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What is ‘Charitable Purpose’ for Income Tax Purposes ?  [ Sec. 2(15)]

Section 2(15) of the Income-tax Act defines charitable purpose for the purpose of the Act and includes relief of the poor education, medical relief and the advancement of any other object of general public utility.

 

Accordingly, charitable purposes can be classified under four heads

 

(a)     relief to the poor

 

(b)     education

 

(c)     medical relief

 

(d)     preservation of environment (including water sheds, forests and wild life)

 

(e)     preservation of monuments or places or objects of artistic or historic interest, and

 

(f)      any other object of general public utility.

 

A purpose must, in order to be charitable, be directed to the benefit of the  community or a section of the community, as distinguished from an individual or a group of individuals. Where the primary purpose of the settler is to benefit the members of his family and relations and only remotely and indirectly the general public, the trust is not a charitable trust. It has been held that a charitable purpose’ includes a ‘religious purpose’. Thus, the words ‘trust for charitable purposes’ would include even trust for advancement of religion.

 

The definition of the charitable purposes was enlarged by the Finance Act, 2011 by the addition of the following objects in its ambit:

 

• Preservation of environment (including water sheds, forests and wild life).

 

• Preservation of monuments or places or objects of artistic or historic interest.

It is defined to include relief to the poor, education, (with effect from the assessment year 2016-17) yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. 

Sports or Games -

Promotion of sports and games is considered to be a charitable purpose within the meaning of section 2(15). Therefore, an association or institution engaged in the promotion of sports and games can claim exemption under section 11 even if it is not approved under section 10(23) —

Advancement of any other Object of general Public Utility -

From the assessment year 2009-10, “advancement of any other object of general public utility” shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration.

This restriction is, however, not applicable if the total receipts from any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business does not exceed the limits given below –

From the assessment year 2016-17 onwards

20 % of total receipts of the relevant previous year of the trust undertaking such activities.

The above benefit (from the assessment year 2016-17) is available only if such activity is undertaken in the course of actual carrying out of such advancement or any other object of general public utility, regardless of nature of use or application, or retention, of the income from such activity.

 

CONTENT : Assessment of Trust

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