M/S R.B. SHREERAM RELIGIOUS AND CHARITABLE TRUST versus THE COMMISSIONER OF INCOME-TAX VIDARBHA, NAGPUR

Citation: [1998] 3 S.C.R. 697 · Decided: 16-07-1998 · Supreme Court of India · Bench: SUJATA V. MANOHAR · Disposal: Dismissed

Judgment (excerpt)

MIS R.B. SHREERAM RELIGIOUS AND 
CHARITABLE TRUST 
v. 
THE COMMISSIONER OF INCOME-TAX 
VIDARBHA, NAGPUR 
JULY 16, 1998 
[SUJATA V. MANOHAR ANDS. RAJENDRA BABU, JJ.] 
Income Tax Act. 1961 : 
S.2(24) (as it stood prior to amendment made by Finance Act, 1972), 
A 
B 
c 
s.12 (!)-Income of trust for charitable or religious purposes-Amounts 
received by trust as voluntary contribution-Exclusion from total income-
Held, since voluntary contribution was not applicable and was not in fact 
applied wholly for religious or charitable purposes, assessee trust cannot get D 
benefit of s.12 (!)-Sub-section(!) refers to income in the form of voluntary 
contributions received by recepient trust-It has no reference to income 
which may later on be derived from investment of such voluntary contributions. 
The appellant assessee, a registered public trust, disclosed a deficit in 
its income tax return for the assessment year 1966-67. The appellaut had, E 
during the material period, a loan account with a mining firm (R.8.S. Mining 
Firm). At the beginning of the relevant year pertaining to the assessment 
year 1966-67, the assessee owed to the said Mining Firm a sum of Rs. 7.65 
lakhs under the said loan account. During the relevant year the assesee 
received a sun of Rs. 4,55,000 as voluntary contributions and transferred the 
same amount to the Mining Firm as repayment of the loan. 
F 
The Income Tax Officer added to the income of the assessee the 
voluntary contributions received by it amounting to Rs. 4,55,000 on the 
ground that the voluntary contributions were not solely applicable to religious 
or charitable purpose and were not actually applied as such, and the transfer G 
of the sum of Rs. 4, 55,000 to the Mining firm could not be considered as 
application of money for religious or charitable purpose. This finding was 
ultimately upheld by" the Income Tax Appellate Tribunal. It also held that the 
balance-sheet of the assessee revealed that it used to transfer a substantial 
portion of its income to an account called Dharamshala and other Building 
Fund', and out of this Fund the investment in Dharamshala covered only a H 
697 
698 
SUPREME COURT REPORTS 
[1998] 3 S.C.R. 
A 'part of the amount. On a reference being made to the High Court it was held 
that the amount of Rs. 4,55,000 was rightly considered by the Tribunal as 
income of the assessee not exempt under Section 12 (I) of the Income Tax 
Act, I 961 as it stood at the relevant time. Aggrieved, the assessee filed the 
present appeal. 
B 
It was contended for the assessee-Trust that s.12 (I) of the Income Tax 
Act, prior to the amendment of 1972, should be interpreted as referring only 
to any income which accrued to the trust by investing voluntary contributions 
which it had received and that the voluntary contributions itself were not 
income at all. It was contended that prior to the insertion of sub-clause( a) 
C in clause (ii) of s. 2(24) by Finance Act, I 972, the definition of 'income' 
under s.2(24) did not expressly include voluntary contributions received by 
a public religious or charitable trust. Dismissing the appeal, this Court. 
HELD: I In order to get the benefit of s. 12(1) of Income Tax Act, 1961 
the assessee was required to show that the voluntary contributions which it 
D had received was applicable solely for religious or charitable purposes. In 
view of the finding of fact recorded by the Tribunal that the voluntary 
contributions received by the assessee trust were not applicable, and were 
in fact not applied, entirely for religious or charitable purposes, the fligh 
Court has rightly held that the amount of Rs 4,55,000 received by the 
assessee as voluntary contributions was not applicable, and was, in fact, not 
E wholly applied for religious or charitable purposes. Therefore, the assessee 
cannot get the benefit of s. 12(1). 
F 
2.1. The definition of income under Section 2(24) of the Act as it stood 
at the relevant time was an extensive definition. Although it did not expressly 
include voluntary contributions received by way of income by a religious or 
charitable trust, as the definition was not exhaustive, it would cover income 
in all forms. The fact that by a subsequent amendment of Secticn 2(24), such 
income is expressly included does not make any difference to the interpretation 
of Section 12. 
2.2. Undoubtedly by a subsequent amendment in 1972 to the definition 
G of 'income' under Section 2(24), voluntary contributions not bein

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