Applicability of section 40a(3) on schools

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This query is : Resolved

ANUP GUPTA (Querist)

29 August 2012 Hello All Members,

Dear Experts,

Please help me on the issue

1. Whether Section 40A(3) i.e., cash payment exceeding Rs. 20,000 is applicable on schools whose income is exempt under section 10(23C)(iiiad).(this school is not registered u/s 12AA)

2.Whether Donation paid by such school which is shown in their income & expenditure a/c is disallowable or not? If no please provide any support in this regard.

Please note that the school is not registered under section 12AA of income tax act. & run by the society which is registered under society act.

Thanks a lot in Advance.

Soumitra Basu

Soumitra Basu (Expert)

02 September 2012 If there is any addition under section 40A(3, then the same amount shall be treated as income from school as per provision of law. The income of the school is exempted and as such income from addition shall also be exempted.
There is a case at Calcutta High Court in Bata India Ltd that all donations are allowable expenses. If the same is disallowable that being the part of the income of the school which is exempted.

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