COMMISSIONER OF INCOME TAX Vs. BILLESWARA CHARITABLE TRUST

JUDGEMENT

(1.) THIS reference under s. 256(1) of the I.T. Act, 1961, (hereinafter referred to as "the Act") at the instance of the Revenue, raises for our decision the following question of law :

(2.) TO lay bare the question to be decided and to highlight the limited controversy, the minimal facts may be noticed. The assessee, a charitable trust, received a donation from out of the capital funds on another charitable trust of the name of Swadharma Swarajya Sangha. In the course of the assessment proceedings for the year 1972-73 (for the accounting year ending on December 31, 1971), with reference to this donation received by the assessee, the ITO thought that though the amount was received towards corpus. Yet it had to be treated as income under s. 12(2) of the Act and proceeded to grant an exemption. Before the AAC, the assessee took the stand that the amount received from Swadharma Swarajya Sangha as donation towards corpus cannot be treated as income and would also not form part of the accumulated funds of the trust. Accepting the stand of the assessee, the AAC concluded that the donation received by the assessee from Swadharma Swarajya Sangha was towards the corpus of the assessee-trust and not income and therefore, that amount should be deleted from the assessment. On further appeal, the Tribunal found that the donation to the assessee was made by Swadharma Swarajya Sangha for the specific purpose that amount should form part of the corpus or capital of the assessee trust and that such a donation cannot be income of the assessee-trust within the meaning of s. 12(1) of the Act, and, therefore, it would be outside s. 12(2) of the Act as well.

(3.) THE matter may be looked at from the point of view of the charity as well. It may be that a charity lives on voluntary contributions and public donations. In most cases, the charities may have to wait too long to obtain the donations or voluntary contributions. THE charity may also have to look everywhere, even heavenward, for contributions and donations of money and windfalls. THEre is no exercise of control over windfalls in the sense that one cannot say that some more is expected or would come in or that enough had already been secured. THE essence, therefore, of a windfall or voluntary contribution as opposed to income is that it is unexpected. THE characteristic of income is that it is a periodical monetary return coming in with regularity or at least expected regularity. So, voluntary contributions per se are not dealt with by s. 12(1) of the Act. THEy need not be, in order to stand outside the filed of taxation, because they are windfalls and hence the very antithesis of income and, therefore, there is no need to exempt them or to exclude them from the total income. THEy stay out on account of their innate character as non-income. What s. 12(1) meant before its amendment in 1972 was that while voluntary contributions are non-income, even what is undoubtedly income of charities, is not to be charged to tax, if the source of such income is traceable to voluntary contributions. To put it differently, Parliament was extremely charitable to charities. That was the liberality of s. 12(1) of the Act, as it stood prior to April 1, 1973. THE liberality imbedded in s. 12(1), as it stood prior to April 1, 1973. that voluntary contributions are non-income and even income derived from such contributions are exempt from tax in certain circumstances went unnoticed and was lost sight of. Added to this, s. 12(1) had also been result that advantage was taken of it to put down in the statue book the receipt theory about voluntary contributions. Under the present section, the expression "income... derived from voluntary contributions" has been avoided and voluntary contributions are straightway deemed to be income. This shows that but for the deeming, those would not be taxable as income. THE present section gives out only one concession, a small gesture of parliamentary alms giving to charities. THE section now keeps out only voluntary contributions tied up with a direction that the charity must use it as part of the trust corpus. For the rest, what is undoubtedly non-income, is now deemed to be income on the basis of precedents, which Parliament had taken advantage of to cut down the amplitude of exemption from taxation enjoyed by the charities.