Decided on April 16,1984



Bhatnagar, J. - (1.)THE Income-tax Appellate Tribunal, Jaipur Bench, at the instance of M/s. Sukhdeo Charity Trust, Ladnu (hereinafter to be referred as "the assessee-trust"), has referred the following question to this court under Section 256(1) of the I.T. Act, 1961 (hereinafter to be referred as the "Act of 1961"):
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that a sum of Rs. 1,00,000 received by the assessee-trust from Benjamin & Rahama Elias Memorial Trust is liable to be included as part of the income of the assessee-trust under the provisions of Section 12(2) of the Act of 1961 ? "

(2.)THE facts of the case relevant for the purpose of answering the question under reference are as under :
One Sukhdeo Sarawagi, before his death in the year 1933, set' apart Rs. 6,08,000 in trust with instructions to the trustees to hold the same in trust for religious and charitable purposes. On January 25, 1963, a trust was constituted under the terms and conditions contemplated by the trust deed.

Aims and objects of the trust were set out as tinder :

"1. To acquire immovable property or properties in Calcutta or elsewhere by purchase, lease or otherwise and to sell, mortgage, lease out whole or part of the same except the properties being items Nos. 1 and 2 of the properties mentioned in the Schedule " C " hereto.

2. To erect temples and Thakur Bari at Sukhdeo Ashram, Ladnu, started by the donor and to improve the same.

3. To erect hospitals, schools and other religious institutions.

4. To meet the expenses of the ashram schools and hospitals already started and to be started hereafter and to develop and to improve the same.

5. Not to lend any of the trust funds to anybody.

6. Trustees shall not be entitled to utilise trust fund in any way for any purpose whatever.

7. Trustees shall be entitled from time to time to spend such amount from the trust fund as they may think fit and proper in the religious places.

8. Trustees shall be entitled to spend such money as they may think fit and proper for religious purposes."

The scheme for water supply to the town of Ladnu was mooted by the trustees and aid of the Government of Rajasthan was solicited to implement the scheme. The Government of Rajasthan agreed to sanction an amount of Rs. 7 lakhs out of a total estimated cost of Rs. 10 lakhs, subject to the condition that the trustees would collect the balance amount of Rs. 3 lakhs in advance for the purpose.

The assessee-trust opened a separate account of "Water Supply Scheme" in S.Y. 2018, corresponding to the assessment year 1962-63, by transferring a, sum of Rs. 33,138 from its charity fund account. A sum of Rs. 86,449.79 was transferred in the next year from the same account. The total amount in the water supply scheme thus reached Rs. 1,94,324.40. On March 3, 1964, the assessee-trust made a request through a letter to Benjamin & Raharna Elias Memorial Trust (hereinafter to be referred as "the Calcutta trust") seeking donation for the purpose. On March 14, 1964, the assessee-trust issued a cheque for Rs. 1,85,000 in favour of the Government which was encashed by the latter on May 2, 1964.

The Calcutta trust, in response to that request, sent a cheque for Rs. 70,000 on March 31, 1964, and the amount was entered in the account of the water supply scheme on April, 1, 1964, as amount received by way of donation. The balance left in the water supply scheme account became Rs. 69,324.40 in S.Y. 2021. On March 23, 1965, the Calcutta trust sent another cheque of Rs. 1,00,000 in favour of the assessee-trust for the purpose of implementing the water supply scheme. This amount was also entered in the water supply scheme account, making the total amount in balance Rs. 1,69,324.40. The amount till the date of the assessment by the Income-tax Officer (for short "the 1TO") for the assessment year 1965-66, was not spent by the assessee-trust.

(3.)THE ITO was not satisfied by the return submitted by the assessee-trust. He was of the opinion that the contribution received from the charitable or religious institutions should be; deemed to be income derived from property irrespective of the fact whether the amount received from the other trust was spent or remained unspent. THE ITO in terms of Section 12(2) of the Act of 1961, applicable in the case, held that the amount of Rs. 1,00,000 shall be treated as income of the assessee-trust and be taxed accordingly. Penalty notice was also issued for delay in filing the return as also for furnishing inaccurate particulars of income and concealment thereof.
The assessee-trust went in appeal before the Appellate Assistant Commissioner of Income-tax, B-Range, Jodhpur (for short "the AAC"), in grievance of the order of the ITO concerning the amount of Rs. 1,00,000 received from the Calcutta trust: along with other points which are not relevant for the present purpose. The AAC affirmed the view of the ITO that the donation of Rs. 1,00,000 received from the Calcutta trust should be included in the income of the assessee-trust.

Feeling dissatisfied by the aforesaid order, the assessee-trust preferred an appeal before the Income-tax Appellate Tribunal, Jaipur Bench (for short "the Tribunal"). After discussing the nature of the donation and the question of applicability of Section 12(2) of the Act in the case, the learned members of the Tribunal formed the opinion that the sum of Rs. 1,00,000 was rightly brought to tax under the provisions of Section 12(2) of the Act and consequently dismissed the appeal.

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