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Nathu Ram Shiv NaraIn Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 107 of 1976
Judge
Reported in(1982)26CTR(P& H)455; [1982]134ITR625(P& H)
ActsIncome Tax Act, 1961 - Sections 2(15)
AppellantNathu Ram Shiv Narain
RespondentCommissioner of Income-tax
Appellant Advocate D.K. Gupta, Adv.
Respondent Advocate D.N. Awasthy and; B.K. Jhingan, Advs.
Excerpt:
.....manner it liked, the principle laid down by the supreme court in cit v. charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. it is true that the assessee did not keep these amounts in a separate bank account but admittedly a separate dharmada account was maintained in the books in which every receipt was credited and payment made there out 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......year 1972-73, the assessee collected dharmada from its constituents and maintained a separate charity account of the same. the total collections came to rs. 4,625. the assessee actually disbursed a sum of rs. 5,370 for charitable purposes which are mentioned in annex. a. the bulk of the amount was donated to temples and religious institutions. some amount was, however, disbursed to the following institutions:rs.backward class21state bank of india employees'union51punjab national bank employees'union21central bank of india employees'union51bharatiya jan sangh4003. the assessee claimed that the collections on account of charity were customary collections and did not constitute its income because at the time of their receipt they were received from its constituents for being.....
Judgment:

M.R. Sharma, J.

1. The Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law to us for our opinion :

' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that Rs. 4,625 constituted the assessee's income liable to tax '

2. The assessee is a registered firm deriving income from the purchase and sale of utensils. During the assessment year 1972-73, the assessee collected dharmada from its constituents and maintained a separate charity account of the same. The total collections came to Rs. 4,625. The assessee actually disbursed a sum of Rs. 5,370 for charitable purposes which are mentioned in annex. A. The bulk of the amount was donated to temples and religious institutions. Some amount was, however, disbursed to the following institutions:

Rs.

Backward class

21

State Bank of India Employees'

Union

51

Punjab National Bank Employees'

Union

21

Central Bank of India Employees'

Union

51

Bharatiya Jan Sangh

400

3. The assessee claimed that the collections on account of charity were customary collections and did not constitute its income because at the time of their receipt they were received from its constituents for being disbursedfor charitable purposes. Because of the disbursement, specially mentioned above, the ITO disallowed the claim of the assessee.

4. The assessee went up in appeal which was dismissed by the AAC on the ground that the amounts collected by the assessee had not been spent purely for the purposes of charity.

5. The assessee went up in second appeal before the Income-tax Appellate Tribunal. This appeal was also dismissed by the learned Tribunal with the observations that when the assessee had full control over the money collected by it and when it could spend the money in any manner it liked, the principle laid down by the Supreme Court in CIT v. Sitaldas Tirathdas : [1961]41ITR367(SC) , was not attracted.

6. We have heard the learned counsel for the parties at some length. ' Charitable purpose ' is defined in Section 2(15) of the I.T. Act as under:

' ' Charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit.'

7. This definition is of a very wide amplitude. The donations made by the assessee did not involve any process or carrying on of any activity for profit. It is a matter of common knowledge that only low-paid employees working in banks are allowed to form a recognised trade union. When a donation is made to such a union, it merely allows the low-paid employees to put forth their demands for the betterment of their service conditions on collective basis. The donation made to a union remains a charity even though it is secular in nature. The same considerations apply in the case of small donations made to a political party out of the funds which are received by a business for being utilised for charitable purposes. The Tribunal appears to have been influenced by the fact that the assessee had the option to select parties for making the donations. The view taken by it cannot be sustained in view of the following observations made by the Supreme Court in CIT v. Bijli Cotton Mitts (P.) Ltd. : [1979]116ITR60(SC) :

' 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 case the compulsory nature of the payments, if there be any, cannot impress the receipts 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 amount 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 overand 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 dharmada account was maintained in the books in which every receipt was credited and payment made there out 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.' .

8. We, therefore, answer the aforementioned question in the negative, i. e., in favour of the assessee and against the revenue. No costs.


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