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

CIVIL APPEAL No. 1761/1987Supreme Court[1998] 3 S.C.R. 69716 July 1998Bench: 2 JudgesAuthor: SUJATA V. MANOHAR, S. RAJENDRA BABU R.B. SHREERAM RELIGIOUS AND CHARITABLE TRUST11 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s. R.B. Shreeram Religious and Charitable Trust, a registered public trust, disclosed a deficit in its income tax return for assessment year 1966-67. The Income Tax Officer added Rs. 4,55,000, received as voluntary contributions, to the assessee's income. The officer's reasoning was that these contributions were not solely applicable to or actually applied for religious or charitable purposes, and their transfer to R.B.S. Mining Firm as loan repayment did not constitute such application. The Tribunal upheld this finding. The High Court, on reference, confirmed that the Rs. 4,55,000 was rightly considered income not exempt under Section 12(1) of the Income Tax Act, 1961, as it stood then. The assessee appealed this decision.

What did the Supreme Court hold?

The Supreme Court held that to avail the benefit of Section 12(1) of the Income Tax Act, 1961, the assessee must demonstrate that the voluntary contributions received were applicable solely for religious or charitable purposes. Given the Tribunal's finding that the contributions were neither applicable nor actually applied entirely for such purposes, the High Court's decision was affirmed. The Court reasoned that the definition of 'income' under Section 2(24), even before the 1972 amendment, was extensive and covered income in all forms, including voluntary contributions unless they were towards the corpus. Section 12(1) specifically dealt with income in the form of voluntary contributions received by the trust, not income derived from their subsequent investment. The Court disapproved of the Madras High Court's observation in Commissioner of Income-Tax, Tamil Nadu-IV v. Shri Billeswara Charitable Trust that voluntary contributions themselves are not income but only the income they fetch upon investment. The appeal was dismissed.

What were the issues?

1. Whether voluntary contributions received by a charitable trust are considered income under Section 2(24) of the Income Tax Act, 1961, as it stood prior to the 1972 amendment, or only income derived from their investment? Assessee's contention: Section 12(1) prior to the 1972 amendment referred only to income accrued from investing voluntary contributions, not the contributions themselves. It was argued that the definition of 'income' under Section 2(24) did not expressly include voluntary contributions received by a public religious or charitable trust before the Finance Act, 1972, inserted sub-clause (a) in clause (ii). Revenue's contention: The revenue argued that the voluntary contributions were not applied wholly for religious or charitable purposes and therefore not eligible for exemption under Section 12(1).

Which sections of the Income-tax Act were involved?

Section 2(24),Section 12(1),Section 11

AI-generated summary — verify with the full judgment below

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

The order continues below.

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