Law:

Section:

Section 2(15) of the I ncome-tax Act, 1961-Charitable purpose-Dharmada collected and disbursed for charitable purposes including small donations to certain bank employees' unions and a political party-Because of the nature of disbursements made, ITO held collections to be assessee's income-Whether ITO justified - Held, on Facts, no Facts The assessee, a registered firm dealing in purchase and sale of utensils, collected customary Dharmada amounts during the assessment year 1972-73 and maintained a separate charity account of the same. The amount of collections was disbursed as charity largely to temples and religious institutions but some of it was also paid to certain bank employees' unions and a political party. Because of the disbursements made especially to the unions and a political party, the ITO added the entire amount to the assessee's income and taxed the same accordingly. The assessee's appeal to the AAC was dismissed on the ground that the amounts collected had not been spent purely for charity purposes. The Tribunal also dismissed its appeal. On reference: Held The definition of "charitable purpose" given in section 2(15) is of very wide amplitude. The donations made by the assessee did not involve any process of carrying on of any activity for profit and, as such, it was fully covered by the said definition. When a donation was made to employees' union, it merely allowed the low paid employees to put forth their demands for betterment of their service conditions on a collective basis. Similar considerations applied in the case of small donations made to a political party. The fact that the assessee had the opinion to select parties for making donations, did not make any change in the position, in view of the observations of the Supreme Court, in the case of CITv. Bijli Cotton Mills (P.) Ltd. [1979] 116 ITR 60, to the effect that the fact that the assessee would be having some discretion as regards the manner in which and the time when it should spend the Dharmada amounts for charitable purposes, would not detract from the position the assessee held qua such amounts, namely, that it was under an obligation to utilize them exclusively for charitable…

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