1980 (7) TMI 116 - AT - Income Tax

Summary

Issues:
1. Whether the assessee is entitled to exemption for voluntary contributions under section 12 of the IT Act, 1961.
2. Whether the assessee is entitled to the allowance of depreciation.

Issue 1 - Exemption for Voluntary Contributions:
The case involved two appeals consolidated to determine if the assessee is entitled to exemption for voluntary contributions under section 12 of the IT Act, 1961. The donations in question were specifically earmarked for the corpus of the institution. The Revenue argued that the contributions did not qualify as corpus donations. However, the assessee contended that the donations were utilized for the construction of a building, supported by evidence from donors and balance-sheet entries. The Tribunal analyzed the purpose of the contributions and determined that they were indeed made towards the corpus of the institution. Referring to a relevant High Court ruling, the Tribunal held that the contributions formed part of the corpus and were exempt as capital receipts under section 12 of the IT Act, 1961.

Issue 2 - Allowance of Depreciation:
The second issue revolved around the allowance of depreciation. The ITO disallowed depreciation as the institution was charitable and not deriving income from business or profession. The assessee argued that depreciation should be allowed to account for asset usage and preservation obligations. The Tribunal considered the definition of 'vocation' and concluded that the activities of the assessee-institution, a boarding and lodging house for the aged, fell within the meaning of 'vocation.' Citing precedents, the Tribunal held that the institution was entitled to depreciation under section 32 of the IT Act, 1961. However, the Tribunal directed the ITO to examine the details regarding depreciation claims for compliance with the law. Ultimately, the appeals were allowed in favor of the assessee on both issues, granting exemption for voluntary contributions and allowing depreciation for the institution's assets used in its charitable activities.