1. This reference relates to the assessments of Messrs. Thakurdas Sureka Charity Fund, the assessee, in the assessment years 1962-63, 1963-64, 1964-65 and 1965-66, the relevant accounting years ending diwali, R.N. 2018, 2019-20, 2020-21 and 2021-22. The controversy relates to contributions received by the assessee from Messrs. Thakurdas Sureka Charity Trust Fund (1941), hereinafter referred to as the Trust Fund. The admitted position is that the donor, that is the Trust Fund derived its income from property held for charitable or religious purpose to which Section 11 of the I.T. Act, 1961, as it stood at the relevant time applied. It was found that the contributions received by the assessee as aforesaid were in the nature of voluntary contributions from the Trust Fund which were accumulated in the hands of the assessee and, therefore, became liable to be taxed under Section 12(2) of the I.T. Act, 1961, as it stood at the relevant time.
2. In the relevant assessment years, the ITO treated the amounts of the said contributions to the assessee as its income and giving relief for 25% of the total receipts or Rs. 10,000, whichever was higher, tax was assessed accordingly.
3. The assessee, being aggrieved, preferred appeals before the AAC in respect of all the said assessment years. The additions were substantially confirmed. The assessee preferred further appeals before the Income-tax Appellate Tribunal. The only point agitated before the Tribunal was that the amounts received by the assessee from the Trust Fund in the said assessment years should not be included in the assessments. The Tribunal found that under an indenture dated the June 30, 1960, executed by and between the assessee and the said Trust Fund it was, inter alia, agreed that the assessee would receive a sum of Rs. 1,000 per month from the Trust Fund from November, 1960, and would spend the said amount towards the expenses of daily seba puja and bhog of 'Satya Narain Tulsi Manas Mandir at Varanashi'. The Tribunal found that the Trust Fund and the assessee were both charitable and religious institutions and that the said Trust Fund was entitled to claim benefit under Section 11 of the I.T. Act, 1961, in respect of contributions made to the assessee, but under Section 12(2) of the Act such contributions had to be deemed income derived from property in the hands of the assessee, as it was a trust or a charitable or religious institution. Such amounts were taxable unless entitled to exemption under the said Section 11 of the Act. The Tribunal found that the assessee was not entitled to claim any further relief from Section 11 and, accordingly, dismissed the appeals.
4. On the application of the assessee under Section 256(1) of the I.T. Act, 1961, the Tribunal has drawn up a statement of case and has referred the following question to this court for its opinion as a question of law arising out of its order:
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the voluntary contributions of Rs. 12,000 each received by the assessee from Messrs. Thakurdas Sureka Charity Trust Fund in the assessment years 1962-63, 1963-64, 1964-65 and 1965-66, respectively, were to be treated as income of the assessee under Section 12(2) of the Income-tax Act, 1961 ?'
5. Mr. P. K. Pal, learned counsel for the assessee, contended at the hearing that the Tribunal erred in proceeding on the basis that the amounts received by the assessee were voluntary contributions from the Trust Fundwhereas in point of fact it had not been found that such contributions were voluntary and, therefore, Section 12 of the I.T. Act, 1961, had no application. Mr. Pal contended further that even assuming that such contributions received by the assessee were voluntary, the amounts so received would be deemed to be income under Section 11 and there was no finding that any part of the said amounts were taxable under the said sections in the hands of the assessee. Mr. Pal submitted that it was necessary to investigate the matter further and the matter should be remanded.
6. In our opinion, the controversy in the instant case is easily resolved if the relevant sections are kept in mind. Section 11 of the I.T. Act, 1961, as it stood at the relevant time, prior to its subsequent amendments, was as follows:
'(1) Subject to the provisions of Sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income-
(a) Income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated for application to such purposes in India, to the extent to which the income so accumulated is not in excess of twenty-five per cent. of the income from the property or rupees ten thousand, whichever is higher ;...... (2) Where the persons in receipt of the income have complied with the following conditions, the restriction specified in Clause (a) or Clause (b) of Sub-section (1) as respects accumulation or setting apart shall not apply for the period during which the said conditions remain complied with--(a) such persons have, by notice in writing given to the Income-tax Officer in the prescribed manner, specified the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years ;
(b) the money so accumulated or set apart is invested in any Government security as defined in Clause (2) of Section 2 of the Public Debt Act, 1944 (XVIII of 1944), or in any other security which may be approved by the Central Government in this behalf.
(3) Any income referred to in Sub-section (1) or Sub-section (2) as is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto or is not utilised for the purpose for which it is so accumulated in the year immediately following the expiry of the period allowed in this behalf shall be deemed to be the income of such person of the previous year in which it is so applied, or ceases to be so accumulated or so set apart or, as the case may be, of the previous year immediately following the expiry of the period aforesaid.'
7. Section 12 of the Act, at the relevant time, prior to its amendment in 1973, stood as follows :
'12. Income of trusts or institutions from voluntary 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.
(2) Notwithstanding anything contained in Sub-section (1), where any such contributions as are referred to in Sub-section (1) are made to a trust or a charitable or religious institution to which the provisions of Section 11 apply, such contributions shall, in the hands of the trust or institution receiving the contributions, be deemed to be income derived from property for the purposes of that section and the provisions of that section shall apply accordingly.'
8. In view of the aforesaid sections and on the facts admitted and/or found by the Tribunal it appears to us that the amounts received by the assessee from the 'Trust Fund were voluntary contributions within the meaning of Section 12 and by reason of the provisions of Sub-section (2) thereof the same had to be deemed to be income derived from property in the hands of the assessee for the purposes of Section 11.
9. On a consideration of Section 11 it appears to us that in order to claim exemption from tax it was necessary for the assessee to show that such income has been applied wholly for charitable or religious purposes and that the accumulation out of such income was not in excess of 25% of the income or Rs. 10,000 whichever would be higher. The assessee could have given the prescribed notice to the ITO stating the purpose for such accumulation, indicating that the moneys so accumulated were invested in Government security and thus could have claimed further exemption.
10. The assessee does not appear to have proceeded on such basis and, therefore, we do not find anything erroneous in the order of the authorities below. The ITO has given the benefit of exemption of 25% of the accumulation to the assessee,
11. For the reasons as stated above, the assessee cannot succeed in this reference. We answer the question referred in the affirmative and in favour of the Revenue. We, however, direct the Tribunal to consider while disposing of the matter finally whether the assessee is entitled to any further exemption under Section 11 apart from the benefit already granted to it. In the facts and circumstances there will be no order as to costs.
12. I agree.