Income of certain funds or institutions [Section 10(23C)] :
An exemption is available in respect of any income received by any person on behalf of the following entities:
(i) the Prime Minister‘s National Relief Fund [Sub-clause (i)];
(ii) the Prime Minister‘s Fund (Promotion of Folk Art) [Sub -clause (ii)];
(iii) the Prime Minister‘s Aid to Students Fund [Sub-clause (iii)];
(iv) the National Foundation for Communal Harmony [Sub-clause (iiia)];
(v) the Swachh Bharat Kosh, set up by the Central Government [Sub-clause (iiiaa)];
(vi) the Clean Ganga Fund, set up by the Central Government [Sub-clause (iiiaaa)];
(vii) any other Fund or Institution for charitable purposes approved by the prescribed authority having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States [Sub-clause (iv)];
(viii) any trust (including any other legal obligation) or institution wholly for public religious or public religious and charitable purposes approved by the prescribed authority [Subclause (v)];
(ix) any university or other educational institution wholly or substantially financed by the Government which exists solely for educational purposes and not for profit [Sub-clause (iiiab)];
(x) any hospital or other institution wholly or substantially financed by the Government, which exists solely for philanthropic purposes and not for profit and which exists for the reception and treatment of persons suffering from illness or mental defectiveness or treatment of convalescing persons or persons requiring medical attention [Sub-clause (iiiac)];
| If the government grant to a university or other educational institution, hospital or other institution during the relevant previous year exceeds 50% of the total receipts (including any voluntary contributions), of such university or other educational institution, hospital or other institution, as the case may be, then, such university or other educational institution, hospital or other institution shall be considered as being substantially financed by the Government for that previous year. |
(xi) any university or other educational institution existing solely for educational purposes and not for profit and its aggregate annual receipts do not exceed ` 1 crore [Sub-clause (iiiad)];
(xii) any hospital or other institution as described in (ix) above if its aggregate annual receipts do not exceed the prescribed limit of ` 1 crore [Sub-clause (iiiae)];
(xiii) any other university or educational institutions approved by prescribed authority [Subclause (vi)];
(xiv) any other hospital, etc. approved by prescribed authority [Sub-clause (via)].
Note:
1. The application form for such exemption will have to be made in the prescribed form and manner.
2. Commissioner of income-tax (Exemptions) has been authorized to act as “prescribed authority” for the purpose of section 10(23C)(iv)/(v)/(vi)/(via). Commissioner of income-tax (Exemptions), is empowered to call for such documents or information as it considers necessary in order to satisfy itself about the genuineness of the activities of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, before approving the same under section 10(23C)(iv), (v), (vi) or (via). Such documents may include audited annual accounts. The prescribed authority may also make such inquiries as it may deem necessary for this purpose.
3. Exemption under section 10(23C)(iv)/(v) would apply only if the funds are invested or deposited for any period during the relevant previous year otherwise in the modes specified in section 11(5). This requirement will not however apply where the investment is maintained in the form of jewellery, furniture or any other article notified by the Board. For this purpose, the fund or trust or institution must fulfill the following con ditions:
(a) It should apply its income or accumulate it for application wholly and exclusively to the objects for which it is established,
(b) In case where more than 15% of its income is accumulated on or after 1.4.2002, the period of accumulation of the amount exceeding 15% of its income shall be maximum 5 years.
(c) It should invest or deposit the following kinds of funds:
— any assets which form part of the corpus of the fund, trust or institution as on 1.6.1973;
— any equity shares of a public company held by any University or other educational institution or any hospital or other medical institution where such assets form part of its corpus as on 1.6.1998;
— any debentures, issued by or on behalf of any company or corporation, acquired by the fund, trust or institution, etc. before 1.3.1983;
— any bonus shares allotted to the fund, trust or institution, etc. in respect of the shares mentioned above forming part of the corpus of such fund, etc.
— any voluntary contributions received and maintained in the form of jewellery, furniture or other article as the Board may specify for any period during the previous year. However, such assets should not be in the forms or modes of investment laid down in section 11(5).
