|CORAM:||Bhavnesh Saini (JM), T. R. Sood (AM)|
|CATCH WORDS:||Charitable purpose|
|DATE:||April 30, 2015 (Date of pronouncement)|
|DATE:||June 2, 2015 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 11(1)(a): Charitable institutions are eligible to a blanket deduction of 15% of the gross receipts without being required to satisfy any condition|
The decision of the Hon’ble Supreme Court in A.L.N Rao Charitable Trust reported in 216 ITR 697(SC) clearly held that there is a blanket exemption with regard to the 25% (now 15%) of gross receipts as per second part of Section 11(1)(a) of the Income Tax Act. This exemption of 15% is not dependent on any other condition except that the trust or society should be registered u/s 12AA of the Income Tax Act. The only issue to be examined here is whether the provisions of section 11(1) (a) and 11(2) have been since amended and if so, whether the aforesaid decision would apply to the amended provisions also? It is apparent from the reading of the provisions that section 11 (1)(a) was almost identical during the AY 69-70 and during AY 2010-11. As regards the provisions of section 11(2) are concerned, even the amended sub section (2) operates qua the balance of 85 per cent, of the total income of the previous year which has not got the benefit of tax exemption under sub-section (l)(a) of section 11. Section 11(2), as amended, does not operate to whittle down or to cut across the exemption provisions contained in section 11(1)(a)so far as such accumulated income of the previous year is concerned. As held by the Hon’ble Supreme Court in the case of A.L.N Rao Charitable Trust reported in 216 ITR 697(SC), it has to be appreciated that sub-section (2) of section 11 does not contain any non obstante clause like “notwithstanding the provisions of sub-section (1)”. Consequently, it must be held that after section 11(l)(a) has full play and if still any accumulated income of the previous year is left to be dealt with, and to be considered for the purpose of income tax exemption, sub-section (2) of section 11 can be pressed into service and if it is complied with then such additional accumulated income beyond 15 per cent, can also earn exemption from income-tax on compliance with the conditions laid down by sub-section (2) of section 11. As such, this judgement of the Hon’ble Supreme Court is squarely applicable to the appellant’s case. The appellant is thus eligible for exemption of 15% of gross receipts 11(l)(a) of the Income Tax Act.