JUDGMENT
1. This is a reference under Section 256(1) of the Income-tax Act, 1961.
2. The assessee is an association of brick-kiln owners called the "District Brick-kiln Owners Association, Bulandshahr". Every brick-kiln owner was entitled to become its member on payment of an annual subscription of Rs. 12. The district authorities used to distribute coal to the brick-kiln owners through the assessee. The assessee started collecting donation from its members for the construction of " Congress Bhawan ". Every member was required to pay Rs. 100 per wagon of coal allotted to him in pursuance of a resolution dated July 12, 1961, passed by the executive committee of the assessee-association. The original resolution is in Hindi and when translated in English would read :
" Resolved unanimously as per decision of brick-kiln owners that whosoever amongst the brick-kiln owners comes to the association, the secretary and the treasurer of the association shall charge from them a sum of Rs. 100 per wagon of coal allotted to them and that the sum so collected shall be paid to the District Congress Committee according to the latter's instruction."
3. During the previous year relevant to the assessment year 1963-64, the assessee collected a sum of Rs. 25,471 in pursuance of the aforesaid resolution as donation from its members for the construction of " Congress Bhawan ". The assessee claimed that this amount was not part of its income and was not liable to tax. The Income-tax Officer did not accept this claim and treated the amount as income of the assessee and levied tax thereon. On appeal, the Appellate Assistant Commissioner of Income-tax did not agree with this view of the Income-tax Officer and held that the amount in question was not liable to tax as it never represented the assessee's income. The department went up in appeal before the Income-tax Appellate Tribunal, but the Tribunal also endorsed the view of the Appellate Assistant Commissioner of Income-tax. At the instance of the Commissioner of Income-tax the Tribunal, has submitted the following question for the opinion of this court :
" Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the sum of Rs. 25,471 realised by the assessee from its members in pursuance of resolution dated July 12, 1961, was not the trading receipt liable to be included in the income of the assessee ? "
4. It cannot be disputed that the Income-tax Act seeks to levy tax upon a person's income. Every receipt is not taxable unless it partakes of the nature of income. In the instant case, no doubt, the assessee collected from its members a sum of Rs. 100 in respect of each wagon of coal allotted to them, but the collection had no connection with the coal itself. It was neither the price of the coal, nor any charge incidental to the purchase of coal. The assessee never treated i t as its trading receipt and did not credit it to the trading or profit and loss account. The amounts so realised by the assessee were kept in a separate account for being passed on to the District Congress Committee for the purpose of constructing a " Congress Bhawan". Even in the receipts issued to the members, the donation was separately shown as donation for " Congress Bhawan ". The Appellate Assistant Commissioner of Income-tax has stated that for every wagon allotted to the members, the association used to make out the bill in the following manner:
(1) Price of coal.
(2) Commission.
(3) Membership fee.
(4) Donation for " Congres Bhawan".
5. The Tribunal has further found that the account books of the assessee showed very clearly that the assessee had during the relevant period paid the amounts collected as donation by issuing cheques periodically in favour of the District Congress Committee. The assessee also produced a certificate from the Congress Committee stating that the hall and the guest house was built by the assessee-association on behalf of the brick-kiln owners and that a sum of Rs. 25,471 was received as donations towards the cost of construction. On these facts it cannot be said that the amount in question was ever the income of the assessee. It was an amount to be handed over to the Congress Committee for the specific purpose of construction of " Congress Bhawan " and the assessee merely acted like a conduit pipe through whom the money passed from the brick-kiln owners to the Congress Committee.
6. A similar question arose before this court in Agra Bullion Exchange Ltd. v. Commissioner of Income-tax, [1961] 41 ITR 472 (All).
. There also the Agra Bullion Exchange Ltd. collected from its customers besides commission, brokerage, etc., some amount for charity. A Bench of this court held that the amount collected by the Agra Bullion Exchange was never its income. The observations at page 480 are relevant. This is what was observed:
" In the instant case the amount earmarked for charity by the trading members of the assessee-company never accrued as an item of income to the assessee at all. The amounts were given for charity and the assessee-company may be likened to a conduit pipe through whom the amounts passed."
7. This view has been affirmed by this court in a later decision in Bijli Cotton Mills Ltd. v. Commissioner of Income-tax, [1970] 76 ITR 194 (All).
8. We may make it clear that there is another class of cases where exemption from tax is claimed by an assessee, if the income arises out of assets held for charitable purposes. In those cases the receipt is admitted to be the assessee's income, but exemption is claimed because it arises out of assets held for charitable purpose and because of the provisions contained in the Act conferring such exemption. There is also another class of cases where a person may claim exemption of tax in respect of income spent on charitable purpose. These two classes of cases are cases of application of income. The instant case is not a case of application of income because the amount in question was never received by the assessee as its income. It is a case of diversion of the amount of collections through an overriding title before it became income in the assessee's hands. This principle has been enunciated by the Privy Council in Bijoy Singh Dudhuria v. Commissioner of Income-tax, [1933] 1 ITR 135 (PC).
9. We, accordingly, answer the question in the affirmative, in favour of the assessee and against the department. The assessee is entitled to the costs which we assess at Rs. 200.