Legal Reference Library

No denial of exemption to charitable society just because it was charging fees for charitable activities (i) The ratio laid down in Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-Tax, Mysore 101 ITR 234 (SC), CIT vs. Andhra Chamber of Commerce 55 ITR 722 (SC) and Additional Commissioner of Income-tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association 121 ITR 1 is that in the case of entity or organization whose objects are several, some of which are charitable and non-charitable; the test of predominant object for which the organization was set up is alone to be applied. Therefore, in the present case, the research and development in the Information Technology in the Banking Sector is the prime object for which the Appellant society was created by the Reserve Bank of India as is evident from the genesis of the organization. Offer of M.Tech course, Ph.D. programmes are only incidental for attainment of main objects of the organization. The primary object of promo...

A charitable institution is entitled to set apart 25 per cent of the total income for charitable purposes even if it is not spent in the assessment year. It is an option permitted in the Income Tax Act but the limit should be observed. The Supreme Court stated that both the commissioner of appeals and the Andhra Pradesh High Court erred while allowing a larger percentage in the case, CIT vs G R Govindarajulu. The total income was Rs 99 lakh out of which Rs 47 lakh was spent on charity and Rs 32 lakh was set to be spent for charitable purposes in the following year. The assessee claimed that it was therefore entitled to have deduction of the entire amount and its tax liability was nil. The assessment officer did not agree stating that no option for the purpose was exercised before filing the returns and it was not done in a valid manner. Though the appellate authority and the high court accepted that contention, the Supreme Court pointed out that Rs 32 lakh was more than 25 per cent of ...