1998 (7) TMI 2 - SC - Income Tax

Registered public trust - To get the benefit of section 12(1) the assessee was required to show that the voluntary contribution which it had received was applicable solely for religious or charitable purposes - ITAT & HC are justified in holding that the voluntary contribution amounting to Rs. 4, 55, 000 was not applied and was not wholly applicable for religious or charitable purposes. In this view of the matter the assessee on the facts of the present case cannot get the benefit of s. 12(1)

Summary

Issues Involved:
1. Taxability of voluntary contributions aggregating to Rs. 55,000.
2. Taxability of voluntary contributions aggregating to Rs. 4,00,000.
3. Exemption under section 12(1) of the Income-tax Act, 1961, for voluntary contributions aggregating to Rs. 55,000 and Rs. 4,00,000.
4. Tribunal's misdirection regarding the use of voluntary contributions for charitable purposes.
5. Levy of interest under sections 139 and 215 of the Income-tax Act, 1961.

Detailed Analysis:

1. Taxability of Voluntary Contributions Aggregating to Rs. 55,000:
The Income-tax Officer included Rs. 55,000 received by the assessee-trust as voluntary contributions in its taxable income, asserting that these contributions were not solely applied for charitable and religious purposes. The Tribunal upheld this finding, and the High Court agreed, determining that the contributions were rightly considered as income not exempt under section 12(1) of the Income-tax Act.

2. Taxability of Voluntary Contributions Aggregating to Rs. 4,00,000:
Similarly, the Income-tax Officer included Rs. 4,00,000 received by the assessee-trust as voluntary contributions in its taxable income. The Tribunal and the High Court upheld this inclusion, finding that the contributions were not applied solely for charitable and religious purposes.

3. Exemption Under Section 12(1) of the Income-tax Act, 1961:
The assessee contended that voluntary contributions should not be considered income under section 12(1) unless they are invested and generate income. However, the court interpreted section 12(1) to mean that voluntary contributions themselves are considered income if they are not applied solely to charitable or religious purposes. The court referred to various High Court decisions supporting this interpretation, emphasizing that section 12(1) covers voluntary contributions as income unless they are specifically directed towards the corpus of the trust.

4. Tribunal's Misdirection Regarding the Use of Voluntary Contributions:
The Tribunal found that the voluntary contributions were used to discharge liabilities under a loan account, which was not considered a solely charitable purpose. The High Court upheld this finding, noting that the contributions were not applied entirely for charitable purposes, as a significant portion was used to repay advances from a mining firm without interest.

5. Levy of Interest Under Sections 139 and 215 of the Income-tax Act, 1961:
This issue was not pressed by the assessee, and therefore, it was not addressed in the judgment.

Conclusion:
The Supreme Court dismissed the appeal, agreeing with the High Court that the voluntary contributions received by the assessee-trust were rightly considered as income not exempt under section 12(1) of the Income-tax Act, 1961. The court clarified that voluntary contributions themselves are income unless applied solely for charitable or religious purposes, and the assessee failed to demonstrate such application in this case. The appeal was dismissed with no order as to costs.