RITIKA VEGETABLE OIL PRIVATE LIMITED,JAIPUR V. ACIT CENTRAL CIRCLE, ALWAR

ITA 495/JPR/2024

AI Insights

The case involves Ritika Vegetable Oil Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals)-4, Jaipur, sustaining an addition of Rs. 16,22,841 to the assessee's income for the assessment year 2016-17. The addition was initially made by the Assessing Officer, treating the 'Dharmada' collected through sales as part of the sales consideration. The Tribunal examined whether the 'Dharmada' amount, collected and earmarked for charity, should be considered as income. The Tribunal referenced several Supreme Court and High Court decisions, concluding that the 'Dharmada' amount was not part of the sales income but a specific payment for charitable purposes, thus not taxable under the Income Tax Act.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 35392 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-08-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 15-04-2024
• Other Referred Cases: Hari Industries vs. CIT, Bijli Cotton Mills case, Amritsar Transport Co. (P.) Ltd. vs. CIT, D.J. Malpani Vs. CCE, Thakur Das Shyam Sunday vs. Addl. CIT, GheruLal Bal Chand vs. CIT, Tollygunge Club Ltd. vs. CIT, Nathu Ram Shiv Narayan vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJEY MALIK
• Assessee Lawyers: P.C. PARWAL
• Keywords: Transfer pricing; Question of law; Gift; Search and seizure; Earning of tax free income; Charitable institution
• Section: 142(1); 143(2); 201; 11; 12AA; 153; 132; 139; 12; 10(23C); 80G

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh]U;kf;d lnL; ,o Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;djvihy la-@ITA No.495/JP/2024 fu/kZkj.ko\"kZ@Assessment Year :2016-17 Ritika Vegetable Oil Pvt. Ltd. D-47, Laxman Marg, Hanuman Nagar, Vaishali Nagar cuke Vs. ACIT Central Circle, Alwar LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.:AAGCR 6057 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Sh. P. C. Parwal, CA jktLo dh vksj ls@Revenue by: Sh. Ajey Malik, CIT lquokbZ dh rkjh[k@Date of Hearing : 28/08/2024 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 17/10/2024 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM Because the assessee was dissatisfied with the finding so recorded in the order of the Commissioner of Income Tax (Appeals)-4, Jaipur vide dated 14/03/2024 [for short CIT(A) ] the present is filed. The dispute relates to the assessment year 2016-17. The order ld. CIT(A) arise because the assessee was under challenge before ld. CIT(A) against the order dated 21.12.2018 passed under section 143(3)of the Income Tax Act, by ACIT, Central Circle, Alwar [ for short AO]. 2 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT 2. In this appeal, the assessee has raised following grounds: - “1. That the ld. assessing officer has erred in law as well as on the facts and circumstances of the case in making an additions on account of Dharmada and Charity charges of Rs. 1622841.00 under the provisions of Income Tax Act, 1961, which is against the decision of Hon’ble Rajasthan High Court as given in the case of Hari Industries vs. CIT 153 ITR 656 and of Hon’ble Supreme Court in Bijli Cotton Mills case 116 ITR 60 and ld. Commissioner of Income-tax (Appeals)-IV, Jaipur has erred in sustaining the same. 3. Succinctly, the fact as culled out from the records is that a search and seizure action u/s 132 of the Income Tax Act, 1961 (for short Act) was carried out by the Income Tax Department on the members / concerns of Data Group, Alwar on 14/10/2015 of which the Assessee is one of the member company of the group. The assessee filed its return u/s 139 on 30/11/2016 declaring income of Rs. 3,16,76,270/-. The case was already selected under scrutiny through CASS. Notice u/s 143(2) of the Act on 27/09/2017 which was duly served upon the assessee on 27/09/2017. The case of the assessee was referred to the TPO for determination of Arm's Length Price as the assessee company was entered into Specified Domestic Transactions within the meaning of provisions of section 92BA of the Act with the person referred to in clause (b) of sub-section (2) of section 40A during the year under consideration. The Dy. Commissioner of Income Tax, Transfer Pricing Officer 2(3)(2), New Delhi passed order u/s 92CA(3) of the Act on 31/10/2018 wherein no adverse inference has been drawn in 3 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT respect of the Specified Domestic Transactions undertaken by the assessee company during the F.Y. 2015-16. Further, information and details pertaining to the case of the Assessee relevant to assessment of its income were called for u/s 142(1) of the Act by means of a questionnaire. Further, notices u/s 142(1) was issued from time to time. In response to the above referred notice(s), assessee submitted the details which was examined on a test- check basis and placed on record by the ld. AO. Based on the information so received in the assessment proceedings it was noticed from the ledger account of Dharmada / Charity, that the assessee company has a credit balance of Rs. 21,94,939/- including collection during the year under consideration from the purchasers parties charged in the sales bills. The amount was collected for charity purposes but remained unutilized throughout the year. In