1. By this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following question of law for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that a sum of Rs. 7,888 received from the various institutions and credited to the Dharmada account was in the nature of revenue receipt and hence liable to tax as the income of the assessee during the A.Y. 1973-74 ?'
2. 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 periodending 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.
3. The additional credits were from the following sources:
from Jain Swethambar Murthipujak Sukruth Fund
from Vaishnaya Sahayak Kapda Committee
from Digambar Jain Sukruth Fund, Bajajkhana
4. The ITO found that except for an expenditure of Rs. 550, which was given to various persons on the occasion of Raksha Bandhan, nothing was debited to the Dharmada account. He also found that no interest was being paid to the various institutions from whom the amounts were allegedly received. The assessee contended that the above institutions passed on the amounts to the HUF for spending on charity and the said amounts were not the income of the assessee. The ITO negatived the contention of the assessee and treated these receipts as the assessee's income and taxed it under the head 'Other sources'. On appeal before the AAC by the assessee it was contended on behalf of the assessee that the said amounts were originally collected by M/s. Hukumchand Mills Ltd. on sale of cloth as a laga. The said mills distributed part of the collections to the charitable trusts mentioned earlier and these trusts, in turn, paid the aforesaid amounts to the assessee-HUF for being spent for charitable purposes. The AAC also did not accept the contention of the assessee and affirmed the order of the ITO. On further appeal by the assessee before Appellate Tribunal it was contended on behalf of the assessee that the amounts deceived from the various institutions were credited in separate Dharmada account before it was spent for charitable purposes by the assessee. It was pointed out that these receipts 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  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.
5. 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 the income of the assessee. He contended that the amountsin question were not referable to any business activity of the assessee. The amounts in question were initially paid by the Hukumchand Mills Ltd. to the different institutions out of the amount received by the mills as Dharmada and institutions, in their turn, made over a certain percentage of the amount received by them from the mills to the assessee for being spent by the assessee for charitable purposes and the amounts were specifically received by the assessee for that purpose and were credited in a separate Dharmada account and the assessee held the said amounts in trust for utilising the same for charitable purposes and it cannot be said that the said amounts were business receipts of the assessee includible in the income of the assessee. He placed reliance upon a decision of the Supreme Court in CIT v. Bijli Cotton Mills (P.) Ltd. : 116ITR60(SC) . The learned counsel for the revenue supported the order of the Tribunal.
6. Having heard learned counsel for the parties we have come to the conclusion that there is force in the contention raised by the learned counsel for the assessee. The Tribunal has not found that the amounts in question are referable to any business activity of the assessee. It is also not in dispute that the amounts in question were received by the assessee from various institutions. It is not the case of the department that the assessee had any business connections with the institutions from which the amounts were received by the assessee. There is on record a letter dated March 10, 1976, written by the Digambar Jain Sukruth Fund Bajajkhana, 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 Section 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 such laga receipts for being spent by them on charitable purposes'. Digambar Jain Sukruth Fund is one of the institutions from whom one of the disputed items was received by the assessee, for being spent for charitable purposes. The Tribunal held the said amount to be a revenue receipt of the assessee on the ground that only a sum of Rs. 550 was spent by the assessee on charitable purposes during the accounting year in question and that although the amount was utilised by the assessee in the money-lending business and interest was earned on it, no interest was paid to the institutions from whom the amount was received by the assessee. It is difficult to appreciate this reasoning of the Tribunal. The fact that in a particular year a lesser amount is spent on charitable purpose than what was received for that purpose by the assessee does not make the amount abusiness receipt if it is otherwise not so. If the amount was received by the assessee from different institutions for being spent by the assessee for charitable purposes, how can the question of paying interest to those institutions by the assessee properly arise It is not the case of the revenue nor it has been found by the Tribunal that the interest accrued on the amount was treated by the assessee as its income or was utilised by the assessee for itself. The interest earned on the said amount was also credited to the Dharmada account. In the circumstances, the Tribunal committed an error of law in holding that the amounts in question was a business receipt in the hands of the assessee and was includible in the income of the assessee.
7. In CIT v. Bijli Cotton Mills (P.) Ltd. : 116ITR60(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 void for vagueness and uncertainty and that the realisations partook of the character of trading receipts. On a reference the High Court held that the amounts in question were not the assessee's income liable to tax, as the amounts were paid by its customers specifically on account of Dharmada, the amounts were never treated by it as trading receipts or surcharge on the sale price, and that the Dharmada was a customary levy prevailing in certain parts of the country and where it was paid by the customers to a trading concern, the amount was not paid as a price for the commodity sold to the customer, and that the assessee was merely acting as a conduit pipe or clearing house for passing on the amounts to the objects of charity. The Supreme Court, upholding the view taken by the High Court and following its decision in CIT v. Tolly gunge Club Ltd. : 107ITR776(SC) , held as follows (p. 73 of 116 ITR) ;
'On a parity of reasoning the Dharmada amounts paid by the customers cannot be regarded as part of price or a surchage on price of goods purchased by the customers. The amount of Dharmada is undoubtedly a payment which a customer is required to pay in addition to the price of the goods which he purchases from the assessee but the purchase of the goods by the customer would be the occasion and not the consideration for the Dharmada amount taken from the customer. 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.'
8. 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 alleged compulsory nature of the levy and have pointed out that the Dharmada amounts cannot be said to have been paid involuntarily by the customers and in any ease the compulsory nature of the payments, if there be any, cannot impress the recants with the character of being trading receipts. Further, it is not possible to accept the submission that the customers being illiterate did not appreciate that they were paying the amounts with a view to create a trust, especially when it has been found that such payments were made pursuant to a custom which obtained in the commercial and trading community ; indeed, being a customary levy, the constituents or customers. whether literate or illiterate, would be knowing that the additional payments over and above the price were meant for being spent by the assessee for charitable purposes. Further, the fact that the assessee would be having some discretion as regards the manner in which and the time when it should spend the Dharmada amounts for charitable purposes would not detract from the position the assessee held qua, such amounts, namely, that it was under an obligation to utilize them exclusively for charitable purposes. It is true that the assessee did not keep these amounts in a separate bank account but admittedly a separate Dharmarda 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.'
9. 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 trading account of the assessee nor was it carriedover to the profit and loss statement. The amount was received by the assessee In trust for being spent on charitable purposes. In the circumstances, we are of the opinion that the Tribunal was not justified in law in holding that the amounts in question were revenue receipts of the assessee and includible in the income of the assessee. Our answer to the question referred to us, therefore, is in the negative and against the revenue.
10. The reference is answered accordingly. In the circumstances of the case, the parties shall bear their own costs of this reference.