Law:

Section:

Section 12 of the Income-tax Act, 1961 - Charitable or religious trust - Voluntary contributions - Assessment years 1970-71 to 1972-73 - Whether where donor charitable trust, made voluntary contribution of shares with express condition that shares be held as corpus of recipient i.e., charitable society, said shares could not be deemed to be income in hands of recipient society - Held, yes FACTS The assessee was a charitable society. It received donations in the form of shares of a company from a charitable trust. These shares were donated to the assessee by way of an endowment fund to form a part of the corpus of the assessee-society. The assessee received them as such with the further restrictions that these shares could not be utilized by the assessee for its objects nor could the shares be sold without the prior permission of the donor trust. It was only the dividend income of the shares which could be utilized for the objects of the assessee. The ITO felt that the assessee-society was not entitled to the benefits of the exemption under section 11 and added the value of the shares as also the dividend income to the income of the society. On appeal, the AAC confirmed the order of the Income-tax Officer. On further appeal, the Tribunal held that the Income-tax Officer and the AAC had erred in adding the value of the shares as the income of the assessee-society, the reason being that the shares had come to the assessee by way of corpus which it was forbidden to utilize for its objects, or to sell without prior permission of the donor. In any case, if a sale was permitted, the proceeds were to be treated as a part of the endowment fund and the corpus of the society. It was only the dividend income, from these shares, which could be utilized for the purposes of the trust. In these circumstances, the Tribunal deleted the addition. On reference : HELD Normally, a gift of shares or its own capital by a charitable trust to another charitable trust would be income in the hands of the recipient trust. The recipient trust would be free to spend the money or expend the property as it liked in furtherance of its objects. But, in the instant cases, the donor trust attached…

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