1980 (7) TMI 117 - AT - Income Tax

Summary

Issues involved: 1. Exemption of voluntary contributions u/s. 12 of the IT Act, 1961. 2. Allowance of depreciation u/s. 32 of the IT Act, 1961.

For the first issue, the assessee claimed exemption for voluntary contributions made towards the corpus of the institution. The Income Tax Officer (ITO) and the Appellate Authority Commissioner (AAC) rejected the claim stating that the donations were included in the definition of 'income'. However, the assessee argued that the contributions were specifically earmarked for the corpus and utilized for construction, supported by donor correspondences. The Revenue contended that the donations were not towards the corpus. The Tribunal found that the contributions were voluntary with specific directions for building construction, constituting part of the corpus as per s. 12 of the IT Act, 1961. Citing a relevant case, the Tribunal held the claim admissible, directing the ITO to modify the assessments accordingly.

Regarding the second issue of depreciation allowance, the ITO disallowed depreciation for an institution not deriving income from business or profession. The AAC upheld this decision. The assessee argued that depreciation is essential for asset preservation. The Revenue claimed the institution did not engage in business or vocation. The Tribunal noted that the institution's activities for aged individuals constituted a vocation, entitling it to depreciation u/s. 32 of the IT Act, 1961. Referring to a relevant case, the Tribunal directed the ITO to examine and grant admissible depreciation, allowing the appeals.