Satish Chandra, J. - (1.) THESE two writ petitions raise common questions and can conveniently be disposed of together.
(2.) THE petitioner in each case is a public charitable trust, created under deeds of trust dated August 27, 1970. Each of the petitioners was granted a certificate under Section 80G of the Income-tax Act, 1961, by the Commissioner of income-tax, Kanpur, stating that the donations made to them will be exempt from tax in the hands of the donors. In December, 1970, and August, 1971, the J.K. Charitable Trust, Kanpur, made donations to each of the two petitioners of shares held by it in various limited companies worth Rs. 19,000. The donation was made on the condition that the donated properties which formed part of the corpus of the donor trust, shall form part of the corpus of the donee-trusts. The petitioner-trusts, by resolutions passed soon after, accepted the donations made by the J. K. Charitable Trust subject to the condition that the shares will constitute part of the corpus of the petitioner-trusts. Oa 25th July, 1972, each of the petitioner-trusts filed its return of income for the assessment year 1972-73. They claimed refund of the tax paid at source on the dividend income of the shares received by the petitioner-trusts by way of donations. On 25th August, 1973, the Income-tax Officer required the petitioners to supply him the names and addresses of the donors of the shares and to inform him whether the donors were charitable trusts or institutions. In reply the petitioners informed the officer that all the shares were received by them by way of donations from the J. K. Charitable Trust and that the income of those shares by way of dividend was exempt under Section 11 of the Income-tax Act, 1961.
(3.) THE Income-tax Officer felt that the donations as such were covered by Section 12(2) of the Income-tax Act, 1961, and so were liable to be dealt with under Section 11 of the Act. He required the petitioners to show cause why they should not be so dealt with. THE petitioners filed written explanations stating that the donations received by them constituted the corpus of the petitioner-trusts and that they were not income in their hands but capital receipt, and as such they were outside the purview of Section 12(2) of the Act. The petitioners state that they came to know that the Central Board of Direct Taxes has, under Section 119 of the Income-tax Act, 196J, issued general instructions to the Income-tax Officers to assess such donations as income under Section 12(2) of the Act.;