1. This is a reference on a case stated under s. 256(1) of the I.T. Act, 1961 (referred to hereinafter as 'the said Act').
2. The relevant facts giving rise to the reference are as follows :
The relevant assessment year is 1956-66, the relevant previous year being the year ended March 31, 1965. One P. C. Parikh made a charitable trust of a sum of Rs. 1,000 by a deed dated June 15, 1964. The said trust was styled as 'Visha Nima Charitable Trust'. The assessees before us are the trustees of the said trust. The object of the said trust was, inter alia, to acquire and maintain a charitable home in Bombay for providing temporary accommodation to persons for the purposes of study, medical treatment and such other charitable purposes. Clauses 6 of the said deed of trust authorises the trustees thereof to invite and receive or without such invitation receive voluntary contributions from any person or persons and institutions and members of the public by way of donations, legacies or otherwise for all or any of the charitable objects set out earlier in the said deed of trust. The said clause, inter alia, provides as follows :
'All such contributions shall be treated as forming part of the trust fund being the subject-matter of these presents and subject as aforesaid be applied accordingly......'
3. The trustees were specifically authorised to raise contributions by way of written appeals, public means, entertainments and so on. Within three weeks of the creation of the trust on July 5, 1964, the Visha Nima Griha Committee organised a charity show, comprising a Gujarati drama at Shanmukhananda Hall, Sion, Bombay. Contributions were invited by way of tickets for the said charity show. The said tickets were priced from Rs. 100 to Rs. 5 each. Contributions were also invited by way of issue of advertisement space in the souvenir taken out on the occasion, which advertisements were priced from Rs. 1,000 to Rs. 100. A general appeal was issued by the assessees to the public on the occasion of the said charity show, to which we shall have occasion to refer in some detail a little later. The sale of the tickets for the said charity show brought in the amount of Rs. 11,152 and advertisements in souvenir brought in receipts amounting in all to Rs. 83, 644. The total receipts of the trust for the relevant accounting year inclusive of the aforesaid receipts came to Rs. 1,05,372. The outgoings amounted to Rs. 8,601. In the balance-sheet of the assessee-trust, the said outgoings were deducted from the total receipts and the balance of Rs. 96,771 was transferred to the trust fund or corpus. This amount of Rs. 96,771 was thereafter invested mainly in fixed deposits with the Dena Bank. On February 27, 1965, that is, within the year of account ended March 31, 1965, with which we are concerned, agreements were entered into by the trustees with certain builders for acquiring six ownership flats which became ready in subsequent years. The amount collected was used for the payment of the price of these ownership flats. The ITO took the view that the said income was income from property held under a trust wholly for charitable purposes, which would have been exempt from tax under the terms of s. 11(1)(a) of the said Act if applied to such purposes but since it was accumulated for application to such purposes it was held that exemption was available only to the extent of 25% thereof. He calculated the balance of the receipts at Rs. 88,266 and, after granting a deduction in respect of a sum of Rs. 22,066, brought the balance to tax. On an appeal before the AAC, he held that the aforesaid receipts were voluntary contributions and were exempt from tax under s. 12(1) of the said Act. On an appeal preferred by the ITO to the Income-tax Appellate Tribunal, the Tribunal held that the contributions received by the assessee formed part of its capital which was intended to be held as an accretion to the corpus of the trust and hence the provision of ss. 11 and 12 of the said Act did not apply. The Tribunal further held that even if the said receipts constituted income, these receipts consisted of contributions made voluntarily and were made exempt under s. 12(1) of the said Act. The Tribunal further held that s. 11 of the said Act did not come into the picture, since the receipt was treated as capital or corpus of the trust fund. Arising from this decision of the Tribunal, the following questions have been referred to us for our determination :
'(1) Whether, on the facts and in the circumstances of the case, the surplus of contribution in the amount of Rs. 96,771 received by the assessee-trust during the previous year constituted the corpus of the trust ?
2. If the answer to question No. 1 is in affirmative, whether the provisions of section 4, Section 11 and section 12 of the Income-tax Act, 1961, apply to the capital trust fund or corpus of the trust ?
3. If the answer to question No. 1 is in the negative, whether the receipts in question were exempt from tax under section 12(1) of the Income-tax Act, 1961, as income derived from voluntary contributions ?
