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TMI Blog1969 (11) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of dharmada were credited and payment thereout were debited from time to time. The company was incorporated in the year 1943, and it had been realising amounts on account of dharmada since its very inception. On January 15, 1955, the directors of the assessee-company made a resolution in one of the meetings of the board stating that it was considered desirable that the amounts realised by the company on account of dharmada should be treated as a trust fund with Lala Nawal Kishore and Lala Ram Babu Lal, directors of the company, as trustees. It was declared that all money realised in future by the company by sale of yarn from the purchases at 0-1-0 per bundle or such rate as may be decided upon in future, will be handed over to the trustees for being utilised in such altruistic, religious or charitable purposes as may be decided upon by them. Subsequently, in October, 1950, the said directors, viz., Sri Nawal Kishore and Sri Ram Babu Lal, executed a deed of declaration of trust. In this deed it was stated that a sum of Rs. 85,000 had accumulated in the charity fund maintained by the trustees and it was declared that the amount did not belong to any individual but it, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the assessee. The assessee had the opportunity to spend the amount for whatever purpose he liked. In the circumstances, it is difficult to say that a valid trust had been created." Holding as above, the Tribunal confirmed the assessments made by the Income-tax Officer. At the instance of the assessee the Tribunal has referred the following questions for the opinion of this court " (1) Whether, in the circumstances of the case, the sum of Rs. 21,898 was the assessee-company's income liable to to tax in the assessment year 1951-52 (2) Whether, in the circunistances of the case, the sums of Rs. 17,242, Rs. 4,010 and Rs. 904 were the assessee-company's income liable to tax in the assessment year 1952-53 ? It appears that the Tribunal rejected the claim of the assessee for exemption on two grounds, firstly, that the amounts in question could not be regarded as having been held or received by the assessee under a trust for charitable purposes, and, secondly, that the realisations partook of the character of trading receipts. It should be noted, however, that though the assessee had contented before the Tribunal that the amount, in question were held in trust and earmarked for ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, it was held that the amount of brokerage which had been paid by the customers of the assessee-exchange, along with the commission of the exchange, but remained unclaimed by the brokers concerned, was never the income of the assessee-company liable to tax under section 10(1). Following the decision of the Court of Appeal in Morley v. Tattersall, this court observed that the amounts of brokerage which had been initially received by the assessee from its customers for payment to brokers, did not partake of the character of trading receipt and, therefore, the amounts were not liable to be taxed as assessee's income in spite of the fact that the amounts remained unclaimed for years. In the present case, as we have already mentioned, the amounts were paid by the customers of the assessee specifically on account of dharmada or charity, and they were credited in a separate dharmda account. It is true that the assessee used to realise such amounts from its customers on all transactions of yarn and cotton, but the fact that it was a compulsory levy does not, in our opinion, ipso facto, impress the same with the character of a trading receipt. The Tribunal concedes that the assessee use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 32,000. The Supreme Court negatived the claim and held that the amount represented the professional income of the assessee. That case was decided on the footing that the desire on the part of the assessee to create a trust out of the moneys paid to him created no trust; nor did it give rise to any legally enforceable obligation. In the present case, as we have noted, we are not concerned with the question as to whether there was a valid trust in respect of the dharmada amounts. The next case cited on behalf of the revenue was a decision of the Bombay High Court, East India Chamber of Commerce Ltd. v. Commissioner of Income-tax. In that case the assessee was a company limited by shares. The bye-laws of the company provided for payment of lagas at certain rates by the members for every transaction of purchase done by them on account of any non-member in respect of specific commodities. A part of the lagas so realised was to be spent under the bye-laws of the company for charitable and philanthrophic purposes. The Income-tax Officer assessed the entire amount of lagas aggregating to Rs. 1,13,254, under section 10(6) of the Act. One of the questions referred by the Tribunal for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee of a part of his income in a particular way. In the instant case, the assessee does not claim that there was diversion of his income by overriding title. The assessee claims that the money received by it for the purpose of charity from its customers were never his income at all. The customers paid the money to the assessee only for the purpose of charity and the assessee also received the same for such a purpose. It is well known that dharmada is a customary levy prevailing in certain parts of the country and where it is paid by customers to a trading concern, the amount is not paid as price for the commodity sold to the customers. Where there is no such custom, there is no payment for dharmada. It is futile to contend that the amounts paid for dharmada are trading receipts of the trader and payments thereout constituted application of trading profit after it had been earned. As we have already mentioned above, the present case is fully covered by the earlier decision of this court in Agra Bullion Exchange Ltd. v. Commissioner of Income-tax. We hold, therefore, that the amounts in question do not constitute the income of the assessee at all. Having regard to our findi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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