“Section 11(3)(c)”
The decision most relied on for Section 11(3)(c) is Ashok Pai v. CIT (292 ITR 11), cited in 812 judgments on BharatTax.
Leading authorities on Section 11(3)(c)
“Concealment of particulars of income” and “furnishing inaccurate particulars of income” are two distinct offences under Section 271(1)(c) of the Income Tax Act. A penalty cannot be levied under one limb if the show cause notice or basis for penalty specifies the other, as this constitutes a complete variance in the reasons for assuming jurisdiction.
When the addition made in the assessment order, on the basis of which a penalty for concealment under section 271(1)(c) is levied, is subsequently deleted, the penalty has no basis and must be cancelled.
Expenditure is defined as money paid out or away, which is gone irretrievably. To be deductible under Section 37(1), expenditure must be wholly and exclusively for business, not capital or personal, and not fall under specific provisions of Sections 30 to 36, often justifiable on grounds of commercial expediency.
A charitable trust can carry forward its excess expenditure from previous years and adjust it against the income of subsequent years, which qualifies as an application of income under Section 11. Additionally, voluntary contributions received for a specific purpose are treated as corpus funds and are not taxable.
Depreciation is allowable as a deduction even if the expenditure for acquiring the capital asset was treated as application of income for charitable purposes. This does not constitute a double benefit.
The Kerala High Court held that charitable institutions claiming exemption under Section 11 are not entitled to claim depreciation on assets used for charitable purposes, taking a view contrary to most other High Courts.
For charitable trusts, the set-off of excess expenditure from prior years against the income of a subsequent year is considered an application of income for charitable purposes. Similarly, the repayment of loans borrowed for legitimate charitable activities is also treated as an application of income.
The claim of depreciation under Section 32 of the Income Tax Act for assets used by charitable trusts is permissible, affirming the Bombay High Court's view that such a claim does not amount to a 'double benefit'.
