By Jagdish D. Shah, Jagdish T. Punjabi Charted Accountants
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Section 2(24) – Collection of Dharmarth along with the assessee company’s freight income and used for charity is not part of the income of the assessee.
Facts:
The AO made an addition of Rs. 15.99 lakh on account of Dharmarth collected by the assessee along with freight receipt which was not reflected by it in its profit and loss account. According to the AO, the receipts were directly related to the business of the assessee; that the receipts were received not by a trust created for the purposes of charity, but by a company doing business and trading and that no evidence had been filed by the assessee that the receipts had been actually spent on charity. The CIT(A) upheld the addition inter alia on the ground that the assessee was unable to establish that the object of the assessee company, as per its memorandum and articles of association, was also to carry out charity.
Held:
The Tribunal noted that the stand of the assessee was entirely in line with its stand taken earlier in A.Y. 2001-02 to A.Y. 2008-09 which was never disputed by the revenue. According to the Tribunal, 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, the receipts are Dharmarth receipts and nothing else. Further, it was noted that the memorandum and articles of association of the assessee company clearly showed that one of the objectives of the assessee company is charity. Further, relying on the decision of the Supreme Court in the case of CIT vs. Bijli Cotton Mills (P.) Ltd. (1979) 116 ITR 60 the tribunal allowed the appeal of the assessee.
Facts:
The assessee being a company is an association of various industrialists formed in the year 1925 for development of trade, industries and commerce.