4. Exemption under section 10(23C)(iv) or (v) or (vi) or (via) would not apply to profits and gains of business in all cases. However, where the business is incidental to the attainment of its objectives and separate books of account are maintained in respect of the business, the exemption would apply to such business profits also.
5. Any notification issued by the Central Government [under sub-clauses (iv) or (v)] on or after 13.7.2006 will be valid until withdrawn and there will be no requirement on the part of the assessee to seek renewal of the same after 3 years.
6. In order to expedite disposal of such applications, it has now been provided that where such an application is made on or after 13.7.2006, every notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under sub-clause (vi) or sub-clause (via) shall be granted or an order rejecting the application shall be passed within the period of 12 months from the end of the month in which such application was received.
7. If the total income of any entity referred to in sub-clauses (iv), (v), (vi) and (via) of section 10(23C), without giving effect to the provisions of the said sub-clauses, exceeds the basic exemption limit in any previous year, it shall –
(1) get its accounts audited in respect of that year by a chartered accountant; and
(2) furnish such audit report along with the return of income for the relevant assessment year. The report must be in the prescribed form, duly signed and verified by the accountant, and must contain such particulars as may be prescribed.
8. Where the fund / trust / institution / university / hospital etc. does not apply its income during the year of receipt and accumulates it, and subsequently makes a payment or credit out of such accumulated income, to any institution or trust registered u/s 12AA or to any fund / trust / institution / university / hospital, such payment or credit shall not be considered to be an application of income for its specified objectives.
9. The Central Government, or prescribed authority shall have the power to withdraw the approval or rescind the notification if:
(i) such fund/institution/university/hospital etc. has not applied its income or invested/deposited its funds in accordance with the provisions; or
(ii) the activities of such fund, etc are not genuine; or
(iii) such activities are not being carried out in accordance with the conditions based upon which it was notified or approved.
However, the approval or notification can be withdrawn or rescinded only after issuing a show cause notice and giving reasonable opportunity to such fund, etc. of being heard. After withdrawing the approval or rescinding the notification, a copy of the order is to be forwarded to the concerned fund/institution, etc. as well as to the Assessing Officer. 10. The time limit for making an application for grant of exemption or continuation thereof under section 10(23C) by a fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub – clauses (iv)/(v)/(vi)/(via) of section 10(23C) has been specified in respect of such applications made on or after 1.6.2006. Such applications have to be filed on or before 30th September of the succeeding financial year.
For example, if an educational institution seeks exemption under clause (vi) for P.Y.2015-16 (i.e. A.Y.2016-17), it has to make an application for grant of exemption by 30.9.2016.
11. However, any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of the said section shall be included in the total income.
12. If the purpose of a trust or institution referred to in sub clauses (iv)/(v) of section 10(23C) does not remain charitable in a previous year on account of the commercial receipts exceeding 20% of total receipts of the trust or institution, then, such trust or institution would not be entitled to get benefit of exemption in respect of its income for that previous year in which the commercial receipts exceed the specified threshold. The denial of exemption would be compulsory by operation of law and would not be dependent on any approval being withdrawn or registration being cancelled or a notification being rescinded.
Such trust and institution cannot get benefit of tax exemption in the year in which its receipts from commercial activities exceed 20% of total receipts, whether or not the registration or approval granted or notification issued is cancelled, withdrawn or rescinded in respect of such trust or institution.
13. Entities which have been approved or notified for claiming benefit of exemption under section 10(23C) would not be entitled to claim any benefit of exemption under any other provision of section 10 [except exemption under section 10(1) in respect of agricultural income]. This is to ensure that once a trust or institution voluntarily opts for the special dispensation under this section, it should be governed by these provisions and should not be allowed the flexibility of being governed by the general provisions of section 10. All owing such flexibility may have adverse effects on the objective for which this section was enacted.
14. Income for the purposes of application under section 10(23C) shall be determined without allowing any deduction or allowance for depreciation or otherwise, where the cost of acquisition of the asset has been claimed as application of income under section 10(23C) in the same previous year or any other previous year.