Important Point
In order to get the benefit of exemption u/s. 12(1) of the Income-Tax Act, the assessee is required to show that the voluntary contribution received by it is applicable solely for religious or charitable pur­poses and is also applied for religious or charitable purposes.

JUDGMENT

Mrs. Sujata V. Manohar, J.-The assessee M/s. R.B. Shreeram Religious and Charitable Trust, the appellant before us, is a registered public trust. For the assessment year 1966-67 the assessee disclosed in its income-tax return, a deficit of Rs.32,126/-. The Income-tax officer, however, added to the income of the assessee voluntary contributions received by the assessee-trust amounting to a sum of Rs. 4,55,000/- for the relevant year. The Income-tax officer held that the voluntary contributions amounting to Rs. 4,55,000/- received by the assessee during the relevant year were not applicable solely for charitable and religious purposes; and were also not actually applied as such. In appeal, the Appellate Assistant Commissioner held that out of the sum of Rs. 4,55,000/-, a sum of Rs. 4,00,000/- could not be treated as income derived from voluntary contributions. Both the revenue as well as the assessee filed appeals from the order of the Appellate Assistant Commissioner before the Income-tax Appellate Tribunal. The Tribunal allowed the appeal filed by the revenue and dismissed the appeal filed by the assessee.

2. At the instance of assessee, a reference was made to the High Court under Section 256(1) of the Income-tax Act. The questions before the High Court, as reframed by the High Court in the impugned judgment, were as follows:-

“(1) Whether on the facts and in the circumstances of the case and having regard to the relevant provisions of the I.T. Act, the voluntary contributions aggregating to Rs. 55,000/- received by the Assessee was income liable to be taxed under the I.T. Act, 1961?

(2) Whether on the facts and in the circumstances of the case and having regard to the relevant provisions of the I.T. Act voluntary contributions aggregating to Rs. 4,00,000/- received by the assessee was income liable to be taxed under the I.T. Act, 1961?

(3) Whether on the facts and in the circumstances of the case voluntary contributions aggregating to Rs. 55,000/- and Rs. 4,00,000/- were exempt u/s 12(1) of the I.T. Act, 1961?

(4) Whether on the facts and in the circumstances of the case the Tribunal mis-directed itself in holding that mere discharge of debt whether existing or new during the year from out of voluntary contributions of Rs. 55,000/- and Rs. 4,00,000/- does not render it a solely charitable purpose admissible to exemption?

(5) Whether on the facts and circumstances of the case the levy of interest under Section 139 and 215 of the I.T. Act, 1961 was justified in law?”

3. Question No. 5 is not pressed. The High Court answered the remaining questions against the assessee and in favour of the revenue. Hence the present appeal is filed before us by the assessee-trust.

4. The amount of Rs. 4,55,000/- received as voluntary contributions consisted of the following:-(1) A cheque for Rs. 25,000/- from Saraf Mor & Co. Ltd., dated 2.11.65.

(2) A cheque for Rs. 10,000/- from M/s. Ferro Alloys Corporation Ltd., dated 22.11.65.

(3) A cheque for Rs. 20,000/- from R.B. Shreeram Durgaprasad & Feteh­chand Narsinghdas, dated 19.11.66.

These three cheques constituted the sum of Rs. 55,000/- received by the assessee-trust as voluntary contributions. The assessee also had, during the material period, a loan account with M/s. R.B. Shreeram Durgaprasad (Mining Firm). Amounts were lent to the assessee by the said mining firm from time to time. 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, M/s. R.B. Shreeram Durgaprasad & Fetehchand Narsinghdas (Export Firm) gave to the assessee a total sum of Rs. 4,00,000/- which was shown as debited to the account of the donor Export Firm. This amount was transferred to the said mining firm. By the transfer of the said amount to the mining firm, the liability of the assessee-trust to the mining firm under the said loan account was reduced. The sum o