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Exemption of Income U/s 11 in case of Charitable or Religious Trust / Institution does not Apply in certain Cases [Section 13]

The following incomes of charitable or religious trusts/institutions shall not be eligible for exemption under sections 11 and 12.

(1)        Any Part of the income from the property held under a trust for private religious purposes which does not ensure for the benefit of the public [Section 13(1)(a)].

Section 13(1)(a) shall not be applicable if the element of public benefit has been satisfied. It does not matter where the control lies, if the benefit accrues to public at large but the control is with specific group of persons, then section 13(1)(a) will not be attracted.

(2)        Any income of trust / institution created / established for charitable purposes on or after 1.4.1962,

if such trust or institution is created or established for the benefit of any particular religious community or caste [Section 13(1)(b)]. The exemption is however, available to a charitable trust or institution created or established before 1.4.1962 even if it is for the benefit of any particular religious community or caste.

Where assessee-trust had established institution for benefit of all sections of society and religious activities carried out by it were minuscule in comparison to its main activity, Commissioner could not cancel registration of trust on ground of violation of provisions of section 13(1)(b).

(3)        Any income of Charitable or Religious Trust or institution created or established after 1.4. 1962,

if under the terms of the trust or rules governing the institution, any part of the income ensures directly or indirectly for the benefit of any person referred to in sub-section 13(3) [Section 13(1)(c)].

(4)        Any income of a trust for charitable or religious purposes or a charitable or religious institution (whenever created or established) if any part of such income or any property of the trust or the institution during the previous year is used or applied directly or indirectly for the benefit of any person referred to in Section 13(3) [Section 13(1)(c)].

However, exemption is not denied where the trust, etc. is created before 1.4.1962 and such use or application of income is in compliance with a mandatory term of the trust or a mandatory rule governing the institution.

Charitable Trusts not to lose exemption if educational or medical facilities provided to specified persons [Section 13(6)]:

 A trust running an educational institution or a medical institution or a hospital shall not lose the benefit of exemption of any income under section 11 other than the value of benefits of educational or medical facilities provided to the specified persons referred to in section 13(3), solely on the ground that such benefits have been provided to such persons.

However, the value of such facilities provided to such specified persons either free of cost or at concessional rate shall be deemed to be income of such trust and shall not be eligible for exemption under section 11.

The expression "value" shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to any person.

(5)        Any income of a trust / institution, if its funds are invested / deposited otherwise than as specified under section 11(5) [Section 13(1)(d)].

However, the provisions of section 13(1)(d) shall not apply to the under mentioned:

(i)         any asset forming part of the corpus of the trust as on 1.6.1973;

(ii)        any accretion to the corpus shares by way of bonus shares allotted to the trust;

(iii)       debentures issued by or on behalf of any company or corporation and acquired by the trust before March 1, 1983;

(iv)       any asset not covered under section 11(5) where such asset is held for not more than I year from the end of the previous year in which such asset is acquired;

(v)        any fund representing the profits and gains of business, being profits and gains of any previous year relevant to the assessment year 1984-85 or any subsequent assessment year. But such relaxation of the restriction will be denied unless the trust keeps separate accounts for the business. As already noted, subject to certain exceptions, such business profits no longer enjoy exemption under section 11.

 

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