4. Whether, on the facts and in the circumstances of the case, the contributions received by the assessee-trust were derived from 'property' held under trust as contemplated under section 11 of the Act ?'
4. Before considering the submissions advanced by the respective counsel before us, we propose to set out sub-s. (1) of s. 12 of the said Act, as it stood at the relevant time. The said provisions read thus :
'12. Income of trusts or institutions from contributions. - (1) Any income of a trust for charitable or religious purposes or of a charitable or religious institution derived from voluntary contributions and applicable solely to charitable or religious purposes shall not be included in the total income of the trustees or the institution, as the case may be.'
5. Sub-section (2) of s. 12, as it then stood, had no application, because it dealt with contributions made to a trust or religious institution by a trust or a charitable institution or a religious institution, which is, admittedly, not the case before us. The submission of Mr. Joshi, the learned counsel for the Commissioner, is that, in the present case, the receipts or contributions received by the assessee were from tickets sold for the charitable show and from advertisements given in the souvenir. These, according to Mr. Joshi, cannot be regarded as voluntary contributions, because there was a consideration for the same. In the case of the tickets, the consideration was the entertainment, such as it was, offered by the performance and in the case of advertisements in the souvenir, the consideration was the advertisements themselves. In the one case, the consideration was the entertainment provided and in the other, the space given for advertisement. It was submitted by him that as the contributions made were for a consideration they were not voluntary contributions, and were not entitled to exemption conferred by sub-s. (1) of s. 12 of the said Act. It was, on the other hand, contended by Mr. Trivedi, the learned counsel for the assessee, that the so-called consideration, referred to by Mr. Joshi, was merely illusory and that the real motive which induced these contributions to be made to the assessee was charity. It was urged by Mr. Trivedi that the entertainment offered was such that no one would have paid the high price charged for the tickets merely to see the entertainment and that even in respect of the advertisement space purchased in the souvenir, the real purpose could not be to advertise the products.
6. In appreciating the aforesaid arguments advanced by the learned counsel of both the sides, it is necessary to bear in mind that the assessee is a trust which seems to have been formed primarily by the members of a particular caste, although the objects thereof were objects thereof were objects of general public charity. The appeal issued by the trustees to which we have already referred earlier, makes it clear that the object of the trust was to have a permanent home for providing shelter to those who came to Bombay for a short duration. Reference is then made in the appeal to the facts which would show that the members of the public, to whom the appeal was addressed, came from comparatively prosperous rural areas and who would like to strengthen the relations already existing amongst the members of the caste and, at the same time, help a noble cause. It is significant that in this appeal, there is no reference at all to the advertisements in the souvenir being likely to contribute, in any manner, to the advancement of the business of the persons from whom the advertisements were sought. It is hardly likely that, on the facts and circumstances of the case, and taking into account the nature of the trust, the persons to whom the appeal for tickets and advertisements was issued and other relevant factors, any one would have given an advertisement in this souvenir for any purpose other than the charity and as a voluntary contribution. The same can be said about the persons who must have purchased the tickets for the said show. As observed by a Division Bench of this court in Income-tax Reference Application No. 87 of 1973, CIT v. Trustees of Shri Nityananda Arogyashram, Bombay, disposed of on July 10, 1974, conducting entertainments and bringing out souvenirs for raising funds and obtaining donations by way of tickets and advertisements are purely of a voluntary nature and there could be no element of quid pro quo in these transactions. In these circumstances, it appears to us that the contributions made by way of tickets and for advertisement should, on the facts and circumstances of this case, be regarded as merely voluntary contributions and in view of this the exemption contained in sub-s. (1) of s. 12 of the said Act would be clearly attracted, even assuming that these receipts constituted the income of the assessee and not the corpus thereof. Question No. 3, referred to us is, therefore, answered in the affirmative and in favour of the assessee. In the view which we have taken, it becomes wholly unnecessary to decide questions Nos. 1 and 2 and we decline to answer the same. As far as question No. 4 is concerned, it is quite clear that these contributions could never be regarded as income derived by the assessee-trust from property and neither counsel has advanced any argument to that effect before us. That question is, therefore, answered in the negative. Looking to all the facts and circumstances of the case, there will be no order as to costs of this reference.