TMI Blog1998 (7) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4,55,000 for the relevant year. The Income-tax Officer held that the voluntary contributions amounting to Rs. 4,55,000 received by the assessee during the relevant year were not applicable solely for charitable and religious purposes; and were also not actually applied as such. In appeal, the Appellate Assistant Commissioner held that out of the sum of Rs. 4,55,000, a sum of Rs. 4,00,000 could not be treated as income derived from voluntary 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 toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount to the mining firm, the liability of the assessee-trust to the mining firm under the said loan account was reduced. The sum of Rs. 55,000 was also similarly transferred to the mining firm, thus reducing the liability of the assessee under the said loan account. The Income-tax Officer, after examining the balance-sheet of the assessee for the years 1953-54 to 1966-67 and after examining the amounts lent under the said 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or institution receiving the contributions, be deemed to be income derived from property for the purposes of that section and the provisions of that section shall apply accordingly." The assessee contends that section 12(1) refers not to the voluntary contributions themselves but to any income derived from voluntary contributions so received. In other words, according to the assessee, the exemption under section 12(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 purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with interpretation of section 12(2). In the case of Sri Dwarkadheesh Charitable Trust v. ITO [1975] 98 ITR 557, the Allahabad High Court while interpreting section 12(2) observed that section 12 is confined to voluntary contributions which should be treated as income. The Allahabad High Court was concerned with a case where the donor specified that the contribution was towards the corpus of the receiving trust's 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edly by a subsequent amendment in 1972 to the definition of "income" under section 2(24), voluntary contributions not being contributions towards the corpus of such a trust, are included in the definition of "income" of such a religious or charitable trust. Section 12 as amended in 1972 also expressly provides that any voluntary contribution received by a trust for religious or charitable purposes, not being contribution 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 charit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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