TMI Blog1982 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived towards corpus, yet it had to be treated as income under s. 12(2) of the Act and proceeded to grant an exemption. Before the AAC, the assessee took the stand that the amount received from Swadharma Swarajya Sangha as donation towards corpus cannot be treated as income and would also not form part of the accumulated funds of the trust. Accepting the stand of the assessee, the AAC concluded that the donation received by the assessee from Swadharma Swarajya Sangha was towards the corpus of the assessee-trust and not income and therefore, that amount should be deleted from the assessment. On further appeal, the Tribunal found that the donation to the assessee was made by Swadharma Swarajya Sangha for the specific purpose that amount should form part of the corpus or capital of the assessee trust and that such a donation cannot be income of the assessee-trust within the meaning of s. 12(1) of the Act, and, therefore, it would be outside s. 12(2) of the Act as well. The main contention urged by the counsel for the Revenue is that any donation made by one charitable trust to another, even if it be towards corpus, has to be regarded for tax treatment in the hands of the donee, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the trustee of the institution. The phrasing of s. 12(1) of the Act and the result to which an ordinary understanding of that section, as it stood prior to April 1, 1973, leads a court of construction, may now be adverted to. The use of the expression " income" derived from voluntary contributions " is significant. The word " derived " connotes obtaining or drawing or taking or receiving from a source. When something is stated to be derived from something else, the latter is a source, while the former is that which flows from that source. A voluntary contribution understood that way is not by itself income. It is that from which income flows. By implication, therefore, voluntary contributions may be regarded as non-income without anything more indicated in s. 12(1) of the Act. The question whether it is plausible to view voluntary contributions received by a charity as its income may also be touched upon. charity can live by donations alone. What it lives on may be regarded as a revenue receipt because it flows in and that sustains the charity and goes to meet its daily needs as well as current expenses.. Merely looking at that aspect of donation, it may be plausible to say ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation to be read into the statute that voluntary contributions per se are not regarded as income at all ? The matter may be looked at from the point of view of the charity as well. It may be that a charity lives on voluntary contributions and public donations. In most cases, the charities may have to wait too long to obtain the donations or voluntary contributions. The charity may also have to look everywhere, even heavenward, for contributions and donations of money and windfalls. There is no exercise of control over windfalls in the sense that one cannot say that some more is expected or would come in or that enough had already been secured. The essence, therefore, of a windfall or voluntary contribution as opposed to income is that it is unexpected. The characteristic of income is that it is it periodical monetary return coming in with regularity or at least expected regularity. So, voluntary contributions Per se are not dealt with by s. 12(1) of the Act. They need not be, in order to stand outside the field of taxation, because, they are windfalls and hence the very antithesis of income and, therefore, there is no need to exempt them or to exclude them from the total income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid construction is also in consonance with the underlying scheme of Chap. III of the Act. In addition, the underlying purpose for enacting s. 12(2) of the Act, appears to be this. Under s. 11(1) of the Act, by making a voluntary contribution to another charitable or religious trust, exemption could be claimed by a trust by stating that it had actually applied its income for religious or charitable purposes, though in the hands of the receiving trust, such amount had remained unspent or accumulated. Likewise, while accumulating the amount so received, the receiving trust would also be able to claim exemption on the footing that what was received is a voluntary contribution or income therefrom. With a view to discourage resort to accumulation of income in this manner by defeating the provisions of the Act, s. 12(2) provided that contributions constituting income will be taken to be income from property in the hands of the receiving trust or institution within the meaning of s. 11 and subjected to its provisions. The avowed object of s. 12(2) is not to convert what is received as capital into income and has therefore, no application where what is received is only capital. The inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the shares received towards corpus as income of the trust. In dealing with the question whether the donations are covered by s. 12(2) of the Act, the Allahabad High Court held that voluntary contributions, made with specific direction that they shall form part of the corpus of the donee trust and accepted by the donee-trust as such, are not voluntary contributions which constitute income within the meaning of s. 12(1) of the Act, as the subject-matter of the donation becomes part of the corpus or capital and cannot constitute income of the receiving trust and such contributions will not, therefore, fall within the purview of sub-s. (2) of s. 12 of the Act. In so holding, the court pointed out that s. 12(1) did not deal with the same kind of income, namely, income from property held under trust, as that would nullify the conditions and limitations placed by s. 1 of the Act and that, under s. 12(1) of the Act, such incomes are exempt from the total income. It was also noticed how an impasse in the working of the Act would result if the position were otherwise, and it was held that income in the shape of voluntary contributions under s. 12(1) of the Act alone is converted by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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