Section 12 — Income of Trusts or Institutions from Contributions

Section 12 of the Income-tax Act, 1961, pertains to the income of trusts or institutions from voluntary contributions. This section is significant as it provides that any voluntary contributions received by a trust or institution established for charitable or religious purposes shall be deemed as income derived from property held under trust wholly for charitable or religious purposes. The section applies when a trust or institution receives contributions that are not tied to any specific direction or purpose. The statutory test under this section requires that the trust or institution must be registered under Section 12A or 12AA to avail the benefits. The burden of proof lies on the trust to demonstrate that the contributions are voluntary and not in the nature of income from other sources. This section is crucial for trusts and institutions as it affects their tax liability and compliance requirements.

Common Litigation Flashpoints

1. Classification of contributions as voluntary or income
2. Eligibility for registration under Section 12A or 12AA
3. Misuse of funds for non-charitable purposes
4. Documentation and proof of voluntary contributions

Judgments on Section 12 — Income of Trusts or Institutions from Contributions

• Income Tax Officer (Exemption) vs Wrestling Federation of India — ITAT,
  The proviso to Section 2(15) does not apply if the receipts are incidental to the fulfillment of the charitable objectives and not used as business receipts.
• State, CBI vs Sashi Balasubramanian & Anr. — SC,
  Public servants cannot claim immunity under the Kar Vivad Samadhan Scheme, 1998, as the Scheme does not apply to them.
• Radhasoami Satsang, Saomi Bagh, Agra vs Commissioner of Income Tax — SC,
  A fundamental aspect permeating through different assessment years, if sustained by not being challenged, should not be changed in a subsequent year without material change.