JUDGMENT
D.R. Dhanuka, J.
1. The Income-tax Appellate Tribunal has referred the : 1 following two questions of law to this court under section 256(1) of the Income-tax Act, 1961. The said questions are as under :
“1. Whether, on the facts and in the circumstances of the case, the donations received by the assessee-trust from other charitable trusts amounting to Rs. 2,12,800, Rs. 2,66,500 and Rs. 1,49,000 or any part thereof constituted the income of the assessee-trust in terms of section 12(2) for the purposes of section 11 of the Income-tax Act, 1961, for the assessment years 1969-70, 1971-72 and 1972-73 respectively ?
2. Whether the receipts from scholars of the loan scholarship amounts, granted by the assessee-trust in the earlier years, in the sums of Rs. 3,083, Rs. 4,861 and Rs. 5,380 constituted the income of the assessee trust in terms of section 12(2) for the purposes of section 11 of the Income-tax Act, 1961, for the assessment years 1969-70, 1971-72 and 1972-73 respectively ?”
It is common ground that the donor-trust had made the donations referred to in question No. 1 specifically towards the corpus of the donee-trust and were received as such by the donee-trust. Factually, there is no dispute on this aspect. Counsel are agreed that the answer to question No. 1 is, there, covered by the judgment of our High Court in the case of Trustees of Kilachand Devchand Foundation v. CIT [1988] 172 ITR 382. Accordingly, question No. 1 is answered in the negative and in favour of the assessee.
As regards question No. 2, it is necessary to state a few facts :
The assessee is a public charitable trust evidenced an indenture made on June 11, 1955, the settlor being Bai Kasturbai Walchand. The primary objects of the tourist are secular education, relief of the poor, medical relief and other objects of general public utility. In pursuance of its objects, the assessee had granted loan scholarship amounts to various students who returned the said amounts of loan scholarship to the assessee-trust in due course. The question which arises for consideration is whether repayment of loans by the scholars who had taken the loans from the assessee-trust can be construed as income of the trust ? Return of the loan by a debtor to the creditor can never constitute income. There can be no dispute about the fact that these amounts were received by the Applicant-trust towards repayment of the loans advanced by it. It is, however, contended by learned counsel for the Revenue that since loans were granted in part out of the income exempted under section 11 of the Income-tax Act, 1961, the receipt back of the said amounts of loans should be construed as income of the trust. It is not possible to accept this submission. Learned counsel for the Revenue has also relied upon section 12(2) of the Income-tax Act, 1961. The said section was also relied upon on behalf of the Department before the Tribunal.
Section 12(2) of the Act reads as under :
“(2) Notwithstanding anything contained in sub-rule (1), –
(a) where a return of income relates to the assessment year commencing on the day of April 1, 1961, or any earlier assessment year, it shall be furnished in the appropriate form prescribed in rule 19 of the Indian Income-tax Rules, 1922, and shall be verified in the manner indicated therein;
(b) where a return of income relates to the assessment year commencing on the day of April 1, 1962, or April 1, 1963, or the day of April 1, 1964, it shall be furnished in the appropriate form in force immediately before the day of April 1, 1967, and shall be verified in the manner indicated therein.”
Section 12(2) of the Income-tax Act, 1961, is applicable only when the contribution is made by the trust or a charitable institution to which section 11 applies, to another trust. On the face of it, section 12(2) of the Act can have no application to this case, accordingly, there is no merit whatsoever in any of the contentions urged on behalf of the Revenue. We, therefore, answer question No. 2 in the negative and in favour of the assessee. No order as to costs.