TMI Blog1984 (4) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... ions to the trustees to hold the same in trust for religious and charitable purposes. On January 25, 1963, trust was constituted under the terms and conditions contemplated by the trust deed. Aims and objects of the trust were set out as under : " 1. To acquire immovable property or properties in Calcutta or elsewhere by purchase, lease or otherwise and to sell, mortgage, lease out whole or part of the same except the properties being items Nos. 1 and 2 of the properties mentioned in the Schedule " C " hereto. 2. To erect temples and Thakur Bari at Sukhdeo Ashram, Ladnu, started by the donor and to improve the same. 3. To erect hospitals, schools and other religious institutions. 4. To meet the expenses of the ashram, schools and hospitals already started and to be started hereafter and to develop and to improve the same. 5. Not to lend any of the trust funds to anybody. 6. Trustees shall not be entitled to utilise trust fund in any way for any purpose whatever. 7. Trustees shall be entitled from time to time to spend such amount from the trust fund as they may think fit and proper in the religious places. 8. Trustees shall be entitled to spend such money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and be taxed accordingly. Penalty notice was also issued for delay in filing the return as also for furnishing inaccurate particulars of income and concealment thereof. The assessee-trust went in appeal before the Appellate Assistant Commissioner of Income-tax, B-Range, jodhpur (for short " the AAC "), in grievance of the order of the ITO concerning the amount of Rs. 1,00,000 received from the Calcutta trust along with other points which are not relevant for the present purpose. The AAC affirmed the view of the ITO that the donation of Rs. 1,00,000 received from the Calcutta trust should be included in the income of the assessee-trust. Feeling dissatisfied by the aforesaid order, the assessee-trust preferred an appeal before the Income-tax Appellate Tribunal, Jaipur Bench (for short " the Tribunal "). After discussing the nature of the donation and the question of applicability of s. 12(2) of the Act in the case, the learned members of the Tribunal formed the opinion that the sum of Rs. 1,00,000 was rightly brought to tax under the provisions of s. 12(2) of the Act and consequently dismissed the appeal. The assessee-trust filed an application before the Tribunal under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (hereinafter to be referred as " the Act of 1922 ") by the Act of 1961 and subsequent amendment of the relevant provisions by the Finance Act of 1972 (hereinafter to be referred to as " the Act of 1972 "). In the 1922 Act, all the voluntary contributions received by a charitable or religious trust were exempted from tax. In the 1961 Act a distinction was made between the voluntary contribution received by charitable trust from individuals and other charitable trusts. Section 12 of the 1961 Act (before amendment) read as under: " 12. Income of trusts or institutions from voluntary contributions.-(1) Any income of a trust for charitable or religious purposes or of a charitable or religious institution derived from voluntary contributions and applicable solely to charitable or religious purposes shall not be included in the total income of the trust or the institution, as the case may be. (2) Notwithstanding anything contained in sub-section (1), where any such contributions as are referred to in sub-section (1) are made to trust or a charitable or religious institution by a trust or a charitable or religious institution to which the provisions of section 11 apply, such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be deemed to be income derived for the purposes of s. 11. Section 11 contains a provision for taxation of accumulated income and imposes a limit of 25% to the income credited to a charitable or religious trust. Section 12 deals with the income derived from voluntary contributions. That is to say, it is only when the amount in question is income that provisions of s. 12 are attracted. If such an income is received by a charitable or religious trust or institution by another such trust or institution, provisions of s. 12(2) would be applicable. It is quite clear from the material on record that a donation of Rs. 1,00,000 was received by the assessee-trust, a charitable and religious trust from another such trust at Calcutta. The crucial point involved in the matter is whether the donation so receive "the assessee-trust falls within the definition of the term " income " derived from voluntary contributions. Mr. Joshi appearing on behalf of the Revenue emphasized that whatever be the nature of the donation of this amount at the time of the receipt, the subsequent conduct of the assessee-trust, i.e., keeping the money unspent, would amount to accumulation of income and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raja of Nabha State was income or capital came for consideration before their Lordships of the Allahabad High Court in the case of Rani Amrit Kanwar v. CIT [1946] 14 ITR 561. The assessee residing at Dehra Dun in British India with her sons and daughters received some amount from the State of her husband and some amount from the State of her brother. The amount received from her husband was wholly taxable as income deemed to have accrued to the assessee in British India under s. 4(2) of the 1922 Act, for the reason that the payments were made for the purpose of meeting the assessee's household and living expenses and the education of her children. However, the amount received from the Nabha State, for which the assessee was not to account for, was not considered to be an income and, therefore, not liable to be taxed. In the case of CIT v. Thakar Das Bhargava [1960] 40 ITR 301 (SC), the assessee, an advocate, agreed to defend certain accused persons in criminal trial on the condition that he would be provided with the sum of Rs. 40,000 for a public charitable trust which he would create. When the trial was over the assessee was paid a sum of Rs. 32,000. Subsequently he created a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely on the whim of the donor was not held to fall in the category of income. The reason given by their Lordships was that as the payments were commenced long after the ruler had abdicated, they were not under a legal or contractual obligation as the allowances were not made under a custom or usage or as a maintenance allowance and, therefore, were not assessable as income. In the case of CIT v. Keshri Singh [1977] 106 ITR 184 (Raj), the assessee by his efforts persuaded the Maharaja of Jaipur to deposit an amount for purchase of shares from a company. There was no prior understanding or