TMI Blog1981 (1) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of revenue receipt and hence liable to tax as the income of the assessee during the A.Y. 1973-74 ? " The facts giving rise to this reference as set out in the statement of the case are as follows: While examining the books of accounts of the assessee for the assessment year 1973-74 relevant to the accounting period ending Diwali, 1972, the ITO found that in the balance-sheet there was an account in the name and style of Dharmada. The opening balance of this account was Rs. 34,245 and the closing balance was shown at Rs. 42,127. The additional credits were from the following sources: Rs. (1) from Jain Swethambar Murthipujak Sukruth Fund 1,555.50 (2) from Vaishnava Sahayak Kapda Committee 5,183.81 (3) from Digambar Jain Suk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were not credited in the profit and loss account and in the past no disallowance was made. The Tribunal, placing reliance upon a decision of the Allahabad High Court in CIT v. Meerut Bidi Factory [1977] 107 ITR 543, held that the amounts realised by the assessee during the year under consideration and credited in the Dharmada account were in the nature of revenue receipts and hence liable to tax as the income of the assessee. At the instance of the assessee the Tribunal has referred the aforesaid question of law arising out of the order of the Tribunal for the opinion of this court. Shri G. M. Chaphekar, learned counsel for the assessee, contended that the Tribunal committed an error of law in holding that the amounts in question were t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the amounts were received by the assessee. There is on record a letter dated March 10, 1976, written by the Digambar Jain Sukruth Fund Bajaj khana, Indore, to the ITO, A Ward, Indore. This is a letter sent by the Sukruth Fund in answer to the notice given by the ITO under s. 131 of the Act. In this letter it is stated by the Digambar Jain Sukruth Fund that " a payment of Rs. 1,148.50 to M/s. Chunnilal Onkarlal (HUF) by the Sukruth Fund is admitted and it is stated that the Sukruth Fund is getting the amount relating to the charity purposes of laga from the textile mills of Indore, since the last 25 to 30 years. It is the tradition of the trust to pay a fixed percentage of the receipts to the owners of the textile mills, Indore, out of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question was a business receipt in the hands of the assessee and was includible in the income of the assessee. In CIT v. Bijli Cotton Mills (P.) Ltd. [1979] 116 ITR 60 (SC), the assessee, who carried on the business of manufacturing and selling yarn, realised certain amounts on account of Dharmada from its customers on sales of yarn and cotton. The assessee did not credit the amounts so realised by it in its trading account but maintained a separate account known as Dharmada in which the realisation on account of Dharmada were credited and payments made thereout were debited. The Tribunal held that the amounts could not be regarded as having been received or held by the assessee under a trust for charitable purposes, the trust being v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee 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 was further observed by the Supreme Court as follows (p. 74): " Dealing with the factual aspects on the basis of which counsel for the revenue sought to support the Tribunal's finding that no trust could be said to have been created by the customers it will be apparent from the above discussion that none of the aspects are such as would lend support to the inference drawn by the Tribunal. We have already dealt with the alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. " The case of the assessee stands on stronger ground than the case dealt with by the Supreme Court in the aforesaid decision. In the Supreme Court case the amounts were realised by the assessee from its customers on account of Dharmada. In the present case the different institutions made voluntary payments to the assessee for being spent by the assessee for charitable purposes. The amount was held by the assessee in trust and was not credited in the tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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