UPADHYA, J. - (1.) THE question referred for the opinion of this court is : Whether in the circumstances of the case the sums of Rs. 26,903 and Rs. 6,040 were the assessee companys income liable to tax ?
(2.) THE assessee is a company incorporated in 1946 and appears to have been formed specifically with a view to bring together merchants dealing in gold and silver in Agra. One of the objects of the company, notice by the Income-tax Appellate Tribunal is : To contribute for charitable and other purposes out of the profits of the company. The assessee company maintains a trading hall where licensed traders (trading members) do business in bullion through licensed brokers. As stated by the Tribunal in the statement of the case the traders pay to the assessee company whatever amount is due from them on account of (1) commission, (2) brokerage, (3) charity and (4) difference. The assessee company has certain rules which are printed and are known to all the members who agree to use the trading hall of the company for their business. Rule 49 provides as follows : On transactions of gold and silver, the following charges of the exchange will be made : Commission ... ... ... ... 0 4 0 Dalali ... ... ... ... 0 15 0 Dharmada (charity)... ... ... ... 0 1 0 i.e., the total charges to be recovered will be Rs. 1-4-0 per parcha on purchase and sale. Out of the money credited on account of charity 1/4th will be spent on miscellaneous item and the balance of 3/4th will be kept in reserve according to the resolution of the board and will be spent in the discretion of the board. In the statement of the case the Tribunal says : In fact the assessee company acts as a clearing house. The brokerage received by the assessee company is passed on to the brokers through whom transaction were effected. Among other facts, the Tribunal has stated the following : (1) For the assessment year 1948-49 the assessee companys income was computed by the Income-tax Officer at Rs. 56,209 including a sum of Rs. 26,903 said to have been received by the assessee company for the purpose of charity. (2) The assessee company in its profit and loss account did not include the money said to have been received by it for the purposes of charity. (3) In the balance sheet there is a foot-note to the effect that Rs. 42,000 stand deposited in fixed deposit with banks in respect of the Agra Bullion Charitable Eye Hospital Trust out of charity contributions made by trading members as per decision of the directors. (4) For the assessment year 1949-50, the assessee companys income was computed at Rs. 10,652 including a sum of Rs. 6,040 said to have been received on account of charity. (5) The assessee company has a trading hall where licensed traders (trading members) do business through licensed brokers.
(3.) IN fact the assessee company acts as a clearing house. The orders of the INcome-tax Officer and the Appellate Assistant Commissioner have been appended to the statement of the case and made part of it. The INcome-tax Officer subjected to tax a amounts received for charity from the trading members. On appeal the tax was upheld by the Appellate Assistant Commissioner. When a second appeal was preferred to the INcome-tax Appellate Tribunal, Mr. Dalal, the Accountant Member, took the view that the amount received for charity was not the income of the assessee at all. The amount paid by the trading members included commission, brokerage which to the assessee company as its own commission, brokerage which was paid to the assessee company for being passed on to brokers through whom the trading members had transacted business and difference which had to be passed on to person with whom the transactions had been entered into and who were entitled to the amounts. Similarly amounts paid for charity were intended to be spent on charitable objects according to the rules of the company. The amount so paid for charity was not a part of the companys remuneration. Nor was it intended to be paid to the company itself could not be included in the total income of the assessee. It appears that the assessee had put up an alternative case that even if the amounts collected for charity be considered to be the assessees income it was exempt under section 4 (3) (i) of the Income-tax Act. The Judicial member took the view that the amount was not purposes or other legal obligation, and did not fall within the purview of section 4 (3) (i) of the Act. He, therefore was of opinion that the tax should be upheld. On the difference between the two members the matter was referred to the President of the Tribunal who agreed with the Judicial Member and the tax was upheld. The assessee thereupon applied for a reference being made to this court and the question mentioned above has been referred for the opinion of this court. From the facts of the case as stated, and as contained in the various orders appended to the statement of the case, it is clear that the amounts paid by the trading members to the company were not all meant for the company itself. The assessee company was entitled to retain for itself only the commission which was paid at the rate of four annas per parcha. The brokerage charges had to be passed on to the brokers through whom the transactions were entered into. The amount of difference money paid had similarly to be passed on to the trading parties entitled thereto. These amounts have not been treated as income of the company by the income-tax authorities. The only other amount received by the assessee company was for charity at the rate of one annas per parcha. This amount had to be spent according to the rules of the company and the resolution of the board relating to their expenditure. As is evident from rule 49 quoted above one-fourth of this amount could be spent on miscellaneous items of charity but three-fourths had to be spent in accordance with the resolution of the board. Learned counsel for the Department has conceded that substantial amounts have been spent on the eye hospital run by the assessee. It is not suggested that any part of the collections made for charity have been appropriated by the assessee company for its own use. Learned counsel for the Department, however, contended that if the money received for charity was not spent away on charitable purpose forth-with and formed part of the balance in hand the use of that money was available to the assessee company. This argument appears to overlook the fact that the question is not whether the assessee company was in a position to use temporarily some amount received for charity, but whether the amount when received was the income of the assessee company or was an amount received in trust for charitable purposes. From the facts mentioned above and embodied in the various orders appended to the statement sent by the Tribunal it is clear that the amount so received by the assessee company was not its income at all and it had no right to appropriate to its own use any amount collected by it under the rules framed by the trading members as charity. From the accounts of the company and the balance sheet the Tribunal found that the collections made on account of charity were not treated by the company as its own money. ;