the search proceeding statement of Shri Vijay Data u/s. 132(4) was recorded on 14.10.2015. He was asked vide Q. No. 26 about the amount of Rs. 3,04,13,269.43/- shown in the 'Charity Ledger' in M/s. Vijay Solvex Limited on 31.03.2015 and the amount of Rs. 1,14,08,453.06/- shown in the 'Charity Ledger' in M/s. Deepak Vegpro Pvt. Ltd.. He replied that the companies of Data group charge ‘Chairty’ at the time of issuing the bills and this amount is deposited in ‘Charity’ ledger and when we feel suitable, this amount is used in charitable activities. During 4 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT the assessment proceeding, the assessee vide query letter dated 03.10.2017, was specifically asked at point no. 30 to furnish complete details of Dharmada/ Charity charged by company on sale bills alongwith bank statement for last six years including year under consideration. Assessee was also asked to furnish proof of utilization of Dharmada Account/charity fund for the year under consideration, alongwith copy of ledger of Dharmada. In this regard assessee was asked to show cause as to why the Dharmada fund may not be treated as art of sale and accordingly by the addition may not be made on this account. In response, the assessee vide his reply dated 11.12.2018 furnish only the ledger of Dharmada/Charity but not give any justification in respect of the amount remained unutilized throughout the year. The reply of the assessee was considered but not found tenable, as assessee has not furnished any justification that how the amount charged from buyer on the name of so called Charity/Dharmada does quality the requirements to justify it as Charity/Dharmada and it was considered as part of sales consideration. During the year under consideration, the assessee has total credit balance of Rs. 21,94,939/- as dharmada out of which Rs. 16,22,841/- is collected during the year under consideration that the amount of so called dharmada was added back to the income of the assessee. 5 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT 4. Aggrieved from the above finding of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: “5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contention/submissions of the appellant are being discussed and decided as under:- (i) The Ld. AO has made addition of Rs. 16,22,841/- on account of dharmada/charity collected as part of sale. The Ld. AO has established that the companies of Data group have collected huge sum of Rs. 3,04,13,269.43 as dharmada over the years and nothing has been spent by it for any charitable purpose. As per assessment order the assessee has not furnished any justification regarding how the amount charged from buyer on name of so called Charity/Dharmada does qualify the requirements to justify it Charity/Dharmada. (ii) It is noticed in the assessment order that the assessee was specially asked to provide the details of the utilization/ application of the fund towards the objects for which it was collected from the customers. It was noted that the assessee has not spent this amount on charitable or religious purpose even in the earlier years but just accumulated the fund year by year in its books which shows that assessee was not intended to spent this receipts on charity at all. Secondly, assessee has not only accumulated the fund in its own hand but enjoyed interest earning also thereon year by year and the funds were put to use in the business as part of overall funds. (iii) The appellant has been collecting money from the customers in the name of charity but the appellant has not spent such money for several years. In the present case the appellant himself is collecting the charity funds and also himself is keeping the funds for expenditure on charitable purposes however the judgment cited by the appellant are different in the nature as in those cases the funds were handed over by the assesses to the charitable organizations. This issue has also been discussed by the Learned Assessing Officer in the assessment order. The appellant is silent and has not explained the issue in his appeal and has relied upon the judgments in support of his appeals whichindicates that the factual position is undisputed. The facts in the judgments relied upon by the appellant are different. As noted in the assessment order also in the judgments the collecting taxpayer who was collecting the Dharmada transferred the same to a separate registered trust and it was the legal obligation of the separate trust to fulfill the legal requirements and spend the money for charitable purposes. 6 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT (iv) The search and seizure action took place on the appellant group on 14.10.2015 (F.Y. 2015-16) (A.