Law:

Section:

Section 12(1) of the Income-tax Act, 1961 [as it stood before 1-4-1973]-Charitable or religious trust-Exemption of voluntary contributions-Trust collected funds by organising a charity show through sale of tickets and advertisement in souvenir-Proceeds invested in fixed deposits for subsequent charitable use-ITO exempted only 25 per cent of net collection under section 11(1)(a ) and taxed balance-Whether net proceeds constituted income from property held under trust within the meaning of section 11-Held, on facts, no-Whether entire net proceeds, even if treated as income, were exempt under section 12(1), being voluntary contributions-Held, on facts, yes Facts The assessee-trust was formed by a deed dated 15-6-1964 with the objects, inter alia, of acquiring and maintaining a charitable home in Bombay for providing temporary accommodation to persons for purposes of study, medical treatment and such other charitable purposes. For this purpose, the deed specifically authorised the trustees to raise contributions by written appeals, public entertainments and so on. On 5-7-1964, the trust organised a charity show, inviting contributions by way of tickets for the show and by priced advertisements in a souvenir. The total receipts came to Rs. 1,05,372 and the outgoings totalled Rs. 8,601. The balance of Rs. 96,771 was transferred to the corpus of the trust and invested in fixed deposits for subsequent use to fulfil its purposes. The ITO treated the collections as income from property held in trust under section 11(1)(a), and held that since it had been accumulated, exemption was available only to the extent of 25 per cent thereof. In appeal, the AAC held the entire receipts to be voluntary contributions, exempt under section 12(1) (as it then stood). On further appeal, the Tribunal held that the said contributions formed part of the trust capital and that hence the provisions of sections 11 and 12 did not apply. It also held that even if the receipts constituted income, they would be exempt under section 12(1). On reference, the revenue argued that since the receipts were for a consideration, which was entertainment in the case of tickets for the show and advertisement…

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