1986 (1) TMI 173 - AT - Income Tax

Summary

Issues:
1. Whether the donation received by the assessee trust should be treated as income and included in total income.
2. Whether the donation made by the assessee trust to another charitable trust amounts to application of income for charitable purposes.

Analysis:

Issue 1:
The assessee, a charitable trust, received a donation of Rs. 2,31,918 towards the corpus of the trust. The Income Tax Officer (ITO) contended that the donation should be treated as income as the trust used it for charity, violating the donor's conditions. The ITO added the amount to the trust's income. However, the assessee argued that the donation was specifically for the corpus of the trust and should be excluded from income under Section 12 of the IT Act, 1961. The Commissioner of Income Tax (Appeals) (CIT(A)) agreed with the assessee, stating there was no evidence that the donation was used for charity. The Tribunal upheld the CIT(A)'s decision, ruling that the donation received for the corpus should not be considered income.

Issue 2:
Regarding the donation made by the assessee trust to another charitable trust, the ITO did not consider it as application of income for charitable purposes. The assessee contended that such donations should be considered utilization of income for charitable purposes, citing precedents. The CIT(A) disagreed, stating the recipient trust could only use the income from the donation for charity, not the donated amount itself. The Tribunal, however, sided with the assessee, holding that the donation to the other trust was indeed utilization of income for charitable purposes. The Tribunal found that the purpose of the donation was charitable and upheld the assessee's appeal, allowing the donation to be considered as application of income for charitable purposes.

In conclusion, the Tribunal ruled in favor of the assessee, holding that the donation received for the corpus of the trust should not be treated as income and that the donation made to another charitable trust was a valid utilization of income for charitable purposes.