Υ. 2016-17) wherein the issue of accumulation of fund by misusing the dharmada / charity structure was unearthed. During the appeal the appellant has furnished the details of expenditure, where it is claimed that Rs. 2,100 were paid in cash to a society in two parts during the F.Y. 2015-16. No evidence of the same has been furnished and further the payment is claimed in cash so it cannot be verified whether the payment was actually made by the appellant and whether it was made out of the accumulated dharmada / charity fund. Further no details have been furnished with respect to any payment of expenditure out of the said fund in the earlier period. The said small payment is an exception and not the normal. As per assessment order, for little payments if any no supporting for 80G registration of the payee institute/concern has been furnished. Therefore, a little payment out of this fund does not found sufficient to serve the claim of assessec. Any act of the appellant in showing utilisation out of such dharmada fund after the date of search and seizure action is a mere afterthought and a cover-up exercise and cannot justify the earlier conduct and at the same time the intentions of the appellant for the year under appeal are to be judged and inferred on the basis of conduct and transactions till the date of search and seizure action. (v) The present appeal on the ground is squarely covered by the judgement of Hon'ble Supreme Court in Commissioner of Income-tax v. Amritsar Transport Co. (P.) Ltd. [1993] 68 Taxman 56 (SC)/[1993] 201 ITR816 (SC)/[1993] 111 CTR 316 (SC)[31-03- 1993]. Hon'ble Supreme Court distinguished the case from earlier judgement in the case of CIT v. Bijli Cotton Mills (P.) Ltd. [1979] 116 ITR 60 (SC) on the ground that the revenue's case herein is that though collected in the name of Dharmada, e the amounts were neither meant for any charitable purpose nor were they spent on charitable purposes and held in favour of the Revenue. (vi) The Id. AO has noted after detailed analysis that if the question is whether these receipts were voluntary donation the answer would be emphatically a big NO. The appellant has prime facie used the principles of trust and dharmada for the purposes of collecting money for his own benefit as the funds are being utilized in the business apparently and no separate funds bank accounts are maintained and even the interest income is being earned by the appellant on such funds, meaning thereby that the funds are not being utilized for the purposes for which these are being collected and the nomenclature of dharmada is just a façade and colourable device. In view of the above discussion itself this ground of Appeal is liable to be dismissed. The same is discussed further in view of the examination of the provisions applicable to trusts. (vii) As stated in the assessment order assessee is not a Trust or Society registered under 12AA or 10(23C) of the I.T. Act thus assessee is not eligible to receive donation as exempt income. Assessee is a registered company under the 7 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT Companies Act under section 149 (3) and not under 25 of the companies act which pertains to registration of non-profit making company. Assessee is a private/public limited company which purely runs on commercial principles. Looking at the broader picture and facts of the case even if it can be said that the assessee himself has created an unregistered charitable trust within his organization, the appellant has not spent the money and it was required to keep those funds in modes specified under section 11. Even though such benefits areavailable to registered trusts, even then for the sake of examination the appellant has not fulfilled even such conditions. As per section 11 the trust is required to spend at least 85% of the voluntary contributions received during the year on charitable purposes. However the appellant has not done so. Further it is not the case of the appellant that he has obtained registration under section 12A/12AA. The appellant has also not complied with the legal provisions of trust and exemption provisions under section 11 and 12 regarding the registration of trust and regarding the application of the voluntary contribution and the investment of the unspent contribution. The appellant has prime facie used the principles of trust and dharmada for the purposes of collecting money for his own benefit as the funds are being utilized in the business apparently and no separate funds bank accounts are maintained and even the interest income is being earned by the appellant on such funds as noticed by the learned AO, meaning thereby that the funds are not being utilized for the purposes for which these are being collected and the nomenclature of dharmada is just a façade and colourable device. The appellant has also not shown that the trust is registered under the state government relevant laws and it is a settled law that in case the trust is not registered under the state government laws as applicable in that case the exemption under section 11 and 12 is not available. The exemption under section 11 and 12 is also not eligible to the appellant on account of misuse of the trust structure for non- chartiable/personal benefits. (viii) In view of the detailed discussion the appellant is not entitled to exemption benefit regarding the money collected as dharmada and thus not entitled to relief on this ground and the appeal of the appellant on this ground is dismissed.” 5. As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A) the assessee has preferred the present appeal before this Tribunal on the single ground challenging the addition so sustained. To support the solitary ground so raised by the assessee, ld. AR of the 8 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT assessee, has filed a detailed written submissions in respect of the addition sustained : 1. The assessee in course of sale made to its customers of oil, oil cake and oil seeds collect dharmada which is separately shown in the bill. This amount is separately credited to dharmada account and the amount paid towards charity is debited to this account. 