1991 (2) TMI 93 - HC - Income Tax

Court rules in favor of assessee-trust on income treatment of donations and scholarship repayments.

The court ruled in favor of the assessee-trust on both issues referred by the Income-tax Appellate Tribunal. The donations received for the corpus of the ... Charitable Trust Issues Involved: The judgment involves the questions of law referred by the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act, 1961 regarding donations received by the assessee-trust from charitable trusts and the treatment of loan scholarship amounts received back by the trust.Donations Received by Assessee-Trust: The donations received specifically towards the corpus of the donee trust were held not to constitute income of the assessee-trust based on precedent set by a previous High Court judgment. The court noted that there was no dispute regarding the nature of the donations, and the answer to this issue was in favor of the assessee.Loan Scholarship Amounts Repayment: The court considered whether the repayment of loan scholarship amounts by scholars to the assessee-trust should be treated as income of the trust. It was established that the return of loans by debtors does not amount to income. The Revenue argued that since the loans were granted partially from exempted income, the repayment should be considered as income. However, the court rejected this argument, emphasizing that section 12(2) of the Income-tax Act, 1961, cited by the Revenue, was not applicable to the case. Consequently, the court ruled in favor of the assessee on this issue as well, stating that none of the contentions raised by the Revenue had merit.Separate Judgment: The judgment was delivered by D. R. DHANUKA J., and the court answered both questions in the negative and in favor of the assessee, with no order as to costs.