COMMISSIONER OF INCOME-TAX VS AMRITSAR TRANSPORT CO. (P.) LTD., 1994 PTD-SUPREME-COURT-INDIA 18 (1993)

(Appeals by special leave from orders of different dates of the Punjab and Haryana High Court in different applications under section 256(2) of the Income Tax Act, 1961, for orders directing the Appellate Tribunal to state a case).

Income-tax---

----Reference---Question of law---Charitable purposes---Transport business-- Customary collection of one rupee per bilty per customer and credited to separate account in the name of Dharmada---To be used for distribution to poor relatives of workers and also at time of marriages of girls in their family-- Purpose to get full cooperation from workers---Question whether such amount was taxable as not for charitable purposes---To be referred---Indian Income Tax Act, 1961, Ss.2(15), 11 & 256.

The respondent, a private company engaged in the business of transport, in accordance with the custom, prevailing in the transport business, collected from its customers Re. l per bilty and carried the amount collected over to a separate account for Dharmada. When called upon to explain the purpose of 'the collection, the respondent wrote to the Income-tax Officer stating that the amount collected by way of Dharmada was meant for distribution to poor relatives of labourers working in the business premises and also to give at the time of marriages of girls in their families and that this was to get full cooperation from them. The Income-tax Officer included the amount collected in the business -income of the assessee. The Appellate Assistant Commissioner deleted the addition and the Appellate Tribunal confirmed the confirmed the deletion:

Held.that the question of law as to whether the amount realised by the respondent at Re. l per bilty per customer and credited to a separate account called Dharmada was not assessable to tax as revenue receipt arose out of the order of the Appellate Tribunal and the Tribunal had to state a case thereon to the High Court.

C.I.T. v. Bijli Cotton Mills (P.) Ltd. (1979) 116 ITR 60 (SC) ref.

G. Viswanatha Iyer, Senior Advocate (T.V. Ratnam and P. Parameswaran, Advocate with him) Appellants (in CAs. Nos. 3522 of 1979, 1368 of 1982,1558 of 1993 and 1549 to 1557 of 1993).

G. Viswanatha Iyer, Senior Advocate (R. Ayyam Perumal and P. Parameswaran, Advocates with him) for Appellants (in CAs. Nos.2456 of 1978 and 5987 and 5988 of 1990). '

C. S. Aggarwal and B.V. Desai, Advocate for Respondents (in all the Appeals).

JUDGMENT

B.P. JEEVAN REDDY, J.---Civil Appeal No.2456(NT) of 1978.

This appeal is preferred against the judgment and order of the Punjab and Haryana High Court dismissing an application filed by the Revenue under section 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 at Re. l 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 limited 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 too 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 the balance of Rs.8,871 was carried over in a 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 counsel, the true state of affairs is disclosed from the assessee's 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. l per bilty. Not only this but also all the transport companies charge/collect this customary Dharmada.

(2) 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.

(3) The company has nothing to do with this collection, as it has to distribute the same:

It is thus evident, says 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 counsel, the High Court ought to have directed the Tribunal to state the aforesaid question under section 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 C.I.T. v. Bijli Cotton Mills (P.) Ltd. (1979) 116 ITR 60 (SC) 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 assesse itself.

In our opinion, this was a proper case where the High Court ought to have directed the Tribunal to state the said question under section 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 the Revenue under section 256(2) is allowed. The Tribunal shall state the aforesaid question for the opinion of the High Court under section 256(2) of the Act. No order as to costs.

Civil Appeal No. 3522(NT) of 1979, 1368 (NT) of 1982, 5987-5988 (NT) of 1990 and S.L.P. (C) No. 8353 of 1985.

These appeals and special (cave petition 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 S.L.P. (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 is 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 under section 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 that the sums of Rs.5,506, Rs.26,030, 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.

M.BA./2465/T Appeals allowed,