2. The AO held that in search dt.14.10.2015 statement of Shri Vijay Data was recorded u/s 132(4) of the Act. In that statement in reply to Question No. 26 he stated that their companies charges charity in the bills which is credited in the Charity ledger account and out of it donation is made for charitable purposes. However assessee has not furnished any justification that how the amount charged from the buyers in the name of so called charity / dharmada qualify the requirement to justify it as charity / dharmada and why it should not be a part of the sale consideration. The AO further observed that assessee is not a trust or society registered u/s 12AA or 10(23C) of the Act to make it eligible to receive donation as exempt income. Dharmada is a part of sales consideration and simply showing it separately in the bill do not mean that the amount charged from the customer can be termed as donation. The decision of Hon’ble Rajasthan High Court in case of Hari Industries Vs. CIT (1985) 153 ITR 656 is not squarely applicable as in that case the said concern although collected dharmada on sale but not kept the collection with it only but paid a substantial amount to a charitable trust namely M/s Hari Propkari Trust and in this manner the fund has got transferred actually from the control of Hari Industries but in case of assessee funds always remained with the assessee. Accordingly AO made addition of Rs.16,22,841/- to the income of assessee. 3. The Ld. CIT(A) at Para 5.2, Page 16-20 of the order observed that assessee has not spent the amount for charitable purpose but accumulated the funds in its books which shows that it is not intended to be spent on charity. Further assessee enjoyed interest earning on such fund and the funds were put to use in the business as part of overall funds. The facts of the judgement relied upon by the assessee are different. Any act of the appellant in showing utilization out of such fund after the date of search is a mere afterthought. He relied on the decision of Hon’ble Supreme Court in case of CIT Vs. Amritsar Transport Company Private Limited (1993) 201 ITR 816. Accordingly he confirmed the order of AO. 4. It is submitted that right from inception the assessee used to collect certain amount of dharmada from its customers on sale of mustard oil which is separately depicted in the bills. This amount is earmarked for charity and as such it is not income from business liable to tax. From the charity ledger account enclosed it can be noted that the amount so collected has been utilized for charitable purpose in the subsequent year. Since this amount is earmarked for charity, it is 9 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT not a part of sales consideration. The various observations made by AO & CIT(A) are incorrect and irrelevant in as much as assessee has spent such amount for charitable purpose. This issue is also covered by the decision of Hon’ble Rajasthan High Court in case of Hari Industries Vs. CIT (1985) 153 ITR 656 where it observed as under:- The Learned Counsel for the assessee has placed reliance on CIT vs. Bijli Cotton Mills (P.) Ltd. (1979) 116 ITR 60 (SC), which has settled the controversy. The Supreme Court in that case held that \"dharmada\" means anything given in charity for religious or charitable purposes. Among the trading and commercial community, payment for \"dharmada\" is regarded as a gift for charitable purposes. It was further held that when the customers or brokers paid the amounts to the respondent earmarking them for dharmada those payments were validly earmarked for charity. The assessee was under an obligation to spend them only for charitable purposes. Therefore, the amounts received as \"dharmada\" were not its trading receipts. It has been further held that the \"dharmada\" amount could not be regarded as a part of price or surcharge on the price of goods purchased by the customers. Even though the \"dharmada\" was collected through the sale bills and every purchaser had to pay \"dharmada\" if he had to purchase goods from the assessee, still it did not make the payment of \"dharmada\" involuntary inasmuch as it was out of his own volition that the purchaser purchased the goods from the assessee. Therefore, the amount of \"dharmada\" should not be held to be part of price, but a payment for specific purpose for being spent on charitable purpose. The Supreme Court went further to hold that even though the \"dharmada\" amount was of a compulsory nature and the assessee had discretion as regards the manner in which and the time when it should spend for charitable purposes, or even if the assessee did not keep the amounts in a separate bank account, the \"dharmada\" amount could not be held to be part of price. The assessee holds the amount in trust. The Supreme Court approved the cases of the Allahabad High Court in Thakur Das Shyam Sunday vs. Addl. CIT (1974) 93 ITR 27(All) (FB) and of the Punjab High Court in CIT vs. GheruLal Bal Chand (1978) 111 ITR 134(P&H) and followed its earlier authority