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INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES ; ROHIT RANJAN CNLU

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INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES ; ROHIT RANJAN CNLU
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  INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES 2013   1. INTRODUCTION  Income tax is an annual tax on income. The Indian Income Tax Act (Section 4) provides that in respect of the total income of the previous year of every person, income tax shall be charged for the corresponding assessment year at the rates laid down by the Finance Act for that assessment year. Section 14 of the Income tax Act further provides that for the purpose of charge of income tax and computation of total income all income shall be classified under the following heads of income: A.   Salaries B.   Income from house property C.   Profits and gains of business or profession. D.   Capital gains E.   Income from other sources. The total income from all the above heads of income is calculated in accordance with the  provisions of the Act as they stand on the first day of April of any assessment year. In this  booklet an attempt is being made to discuss the various provisions relevant to the salaried class of taxpayers as well as pensioners and senior citizens. An income tax  is a tax levied on the income of individuals or businesses (corporations or other legal entities). Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or profit tax. Individual income taxes often tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income. My project deals with income from property held for charitable or religious purposes,  in which I  basically highlighted statutory provision and case laws dealing with charitable income.  Nani Ardeshir Palkiwala once said, ―to tax and please someone is not can be done by   Government, but to tax and to be fair is what a Government is ought to do‖.   CHANAKYA NATIONAL LAW UNIVERSITY, PATNA. 1    INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES 2013   2.   Statutory Provision 2.1   Charitable purpose Section 2(15) It is defined to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility: Provided that the 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, irrespective of the nature of use or application, or retention, of the income from such activity. 1   2.2 Amendment made in Finance Act, 2008 & 2010  it was seen that a number of entities who were engaged in commercial activities were also claiming exemption on the ground that such activities were for the advancement of objects of general public utility in terms of the fourth limb of the definition of ‗charitable purpose‘.  Therefore, section 2(15) was amended vide Finance Act, 2008 by adding a proviso which states that the ‗advancement of any other object of general public utility‘ shall not be a charitable  purpose  —    1. if it involves the carrying on of     –   (a)   any activity in the nature of trade, commerce or business; or (b)   any activity of rendering any service in relation to any trade, commerce or business; for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity. 2. if the total receipts from any such activity in the nature of trade, commerce or business, or any   activity of rendering any service in relation of any trade, commerce or business exceeds Rs. 10 lacks in the previous year. 1 INCOME TAX ACT     CHANAKYA NATIONAL LAW UNIVERSITY, PATNA. 2    INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES 2013   In the final analysis, however, whether the assessee has for its object ‗the advancement of any other object of general public utility‘ is a question of fact. If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in relation to trade, commerce or business, it would not be entitled to claim that its object is charitable purpose. 2  In such a case, the object of ‗general public utility‘ will be only a mask or a device to hide the true  purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. Each case would, therefore, be decided on its own facts and no generalization is possible. Assessees, who claim that their object is ‗charitable purpose‘ within the meaning of Section 2(15), would be well advised to eschew any activity which is in the nature of trade, commerce or business or the rendering of any service in relation to any trade, commerce or business. Section 10 (23BBA)  Any income of any body or authority (whether or not a body corporate or corporation sole) established, constituted or appointed by or under any Central, State or Provincial Act which  provides for the administration of any one or more of the following, that is to say, public religious or charitable trusts or endowments (including maths, temples, gurudwaras, wakfs, churches, synagogues, agiaries or other places of public religious worship) or societies for religious or charitable purposes registered as such under the Societies Registration Act, 1860 (21 of 1860), or any other law for the time being in force: Provided that nothing in this clause shall be construed to exempt from tax the income of any trust, endowment or society referred to therein; Section 11 [Income from property held for charitable or religious purposes.]  (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income  —    2 http://www.incometaxindia.gov.in   CHANAKYA NATIONAL LAW UNIVERSITY, PATNA. 3    INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES 2013  (a)   income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of 322a[fifteen per cent] of the income from such property ; (b)   income derived from property held under trust in part only for such purposes, the trust having  been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such  purposes in India, to the extent to which the income so set apart is not in excess of [fifteen per cent] of the income from such property; (c)   income derived from property held under trust  —   (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India : Provided that the Board, by general or special order, has directed in either case that it shall not  be included in the total income of the person in receipt of such income. (d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. SECTION 12 Income of trusts or institutions from contributions.  (1) Any voluntary contributions received by a trust created wholly for charitable or religious  purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from property held under trust CHANAKYA NATIONAL LAW UNIVERSITY, PATNA. 4  
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