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Issues Involved:
1. Taxability of voluntary contributions received in the form of shares under sections 11 and 12(2) of the Income-tax Act, 1961. 2. Applicability of section 13(2)(h) concerning interest income. Detailed Analysis: Issue 1: Taxability of Voluntary Contributions Eternal Science of Man's Society, New Delhi - The primary issue was whether the sum of Rs. 4 lakhs received as shares from M/s. Daulat Ram Public Trust was taxable under sections 11 and 12(2) of the Income-tax Act, 1961, for the assessment year 1970-71. - The Tribunal held that the shares were received as part of the corpus with restrictions on their use and sale, making them non-taxable. - The ITO had added the value of the shares and dividend income to the society's income, which was contested and deleted by the Tribunal. Daulat Ram Public Mission, New Delhi - Similar to the Eternal Science of Man's Society, the assessee received shares worth Rs. 2,21,300 as corpus with restrictions. - The Tribunal followed the same reasoning and held that the shares were part of the corpus and not taxable. Daulat Ram General Education Society, New Delhi - The society received shares worth Rs. 1,30,000 and Rs. 2,20,000 in different assessment years with similar restrictions. - The Tribunal held that these contributions were part of the corpus and not taxable. Legal Reasoning: - Section 12(1) exempts income derived from voluntary contributions applicable solely to charitable/religious purposes. - Section 12(2) deems such contributions as income derived from property for the purpose of section 11. - The contributions in question were part of the corpus with specific restrictions, thus not constituting income. - The amended section 12 clarifies that contributions forming part of the corpus are not taxable. Conclusion: - Voluntary contributions to the capital assets are excluded from taxable income. - The Tribunal's decision was upheld, and the contributions were not considered taxable income. Issue 2: Applicability of Section 13(2)(h) Concerning Interest Income Eternal Science of Man's Society, New Delhi - The ITO found that the interest income for the assessment years 1971-72 and 1972-73 was not spent and held it taxable under section 13(2)(h). - The Tribunal held that the interest income was not taxable as it was not lent without adequate security or interest. Daulat Ram Public Mission, New Delhi - Similar findings were made for the assessment years 1971-72 and 1972-73. - The Tribunal upheld the exclusion of interest income from taxable income, following the same reasoning. Legal Reasoning: - Section 13(2)(h) deals with funds invested in concerns where persons specified in section 13(3) have a substantial interest. - The distinction between loans and investments was emphasized, with loans covered under section 13(2)(a). - The Tribunal found that the funds were not lent without adequate security or interest, making section 13(2)(h) inapplicable. Conclusion: - The interest income was not deemed to have been used for the benefit of specified persons under section 13(2)(h). - The Tribunal's decision was upheld, and the interest income was excluded from taxable income. Final Judgment: - All questions were answered in favor of the assessees. - The voluntary contributions received as shares forming part of the corpus were not taxable. - The interest income was not taxable under section 13(2)(h). - The assessees were entitled to costs from the revenue, with counsel's fee set at Rs. 500.
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