in CIT vs. Tollygunge Club Ltd. (1977) 107 ITR 776 (SC) and confirmed the decision of the Allahabad High Court in Bijli Cotton Mills Ltd. vs. CIT (1970) 76 ITR 194(All) . The Punjab and Haryana High Court in Nathu Ram Shiv Narayan vs. CIT (1982) 134 ITR 625(P&H) , has held that the definition of charitable purpose in s. 2(15) of the Act was of a very wide amplitude. The donations made by the assessee did not involve any process or carrying on of any activity for profit. Therefore, the payments made to the Bank Employees' Union and backward classes were held to be for charitable purposes. In this view of the matter, we hold that the amount of Rs. 7,984 collected by the assessee as \"dharmada\" through its sale bills did not constitute, part of sale price and, as such, it is not taxable income of the assessee. 5. The Ld. CIT(A) has referred to the decision of Hon’ble Supreme Court in 201 ITR 816. However in this decision Hon’ble Supreme Court directed the ITAT to state the question of law as framed by the revenue for the opinion of the High 10 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT Court u/s 256(2) of the Act. Thus this decision nowhere states that dharmada is assessable as revenue receipt. As against this the Hon’ble Supreme Court in a three judges bench in case of M/s D.J. Malpani Vs. CCE (2019) 176 DTR 305 in an excise matter by relying on its decision in case of CIT Vs. Bijli Cotton Mills 116 ITR 60 at Para 18 & 23 of its order held as under: “18. We find from the facts of the case before us that the receipts on account of Dharmada were voluntary, earmarked for charity and in fact credited as such. Though the payment as Dharmada has been found to be voluntary, it would make no difference to the true character and nature of the receipts even if there were found to be paid compulsorily because the purchaser, purchased the goods out of their own volition. The purchase of the goods is the occasion and not consideration for the Dharmada paid by the customer as held in Bijli Cotton Mills (supra) vide para 15: - \"15.. .... It is true that without payment of \"Dharmada\" amount the customer may not be able to purchase the goods from the assessee but that would not make the payment of \"Dharmada\" amount involuntary inasmuch as it is out of his own volition that he purchases yarn and cotton from the assessee. The \"Dharmada\" amount is, therefore, clearly not a part of the price, but a payment for the specific purpose of being spent on charitable purposes. . .......... “23. In the circumstances we hold that when an amount is paid as Dharmada along with the sale price of goods, such payment is not made in consideration of the transfer of goods. Such payment is meant for charity and is received and held in trust by the seller. If such amounts are meant to be credited to charity and do not form part of the income of the assessee they cannot be included in the transaction value or assessable value of the goods.” In view of above the addition made by AO and confirmed by Ld. CIT (A) be deleted.” 6. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: S. No. Particulars Pg No. 1 Copy of Balance Sheet 1 2 Copy of list of other creditors 2-3 3 Copy of Dharmada Account 4-7 4 Copy of invoice 8-9 5 Copy of audit report along with Balance Sheet & Profit & Loss account for A.Y 2011-12 10-31 11 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT Case laws relied upon: S. No. Particulars Pg No. 1. Copy of decision of Hon’ble Supreme Court in case of D.J. Malpani Vs. CCE 176 DTR 305 dt. 09.04.2019 1-8 2. Copy of decision of Hon’ble Supreme Court in case of CIT Vs. Amritsar Transport Company Private Limited (1993) 201 ITR 816 9-11 3. Copy of decision of Hon’ble Rajasthan High Court in case of Hari Industries Vs. CIT (1985) 153 ITR 656 12-14 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the donation for which the addition is made has not been received through donations receipts but instead of receiving it has been charged from the customers on the total amount of sale bills for a certain specific percentage and that part of the amount is not considered as sales and has been marked as “Dharmada” in the sale bills. Therefore, in no manner the said amount charged from the customer be regarded as income. Ld. AR also relied upon the decision cited in his paper book filed. 8. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). The ld. DR also submitted that the ld. CIT(A) has also dealt with the decision cited by the assessee. 12 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT 9. We have heard the rival contentions and perused the material placed on record. The bench noted that in this appeal the solitary issue raised by the assessee is addition of Rs. 16,22,841/- made by the ld. AO and sustained by the ld. CIT(A). The brief facts related to this addition is that the assessee in course of sale made to its customers of oil, oil cake and oil seeds collect dharmada which is separately shown in the bill. This amount is separately credited to dharmada account and the amount paid towards charity is debited to this account. For the year under consideration in that account Rs. 16,22,841/- was credited. Ld. AO treated this sum as part of sale consideration and added to the income of the assessee as the same were not forming part of the profit