment which a race-goer is required to make in addition to the price of admission ticket if he wants to witness the race from the Club enclosure, but on that account it does not become part of the price for admission. The admission to the enclosure is the occasion and not the consideration for the surcharge taken from the race-goer. It is true that but for this insistence on payment of the surcharge at the time of admission to the enclosure, the race-goer might not have paid any amount for local charities. But that does not render the payment of the surcharge involuntary, because it is out of his own volition that he seeks admittance to the enclosure and if he wants such admittance, he has to pay not only the price of the admission ticket but also the surcharge for local charities. The surcharge is clearly not a part of the price for admission but it is a payment made for the specific purpose of being applied to local charities. Secondly, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llocation of a receipt for local charities before it became income in the hands of the assessee ? The true test for determining this question is, to use the words of Hidayatullah J., in Commissioner of Income-tax v. Sitaldas Tirathdas [1961] 41 ITR 367, 374 (SC) whether the amount sought to be deducted, in truth, reaches the assessee as his income. The learned judge proceeded to explain this test in the following words : " In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible : but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal clearly showed "that the persons who paid the sum of Rs. 32,500 did not use any words of an imperative nature creating a trust or an obligation. They were anxious to have the services of the assessee in Farrukhnagar case ; the assessee was at first unwilling to give his services and later he agreed, proposing that he would himself create a charitable trust out of the money paid to him for defending the accused persons in the Farrukhnagar case." Considerable reliance was placed by this Court on the recital in the trust deed where the assessee had said " that he was reserving his professional income as an advocate accruing after June, 1944, for payment of taxes and charity and accordingly when he received his professional income in the Farrukhnagar case he created a charitable trust out of the money so received."It was also emphasised by this court that it was not stated anywhere" that the persons who paid the money created a trust or imposed a legally enforceable obligation on the assessee " and even in the affidavit made by the assessee there was " no suggestion that the persons who paid the money created the trust or imposed any obligation on the assessee " and it was "the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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