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Issues involved: Whether grants-in-aid received by the assessee from the Government can be considered as voluntary contributions and exempt under section 12(1) of the Income-tax Act, 1961.
Summary: The assessee, a company established for charitable purposes, received grants-in-aid from the Government subject to certain conditions. The Income Tax Officer (ITO) brought the grants-in-aid to tax, but the Appellate Assistant Commissioner (AAC) directed their exclusion based on the argument that they were voluntary contributions exempt under section 12(1) of the Act. The Income-tax Appellate Tribunal upheld the AAC's decision, stating that the grants were voluntary contributions and not payments for any benefit or privilege. The Tribunal's order was challenged, leading to the question of whether the grants were indeed voluntary contributions under section 12(1) of the Act. The Revenue contended that the conditions imposed by the Government on the grants negated their voluntary nature. However, the court held that grants-in-aid are made at the discretion of the Government without expecting any return, making them voluntary contributions. The court cited a case to differentiate between voluntary contributions and payments made under a contract, emphasizing that the conditions attached to the grants were meant to ensure proper utilization and did not change their voluntary nature. The court distinguished another case where payments were considered consideration for privileges, unlike the grants-in-aid in the present case. It was concluded that the grants were indeed voluntary contributions, and the decision of the AAC and Tribunal was justified in law. Therefore, the question was answered in the affirmative, ruling in favor of the assessee and awarding costs of the reference to them.
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