TaxTMI 
TaxTMI 
1998 (7) TMI 2
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....oluntary contributions. Both the Revenue as well as the assessee filed appeals from the order of the Appellate Assistant Commissioner before the Income-tax Appellate Tribunal. The Tribunal allowed the appeal filed by the Revenue and dismissed the appeal filed by the assessee. At the instance of the assessee, a reference was made to the High Court under section 256(1) of the Income-tax Act. The questions before the High Court, as reframed by the High Court in the impugned judgment, were as follows (see [1988] 172 ITR 373, 375 (Bom)) : "(1) Whether, on the facts and in the circumstances of the case, and having regard to the relevant provisions of the Income-tax Act, the voluntary contributions aggregating to Rs. 55,000 received by the assessee towards its corpus was income liable to be taxed under the Income-tax Act 1961? (2) Whether, on the facts and in the circumstances of the case, and having regard to the relevant provisions of the Income-tax Act, voluntary contributions aggregating to Rs. 4,00,000 received by the assessee towards its corpus was income liable to be taxed under the Income-tax Act, 1961? (3) Whether, on the facts and in the circumstances of the case, vo....
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....id loan account to the assessee-trust, held that out of the total income earned by the assessee-trust amounting to approximately Rs. 24,00,000 for these assessment years, only a sum of Rs. 7,12,219 was invested in dharamshala and the balance amounts were invested in other properties, advances and investments. The Income-tax Officer came to the conclusion that the transfer of a sum of Rs. 4,55,000 to the said mining firm cannot be considered as application of money for religious or charitable purposes. The assessee had contended that the amount received by way of loans from the said mining firm had been utilised for the construction of a dharamshala. The Income-tax Officer, however held that the amounts received as loans from the mining firm did not necessarily go into the construction of a dharamshala. The funds of the assessee were allowed to grow side by side with the loans from the mining firm. Looking to the totality of circumstances, the Income-tax Officer gave a finding of fact that the voluntary contributions were not solely applicable to religious and charitable purposes and were not actually applied as such. This finding has been ultimately upheld by the Tribunal. The T....
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....2(1) is applicable to any amount realised as income from out of investment of any voluntary contribution received by the assessee during the year. Voluntary contribution itself is not income at all. In support, the assessee relies upon the definition of "income" under section 2(24) as in force at the relevant time. Section 2(24) at the relevant time did not expressly include in the definition of "income" voluntary contributions received by a public religious or charitable trust. The definition of "income" under section 2(24) was, however, subsequently amended by the Finance Act of 1972 by including in the definition of "income" under sub-clause (ii)(a) of section 2(24), voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purpose. The amended definition also excluded from the definition of "income" those contributions which were made with a specific direction that they shall form a part of the corpus of the trust or the institution. The assessee, therefore, contends that section 12(1) prior to the amendment of 1972 should be interpreted as referring only to any income whi....
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.... funds. The Allahabad High Court held that since the voluntary contribution was made expressly towards the corpus of the trust, it could not be considered as income. Hence, it was not covered by section 12(2) which covers only income in the form of voluntary contributions. The same view has been taken by the Gujarat High Court in CIT v. Bal Utkarsh Society [1979] 119 ITR 137. The Gujarat High Court, following the Allahabad High Court's decision in Sri Dwarkadheesh Charitable Trust [1975] 98 ITR 557, has also observed that section 12(1) covers voluntary contributions which are received as income. Sub-section (2) would apply if the voluntary contribution is from one public charitable trust to another. However, when the voluntary contribution is expressly towards the corpus of the receiving trust, it cannot be considered as income. A similar view has been taken by the Kerala High Court in CIT v. Vanchi Trust [1981] 127 ITR 227 and by the Delhi High Court in CIT v. Eternal Science of Man's Society [1981] 128 ITR 456. (see also Sukhdeo Charity Estate v. CIT [1984] 149 ITR 470 (Raj)). The Madras High Court in the case of CIT v. Shri Billeswara Charitable Trust [1984] 145 ITR 29, was a....
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....ntribution towards the corpus of the trust, shall, for the purpose of section 11, be deemed to be income derived from property held by the trust wholly for charitable or religious purposes. This, however, does not necessarily imply that prior to the amendment of 1972, a voluntary contribution which was not towards the corpus of the receiving trust, was not income of the receiving trust. It was. Even prior to the amendment of 1972, any income received by a religious or charitable trust in the form of a voluntary contribution would be income of the trust unless such contribution was expressly made towards the corpus of the trust's fund. Section 12, therefore, prescribed that such income would not be included in the total income of the trust if it was applicable solely to charitable or religious purposes. It would, however, be treated as income from property under section 11 if it is received from another charitable or religious trust. The assessee has relied upon a departmental circular No. 20/10/67-IT(AI) dated May 1, 1967, which deals with exemption of income of a charitable trust under section 11(1) of the Income-tax Act, 1961. The departmental circular, inter alia, states that....