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Issues: (i) Whether voluntary contributions received with specific directions for construction of a building for the assessee institution formed part of the corpus and were not income under section 12. (ii) Whether the assessee institution was entitled to depreciation under section 32 on the assets used for its activities.
Issue (i): Whether voluntary contributions received with specific directions for construction of a building for the assessee institution formed part of the corpus and were not income under section 12.
Analysis: The contributions were made for construction of a building in the assessee's premises, and the amounts were actually utilised for that purpose. The building belonged to the assessee and constituted capital of the institution. Amounts so received with a specific direction for a capital purpose were treated as forming part of the corpus and, after the amendment to section 12 by the Finance Act, 1972, did not constitute income.
Conclusion: The issue was answered in favour of the assessee. The voluntary contributions were held to be corpus receipts and exempt from inclusion as income.
Issue (ii): Whether the assessee institution was entitled to depreciation under section 32 on the assets used for its activities.
Analysis: Depreciation under section 32 is allowable on assets used for the purposes of business or profession, and profession includes vocation. The assessee was running a permanent boarding and lodging home for the aged, providing food, shelter, and medical facilities. Those activities were treated as a vocation, so the institution was regarded as carrying on a vocation for the purpose of depreciation allowance.
Conclusion: The issue was answered in favour of the assessee. Depreciation was held to be admissible, subject to verification of the written down value and other particulars.
Final Conclusion: Both common points were decided in favour of the assessee, and the assessments were directed to be modified accordingly.
Ratio Decidendi: Voluntary contributions made with a specific direction for a capital purpose and actually applied to that purpose form part of the corpus of the institution and are not income; an institution carrying on charitable activities of the nature of a vocation is entitled to depreciation on its assets used in such activities.
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