Case Law Details
The only dispute before us is as to whether the receipts were, in fact, Dharmarth receipts. The assessee’s stand in this regard is that it was collecting Dharmarth in GRs and gate passes, as part of charity; that this Dharmarth collected every month was being passed on to a charitable trust; and that the receipt was neither shown as income, nor as expenditure. This stand of the assessee is entirely in line with its stand for the earlier years, right from assessment year 2001-02 to assessment year 2008-09. For all these years, in scrutiny assessments framed under section 143(3) of the Income-tax Act, 1961 (for short “the Act”), but for assessment year 2002-03, for which year, such assessment was framed under section 143(1) of the Act, the Department has never disputed such collection in GRs and gate passes and the fact that it was being passed on to a charitable trust. The objection of the authorities below in this regard, raised only for the first time, during the year 2009-10, is that the receipt is not by a charitable trust, but by the assessee company, which is doing business and trading. This, according to us, is not at all acceptable. Once the receipts are routed as such to a charitable trust by the assessee company and the nature of that trust has not been questioned, we hold that the receipts are Dharmarth receipts and nothing else. The consistent acceptance of such receipts by the Department itself, for as many as eight earlier assessment years, mandates the acceptance of such receipts of the assessee during the year under consideration also as Dharmarth receipts, when no change in facts has been pointed out by the authorities to have come about during the year under consideration.
That Dharmarth receipts are not taxable, has been laid down as law by the Hon’ble Supreme Court, way back in the year 1979, in the case of Bijli Cotton Mills (P.) Ltd. (supra). Clause no. 30 of the memorandum and articles of association of the assessee company reads as follows:
“30. To donate or subscribe money for any national, charitable, benevolent or public purchase or to institutions and funds for public benefit or which have any moral and other claim on company or its members, employees or customers and to promote such institutions and funds and to give charities and donations.”
This clause of memorandum and articles of association of the assessee company clearly shows that one of the objectives of the assessee company is charity. The learned Commissioner (Appeals) has remained oblivious of this specific clause in the memorandum and articles of association of the assessee company, while holding that ‘the appellant could not establish before me that the objectives of the company as per memorandum and articles of association was also to carry out charity.’
Therefore, finding merit in this grievance raised by the assessee, the same is hereby accepted. The impugned order in this regard is cancelled and the addition made is deleted.
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