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TMI Blog1987 (1) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 and Rs. 4,00,000 were exempt under section 12(1) of the Income-tax Act, 1961 ? (4) Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in holding that mere discharge of debt whether existing or new during the year from out of voluntary contributions of Rs. 55,000 and Rs. 4,00,000 does not render it a solely charitable purpose admissible to exemption ? (5) Whether, on the facts and in the circumstances of the case, the levy of interest under sections 139 and 215 of the Income-tax Act, 1961, was justified in law ? " Basic background can be stated thus : The assessee is a registered public trust. Relevant assessment year is 1966-67. The assessee follows the mercantile system and the previous year is the year for the assessment year ended on March 31, 1966. In the return, the assessee disclosed deficit of Rs. 32,126. The Income-tax Officer determined the income at Rs. 4.92 lakhs. A sum of Rs. 4,55,000 which was credited in the books of account of the assessee as voluntary contributions was added as part of the income. The details of the credit entries are as follows : Rs. 25,000 From Saraf Mor and -Company Private Limited on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sum of Rs. 55,000 was concerned, the Appellate Assistant Commissioner agreed with the Income-tax Officer. The Revenue as well as the assessee were both dissatisfied with the order of the Appellate Assistant Commissioner and hence they filed appeals before the Tribunal. The Tribunal allowed the appeal filed by the Revenue and dismissed the appeal filed by the assessee and thus in effect the order of the Income-tax Officer was restored. Shri Thakkar, learned counsel for the assessee, firstly contended that section 12(1) of the Income-tax Act, 1961, as it stood at the material time (before amendment by the Finance Act, 1972) referred only to income derived from the voluntary contributions and not to the voluntary contributions themselves, and as a result, Rs. 4.55 lakhs could not be held to be " income ". That the new section includes within its purview the voluntary contributions themselves is not disputed. Originally section 12(1) and (2) read thus: " 12. Income of trusts or institutions from voluntary contributions.(1) Any income of a trust for charitable or religious purposes or of charitable or religious institution derived from voluntary contributions and applicable sole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the recipient trust and are accepted as such, they shall not form part of the income of the trust is an altogether different aspect of the matter. In the matter on hand it is nobody's case that contributions of Rs. 55,000 and/or Rs. 4,00,000 were made specifically with view to form the corpus of the assessee and were accepted as such. Shri Jetly, learned counsel for the Revenue, has invited our attention to a long line of decisions taking the view that section .12(1) was intended to cover not only income derived from voluntary contributions but the very contribution itself. We may in the first place refer to the case of Sri Dwarkadheesh Charitable Trust v. ITO [1975] 98 ITR 557 (All). It is observed (at p. 560) : "In our opinion, section 12(1) contemplates voluntary contributions which Will Constitute or be deemed to be income in the hands of the receiving trust. If a donation becomes income in the hands of a trust, the donation itself is within the purview of section 12(1). Section 12(1) is, therefore, confined to contributions which are made voluntarily and which constitute the income of the receiving trust. This category of contributions alone being the subject-matter of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns in the Finance Bill, 1972, especially para. 24. Apart from the fact that the statement in the memo will be of no use where the language employed in the provision is clear, we do not see any definite statement either to the effect that voluntary contributions were never treated as income before this Bill was introduced. Circular No. F. No. 20/10167-IT(A-1), dated 1-5-1967 was also relied upon to support the interpretation put on section 12(1). This circular has been issued in the context of accumulation of income in excess of 25 per cent. under section 11(1) vis-a-vis donations received from the public. In this context, it is said : " The donations received by a charitable trust from the members of the public, being capital receipts, cannot be regarded as income of the trust. Accordingly, the donations received by the trust should be excluded from the income of the trust for the purpose of calculating the accumulation limit of 25 per cent. except in cases covered by section 12(2)." It seems to us that the said circular cannot be read out of context. Its gist seems to be that donations specifically received towards capital receipts cannot be regarded as income of the trust and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haritable Foundation (ITR No. 15 of 1977 decided on July 23, 1986, decided by the Rajasthan High Court)-[1987] 164 ITR 439. This judgment has also been relied upon for the view it has taken on Circular No. 101, dated 24-1-1973. We have perused the said judgment as well as the circular. The judgment is in the context of section 11(1) of the Income-tax Act 1961. It only lays down that in the said section there are no words of limitation requiring that the income should have been applied for charitable or religious purposes only in the year when the income had arisen. We see nothing in the said decision or in the said circular which supports the submission of Shri Thakkar on the interpretation of section 12(1) and (2). All that circular says is that even in a case where a trust incurs a debt for the purpose of the trust, the repayment of the debt would amount to an application of income for the purposes of the trust. This will have no application to the matter at hand. Even on facts it is, materially different. When the donation was made, no statement even to this effect was made. Under these circumstances, there is no escape from the conclusion that the voluntary contributions them ..... X X X X Extracts X X X X X X X X Extracts X X X X
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