Constructive trust over entertainment tax collections prevented taxability as income when retained for a charitable object.

A sum collected as entertainment tax was held not to be taxable income because it was not the assessee's income when received and, on the surrounding application and certificate, was retained under the compounding order for a charitable trust. The Court treated the amount as impressed with a constructive or implied trust before any legal accrual as income could arise in the assessee's hands. Authorities on business receipts applied to charity after receipt were distinguished on the facts. The amount was therefore outside the assessee's taxable income for the assessment year in question.

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Issues: Whether the sum of Rs. 97,685 collected as entertainment tax, and later remitted under the compounding order, constituted taxable income of the assessee in the assessment year 1957-58.

Analysis: The amount was initially collected as entertainment tax and was not the assessee's income at the time of collection. The later order under the entertainments tax law was passed after the collections had already been made and, read with the application and certificate, showed that the money was to be retained for the charitable trust. On those facts, the Court held that the amount was impressed with a constructive or implied trust before any legal accrual as income could arise in the assessee's hands. The Court distinguished authorities where receipts were held taxable because they accrued as business income or were applied to charity only after receipt.

Conclusion: The amount of Rs. 97,685 was not taxable income in the hands of the assessee.

Ratio Decidendi: A receipt collected for a designated tax purpose does not become taxable income where, on the facts, it is impressed with a trust before accrual as income and is retained for the charitable object under the governing order.

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