COMMISSIONER OF INCOME TAX Vs. BAL UTKARSH SOCIETY
LAWS(GJH)-1979-2-1
HIGH COURT OF GUJARAT
Decided on February 07,1979

COMMISSIONER OF INCOME TAX Appellant
VERSUS
BAL UTKARSH SOCIETY Respondents

JUDGEMENT

B.J.DIVAN, J. - (1.) IN this case, at the instance of the Revenue, the following question has been referred to us for our opinion : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that, since the donations made by the donor trust to the assessee trust were towards the corpus or the capital fund of the assessee, such contributions cannot be treated as income of the assessee trust ?"
(2.) THE facts leading to this reference are as follows : We are concerned with the asst. year 1970 71. The asessee before us is a charitable trust. It filed its return of income for the assessment year under consideration showing a loss of Rs. 424. On scrutiny of the income and expenditure accounts, the ITO found that the said account was credited with a sum of Rs. 2,100. He also noticed that the trust fund account was credited with a sum of Rs. 2,74,000. On being asked to furnish the details of these items, the assessee explained that it had received by way of donations from one Uday Education Society, another charitable trust, one thousand shares of Alembic Glass Industries Ltd. of the face value of Rs. 1,00,000 and five hundred shares of Alembic Chemical Works Co. Ltd. of the face value of Rs. 50,000, aggregating to Rs. 1,50,000 of the face value of the shares and this amount of Rs. 1,50,000 was included in the total credit of Rs.2,74,000 as shown in the trust fund account. Over and above this amount of Rs.2,74,000, donations in cash aggregating to Rs. 2,000 were received and this was included in the total amount of Rs. 2,100 as shown in the income and expenditure account of the assessee. The ITO took the view that donations in the form of shares which were received by the assessee trust from Uday Education Society constituted income in view of the provisions of 12(2) of the IT Act, 1961, as it stood before the amendment which came into effect from April 1, 1973. The ITO, accordingly, included the sum of Rs. 2,80,625 in the total income of the assessee for the assessment year under reference. He determined the said figure by adopting the market rate of the shares of Alembic Glass Industries Ltd. at Rs. 195 per share and of the shares of Alembic Chemical Works Co. Ltd., at Rs. 171.25 per share and evaluated the worth of the shares accordingly. Against the decision of the ITO, the assessee trust preferred an appeal and the AAC took the view that the provisions of S. 12(2) were not applicable to the case of the assessee. He allowed the appeal accordingly. Against the decision of the AAC, the Revenue went in appeal to the Tribunal. The Tribunal considered the provisions contained in S. 12 of the Act, both before the amendment and after the amendment which came into effect from April 1, 1973, and, relying on the decision of the Allahabad High Court in Sri Dwarkadheesh Charitable Trust vs. ITO [1975] 98 ITR 557 (All) and applying the principle laid down in the said decision, the Tribunal held that, in this particular case, the donations were made by the donor trust to the donee trust towards the corpus or the capital of the trust and could not, therefore, be treated as income in the hands of the assessee trust. Thereafter, at the instance of the assessee, the question hereinabove set out has been referred to us for our opinion.
(3.) SECTION 12, as it stood prior to its amendment, was in these terms : "12. Income of fruits or institutions from voluntary contributions. (1) Any income of a trust for charitable or religious purposes or of a charitable or religious institution derived from voluntary contributions and applicable solely to charitable or religious purposes shall not be included in the total income of the trustees or the institution, as the case may be. (2) Notwithstanding anything contained in Sub S. (1), where any such contributions as are referred to in Sub S. (1) are made to a trust or a charitable or religious institution by a trust or a charitable or religious institution to which the provisions of S. 11 apply, such contributions shall, in the hands of the trust or institution receiving the contributions, be deemed to be income derived from property for the purposes of that section and the provisions of that section shall apply accordingly." ;


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