In which section we can claim exemption

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 August 2011 IF THERE IS ANY INSTIUTION WHOSE MAIN OBJECTS ARE:
1) TO UNDERTAKE AND ORGANISE RESARCH STUDY, ACTION RESARCH, STUDY COURSES, CONFERENCES, LECTURES, EDUCATION , TRAINING AND DEMONSTRATION PROGRAMMES IN MATTER RELATING TO RURAL DEVELOPMENT, REGIONAL & ENVIORNMENTAL PLANNING AND SOCIO-ECONMIC DEVELOPMENT.
2)TO UNDERTAKE AND PROVIDE FOR THE PUBLICATION OF JOURNALS, RESEARCH STUDIES AND RESEARCH BOOKS.
3)TO ESTABLISH AND MAINTAIN LIBRARY IN RURAL AND REGIONAL DEVELOPMENT AND ALLIED SUBJECTS AND TO UNDERTAKE SUCH ACADEMIC OR RESEARCH ACTIVITIES.
THEN IN WHICH SECTION UNDER INCOME TAX CAN CLAIM EXEMPTION APART FROM SEC 12???
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C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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29 August 2011 Any income which comes from property held under any trust or institution which works for charitable or religious purposes is exempt from income tax point of view if the 85% of the income is spent on the charitable or religious purposes. If the amount spent on the religious and charitable purpose goes short to 85%, the shortfall is taxable under income tax act.

Charitable purpose has a vast topic and it includes:-

1- Relief to the poor persons

2- Educational relief

3- Medical relief

4- And the advancement for the object of general public utility.

5- Preservation of enviournment

6- Preservation of places and monuments

However if advancement of general public utility carries some business or trade and charges some fees etc, this will not be regarded as general public utility if the total receipt of these activities exceeds Rs. 10 lakhs.

The legal frame work, granting exemption to a public charitable Trust, a company registered under section 25 of the Companies Act, or a society registered under the Societies Registration Act, 1860, or any other institution is contained in one or more of the following sections of Act:-
(i) Section 2(15);
(ii) Section 2(24) (iia);
(iii) Section 10
(iv) Sections 11,12, 12A, 12AA and 13; and
(v) Sections 35(1)(ii) and 35(i)(iii).

Section 12A enacts that provisions of section 11 and section 12, regarding
exemption of income, will not be applicable to an institution etc., unless an
application for its registration is made to the CIT/DIT(E) within a period of
one year from the date of its creation. The CIT/DIT(E) may condone the
delay for good and sufficient reason.

The application for registration has to be made in Form no. 10A (Annexe-1). The application has to be accompanied by the following documents;-
(i) Copy of the instrument by way of which the trust or institution etc. is created; and
(ii) If it existed in years prior to the year in which application is made,
accounts of the prior years (not exceeding three years)
[Rule 17A]

On receipt of the application, the CIT/DIT (E) has to pass an order either
registering the trust etc. or rejecting the application. The registration may
be rejected on the ground that the trust or its activities are not genuine.
Such an order has to be passed within a period of six months from the end
of the month in which the application is made.[Section 12AA (2)]

The law regarding conditions precedent for registration, so far as merits
are concerned, is written briefly and in simple language, namely, that the
CIT/DIT(E) should satisfy himself about:-
(i) objects of the trust etc; and
(ii) genuineness of its activities.
Obviously, the object(s) of the trust etc. should constitute religious or
charitable purpose(s) u/s 2(15) and this aspect will be enquired into. The
‘genuineness of activities’ can be inferred only if the trust/institution etc.
has started to carry out the purpose(s), mentioned in the object clauses of
instrument of its creation, at the time when application is made.

Section 12A(b) also requires that if income of a trust etc. in any previous
year exceeds rupees fifty thousand before giving effect to provisions of
section 11 and section 12, then its accounts are required to be audited by
an accountant and his report in Form no. 10B (Annexe-2) has to be filed
along with the return of income.

The following points should normally be kept in mind at he time of making
an application for registration:-
(i) there should be a legally existent entity, which can be registered;
(ii) it should have a written instrument of its creation or written
document evidencing its creation;
(iii) all its objects should be charitable or religious in nature;
(iv) its income and assets should be made applicable towards objects
only, mentioned in the object clauses, and Rules and Regulations;
(v) no part of its income should be distributable or distributed, directly
or indirectly, to its members, directors or founders, related persons
or relatives etc. claiming through them; and
(vi) in case of dissolution, its net assets after meeting all its liabilities,
should not be revertible or reverted to its founder, members,
directors or donors etc., but used for the objects.

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