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Section 12(2) [as it stood prior to 1-4-1973], read with section 11 of the Income-tax Act, 1961 - Charitable or religions trust - Exemptions of voluntary contributions - Whether contributions made expressly to capital or corpus of a trust, though voluntary, Sell within purview of section 12(2) and consequently, could he deemed to be income derived from property for purposes of section 11 - Held, no FACTS The assessee-society, having charitable objects, was registered under the Societies Registration Act, 1860. During the assessment year 1967-68, the assessee accepted the offers of donations from two public charitable trusts, and pursuant to conditions of the offers, the donations were added to the assessee's capital. It claimed that the said donations fell outside the provisions of section 12(2) (as it stood prior to 1-4-1973). The ITO, however, brought to tax the surplus, i.e., the excess of the permissible limit of accumulation of income prescribed by section 11(1). On appeal the AAC held that the ITO had erred in taxing the said donations. The Tribunal, however, allowed the revenue's appeal. On reference: HELD The provisions of sub-section (2) of section 12 applied to such contributions as were referred to in sub-section (1) thereof. Sub-section (1) referred to contributions which were voluntary contributions and applicable solely to charitable or religious purposes. Donations of a capital nature might be voluntary, but could not, however, be applied to charitable or religious purposes. It is the income thereof that must be so applied. A contribution made expressly to the capital or corpus of a trust, though voluntary, does not, therefore, fall within the purview of section 12(2). Accordingly, such contributions could not be deemed to be income derived from property for the purposes of section 11, and the provisions of section 11 would not apply. Hence, in the present case, the impugned donations did not constitute income in the assessee's hands for the purpose of exemption under section 11. CASE REVIEW CIT v. Bal Utkarsh Society [1979] 119 ITR 137 (Guj.) and CIT v. Vanchi Trust [1981] 127 ITR 227 (Ker.) followed and relied upon. CASES REFERRED TO CIT v. Bal…

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