1987 (1) TMI 13 - HC - Income Tax

Court rules voluntary contributions taxable under Income-tax Act, 1961, not solely charitable.

The court held that voluntary contributions totaling Rs. 55,000 and Rs. 4,00,000 were taxable under section 12(1) of the Income-tax Act, 1961. It found ... Charitable Trust Issues Involved:1. Taxability of voluntary contributions aggregating to Rs. 55,000.2. Taxability of voluntary contributions aggregating to Rs. 4,00,000.3. Exemption u/s 12(1) of the Income-tax Act, 1961 for voluntary contributions.4. Tribunal's misdirection regarding the discharge of debt from voluntary contributions.5. Justification of interest levy u/s 139 and 215 of the Income-tax Act, 1961.Summary:Issue 1: Taxability of Voluntary Contributions Aggregating to Rs. 55,000The court examined whether the voluntary contributions of Rs. 55,000 received by the assessee were liable to be taxed u/s 12(1) of the Income-tax Act, 1961. The court concluded that these contributions could form part of the 'income' of the trust even under the old section 12(1).Issue 2: Taxability of Voluntary Contributions Aggregating to Rs. 4,00,000Similarly, the court considered the taxability of Rs. 4,00,000 received by the assessee. It was determined that this amount was rightly added as income, as voluntary contributions themselves could be considered income under the old section 12(1).Issue 3: Exemption u/s 12(1) of the Income-tax Act, 1961 for Voluntary ContributionsThe court analyzed the applicability of the exemption provision in section 12(1). It was found that the voluntary contributions were not solely applicable to charitable or religious purposes and were not actually applied as such. Therefore, the contributions did not qualify for exemption u/s 12(1).Issue 4: Tribunal's Misdirection Regarding the Discharge of Debt from Voluntary ContributionsThe court addressed whether the Tribunal misdirected itself in holding that the mere discharge of debt from voluntary contributions does not render it solely charitable. It upheld the Tribunal's finding that the contributions were not solely applicable to charitable or religious purposes.Issue 5: Justification of Interest Levy u/s 139 and 215 of the Income-tax Act, 1961The court noted that this issue did not arise from the order of the Tribunal and was therefore not pressed.Conclusion:The court answered questions (1) and (2) in the affirmative and against the assessee, question (3) in the negative and against the assessee, and question (4) in the negative and against the assessee. Question (5) was not pressed. There was no order as to costs.