promise of remuneration or reward by way of brokerage but taking all the facts and circumstances into consideration, their Lordships felt persuaded to hold that the amount paid by the company was in appreciation of the services rendered by the assessee in persuading the Maharaja of Jaipur, who was admittedly his close acquaintance. The receipt by the assessee was held to be income assessable to tax. In the case of CIT v. Motor and General Finance Ltd. [1974] 94 ITR 582 (Delhi), the amounts received towards deposit and as advance from sub-distributor to be returned to the sub-distributor after ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of a resolution passed at a general meeting of the respondent for levying surcharge of eight annas over and above the admission fees, the proceeds of which were to go to the Red Cross Fund. This resolution was varied by another resolution to the effect that the surcharge should be earmarked "for local charities and not solely for the Indian Red Cross ". Every entrant was issued two tickets, one an admission ticket for admission to the enclosure of the club, and the other, a separate ticket in respect of the surcharge of eight annas for local charities. The question arose whether receipts on account of the surcharge were to be treated as the respondent's income. The Tribunal and the High Court on a reference held in favour of the assessee. The matter went to the Supreme Court and the decision of the High Court was affirmed and it was held that the surcharge was not a part of the price for admission but was a payment made for the specific purpose of being applied to local charities. Their Lordships were pleased to enunciate the following principle (p. 781) : "It is settled law that a trust may be created by any language sufficient to show the intention and no technical word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale price, and " Dharmada " was a customary levy prevailing in certain parts of the country. The reasonings given by the High Court were that the amounts were received and held by the respondent under an obligation to spend them for charitable purposes only, with the result that those amounts were not its trading receipts. " Dharmada " was also considered to be a voluntary payment by a customer in addition to the (price for the) goods which he purchased from the respondent. It was not considered to be involuntary inasmuch as it was out of his own volition that he purchased yarn or cotton from the respondent. Their Lordships were pleased to observe as under (Headnote) : " none of the following facts would lead to the inference that no obligation to utilise the amounts exclusively for charitable purposes could be said to have been created: (a) the compulsory nature of the payment, (b) the fact that the respondent had some discretion as regards the manner in which and the time when the respondent should spend the Dharmada amounts for charitable purpose, or (c) the fact that the respondent did not keep the amounts in a separate bank account". The principle enunciated in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of these principles, we would now deal with the aims and objects of raising the demand by the assessee-trust, the correspondence entered between the assessee-trust and the Calcutta trust and the way in which the amount was treated by the former. There is no dispute on the point that the Ladnu Water Supply Scheme was mooted by the assessee-trust for implementing the scheme. It is also not disputed that the Government of Rajasthan agreed to sanction an amount of Rs. 7,00,000 out of the estimated expenditure amount of Rs. 10,00,000. This was, however, to be done by the Government on the condition that the assessee-trust would collect Rs. 3,00,000 and contribute in advance Rs. 2,85,000. A separate account was opened for the water supply scheme and the assessee-trust transferred the amount from its charity trust to that account as stated earlier. The letter written by the assessee-trust to the Calcutta trust on March 5,1964, reads as under : " We are to state that with a view to supply water to the locality of Ladnu (Rajasthan), we proposed to the Government concerned to sanction a grant for the purpose. The Government has been pleased enough to sanction an amount of Rs. 7 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Supply Scheme at Ladnu. Since you had undertaken to deposit the requisite amount with the Government of Rajasthan for the above scheme, the said contribution by us was routed through you. Yours faithfully, For Benjamin Rahama Elias Memorial Trust, sd/- Trustee." It is true that there is more amount in credit in the account of the water supply scheme because of the receipt of this one lakh rupees more than what was required for, i.e., three lakhs rupees to be contributed by the assessee-trust. The argument of the learned counsel for the assessee-trust is that in anticipation of receiving voluntary contributions from others, the assessee-trust transferred the amount from its own charity funds towards that scheme and, therefore, this amount was to be deposited towards the amount so advanced by the assessee-trust. The argument has no force for the reason that while transferring the amount, the assessee-trust had not so mentioned it in its accounts nor any intention of adjusting the amount can be gathered from the facts and circumstances of the case. However, that in itself will not make any difference nor would it be sufficient to hold that the amount received initially from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see on behalf of the quota holders. Their Lordships were pleased to propound the following principle (Headnote): " It is well-settled that the taxability of a receipt is fixed with reference to its character at the moment it is received and that merely because the recipient treats it subsequently in his own accounts as his own does not alter that character. The consideration applied by the Tribunal that the amount belonging to the quota-holders could not be recovered by them by reason of limitation must be regarded as one of little importance. " Applying the principles of the aforesaid decisions to the facts and circumstances of the present case, the only conclusion that can be drawn would be that it was for the specific purpose of the implementation of the water supply scheme that the demand was raised by the assessee-trust and it was in response to that demand that the Calcutta trust made voluntary contribution with a specific intention and implied instructions that the amount was meant for the water supply scheme. It was with this object and intention that the assessee-trust received the amount and credited it in the separate accounts maintained for the purpose. The amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
