1982 (2) TMI 52 - HC - Income Tax

Summary

Issues involved: Determination of whether the surplus contributions received by the assessee-trust constituted the corpus of the trust, applicability of sections 4, 11, and 12 of the Income-tax Act, 1961 to the trust fund, exemption from tax under section 12(1) for income derived from voluntary contributions, and whether the contributions received were derived from property held under trust as contemplated under section 11 of the Act.

Summary:

The case involved a charitable trust formed by P.C. Parikh known as "Visha Nima Charitable Trust" with the objective of providing temporary accommodation for charitable purposes. The trust raised funds through a charity show and advertisements, resulting in total receipts of Rs. 1,05,372 for the relevant accounting year. The Income Tax Officer (ITO) held that the income was accumulated for application to charitable purposes and granted partial exemption. The Appellate Tribunal later ruled that the contributions were voluntary and exempt under section 12(1) of the Act, as they were intended to be held as an accretion to the trust's corpus.

The questions referred to the court included whether the surplus contributions constituted the trust's corpus, the applicability of sections 4, 11, and 12 to the trust fund, and whether the contributions were exempt under section 12(1) as income from voluntary contributions. The court analyzed the nature of the contributions, considering arguments on whether the contributions were voluntary or had a consideration attached to them. The court found that the contributions were made primarily for charitable purposes, and the entertainment and advertisements were of a voluntary nature, attracting the exemption under section 12(1) of the Act.

The court concluded that the contributions should be regarded as voluntary, and therefore exempt from tax under section 12(1), regardless of whether they constituted income or corpus of the trust. The court declined to answer questions 1 and 2, as they were rendered unnecessary by the decision on question 3. Question 4, regarding whether the contributions were derived from property held under trust as per section 11, was answered in the negative. The court made no order as to costs in the reference.