dharmada

Sometimes the manufacturer charges from the buyer a specific amount, which is used for charitable purposes. This amount is known as charity amount or Dharmada. It may be compulsory or optional for the buyer.

The amount so collected in “not retained” by the manufacturer but used solely for religious or charitable purposes, thus the amount collected doesn’t go to the manufacturer or doesn’t form part of his income.

The Law Lexicon, P. Ramantha Aiyer, Badhwa define Dharamada as an endowment or gift for religious or charitable purposes.

In CIT v/s Bijli Cotton Mills (AIR 1979 SC 346), a case under the Income Tax Act, 1961, it was held that Dharmada collected for charitable purposes and spent on charity purposes is not a part of the income of the assessee.