and loss account. When the matter carried to ld. CIT(A), he confirmed the addition on the count that the assessee has not made any expenditure out of the money so collected. The judgments cited by the assessee are different on facts as in those cases the funds were handed over by the assessee to the charitable organizations. Ld. CIT(A) also considered the provision of section 11 & 12 of the Act and has dismissed the appeal of the assessee. Before us it has been submitted that the assessee right from inception used to collect certain amount of dharmada from its customers on sale of mustard oil which is separately depicted in the bills. This amount is 13 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT earmarked for charity and as such it is not income from business liable to tax. From the charity ledger account placed on record it can be noted that the amount so collected has been utilized for charitable purpose in the subsequent year. Since this amount is earmarked for charity, it is not a part of sales consideration. The various observations made by AO & CIT(A) are incorrect on facts as assessee has spent such amount for charitable purpose. This issue is also covered by the decision of Hon’ble Rajasthan High Court in case of Hari Industries Vs. CIT (1985) 153 ITR 656 where it observed as under:- The Learned Counsel for the assessee has placed reliance on CIT vs. Bijli Cotton Mills (P.) Ltd. (1979) 116 ITR 60 (SC), which has settled the controversy. The Supreme Court in that case held that \"dharmada\" means anything given in charity for religious or charitable purposes. Among the trading and commercial community, payment for \"dharmada\" is regarded as a gift for charitable purposes. It was further held that when the customers or brokers paid the amounts to the respondent earmarking them for dharmada those payments were validly earmarked for charity. The assessee was under an obligation to spend them only for charitable purposes. Therefore, the amounts received as \"dharmada\" were not its trading receipts. It has been further held that the \"dharmada\" amount could not be regarded as a part of price or surcharge on the price of goods purchased by the customers. Even though the \"dharmada\" was collected through the sale bills and every purchaser had to pay \"dharmada\" if he had to purchase goods from the assessee, still it did not make the payment of \"dharmada\" involuntary inasmuch as it was out of his own volition that the purchaser purchased the goods from the assessee. Therefore, the amount of \"dharmada\" should not be held to be part of price, but a payment for specific purpose for being spent on charitable purpose. The Supreme Court went further to hold that even though the \"dharmada\" amount was of a compulsory nature and the assessee had discretion as regards the manner in which and the time when it should spend for charitable purposes, or even if the assessee did not keep the amounts in a separate bank account, the \"dharmada\" amount could not be held to be part of price. The assessee holds the amount in trust. The Supreme Court approved the cases of the Allahabad High Court in Thakur Das Shyam Sunday vs. Addl. CIT (1974) 93 ITR 27(All) (FB) and of the Punjab High Court in CIT vs. GheruLal Bal Chand (1978) 111 ITR 134(P&H) 14 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT and followed its earlier authority in CIT vs. Tollygunge Club Ltd. (1977) 107 ITR 776 (SC) and confirmed the decision of the Allahabad High Court in Bijli Cotton Mills Ltd. vs. CIT (1970) 76 ITR 194(All) . The Punjab and Haryana High Court in Nathu Ram Shiv Narayan vs. CIT (1982) 134 ITR 625(P&H) , has held that the definition of charitable purpose in s. 2(15) of the Act was of a very wide amplitude. The donations made by the assessee did not involve any process or carrying on of any activity for profit. Therefore, the payments made to the Bank Employees' Union and backward classes were held to be for charitable purposes. In this view of the matter, we hold that the amount of Rs. 7,984 collected by the assessee as \"dharmada\" through its sale bills did not constitute, part of sale price and, as such, it is not taxable income of the assessee. Before us, the ld. DR did not place on record any other binding precedent on the issue we respectfully follow the decision of our High Court. Not only that even after the amended provision of Act u/s. 145A of the Act while making the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation is not applicable to the present case. Considering the above facts and decision relied upon by the assessee we direct the ld. AO delete the addition of Rs. 16,22,840/- made in the hands of the assessee. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 17/10/2024. Sd/- Sd/- ¼Mk0 ,l- lhrky{eh½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member 15 ITA No. 495/JP/2024 Ritika Vegetable Oil Pvt. Ltd. vs. ACIT Tk;iqj@Jaipur fnukad@Dated:- 17/10/2024 *Ganesh Kumar, Sr. PS vkns'k dh izfrfyfivxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Ritika Vegetable Oil Pvt. Ltd., Jaipur 2. izR;FkhZ@ The Respondent- ACIT, Central Circle, Alwar 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr ¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 495/JP/2024) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar "