Law:

Section:

Section 12 of the Income-tax Act 1961 - Charitable or religious trust - Voluntary contributions - Assessment Year 1971-72 -Whether voluntary contributions made with a specific direction that they would form part of corpus of donee-trust and accepted by donee-trust as such, are not voluntary contributions which constitute income within meaning of section 12(1) and such contributions are not within purview of sub-section (2) - Held, yes. - Whether, therefore, such donations cannot themselves be deemed to be income from property held under trust within meaning of section 11 - Held, yes FACTS The J.K. charitable trust, made donations to each of the two petitioners of shares held by it in various limited companies on the condition that the donated properties which formed part of the corpus of the donor trust, would form part of the corpus of the donee-trusts. The petitioner-trusts, by resolutions passed soon after, accepted the donations subject to the condition that the shares would constitute part of the corpus of the petitioner-trusts. The ITO held that the donations as such were covered by section 12(2) and so were liable to be dealt with under section 11. On writ : HELD 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 sub-section (1), they alone will constitute 'such contributions as are referred to in sub-section (1)' within the meaning of sub-section (2). In other words, if a voluntary contribution does not constitute income of the receiving trust, it will be outside the purview of sub-section (1) and so also of sub-section (2), because, as already noticed, sub-section (2) deals with such contributions only as are covered by subsection (1). In tax jurisdiction there is a well-settled and well-known distinction between 'income' and 'capital'. Generally speaking,…

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