Dharmada collections for charitable purposes were not trading receipts and remained outside taxable business income.

Amounts collected from customers as dharmada for charitable purposes, and credited to a separate account outside the trading and profit and loss accounts, did not constitute taxable business income under section 10(1) of the Income-tax Act, 1922. The compulsory character of the levy did not convert the receipts into trading receipts or a surcharge on sale price. As the assessee acted only as a conduit for passing the sums to charitable objects, the collections were held not to form part of its business profits and were not income at all.

---

---

Issues: Whether amounts collected by the assessee from customers as dharmada for charitable purposes constituted its taxable business income under section 10(1) of the Income-tax Act, 1922.

Analysis: The collections were made specifically as dharmada, were credited to a separate account, and were not treated by the assessee as part of its trading account or profits and loss account. The compulsory character of the levy did not, by itself, convert the receipts into trading receipts or a surcharge on the sale price. The amounts were received only for charitable purposes and the assessee functioned merely as a medium for passing them on to charitable objects. The Court followed the earlier view that such receipts do not constitute the assessee's income at all.

Conclusion: The amounts collected as dharmada were not taxable business income of the assessee and the reference was answered in favour of the assessee.

Ratio Decidendi: Amounts collected from customers specifically for charitable purposes as dharmada, and kept outside the trading account, do not form part of the trader's business profits and are not taxable as income under section 10(1) of the Income-tax Act, 1922.

---