“Section 11(5)”
The decision most relied on for Section 11(5) is PCIT v. Wipro Ltd. (140 Taxmann.com 223), cited in 192 judgments on BharatTax.
Leading authorities on Section 11(5)
Exemption provisions under Chapter III, such as Section 10B(8), must be interpreted strictly, and any claim for such exemptions must be made in the return of income. The principles governing Chapter III (incomes not forming part of total income) differ from those for Chapter VIA (deductions in computing total income).
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 a charitable trust, a violation of Section 13(1)(d) does not lead to the denial of exemption under Section 11 on its total income. Instead, only income derived from investments or deposits made in violation of Section 11(5) or income diverted under Section 13(1)(c) or 13(1)(d) is taxable.
Income of a trust that is taxable at the maximum marginal rate should be taxed accordingly, while other income is eligible for exemption under Section 11 of the Income-tax Act.
Income of a charitable trust, other than from a business undertaking covered by Section 11(4), is determined based on its books of account. Payments of income tax and wealth tax by the trust are considered an application of income for charitable purposes under Section 11.
A trust's objects, even if based on religious tenets, can qualify as charitable for tax exemptions if its benefits are not exclusively restricted to a particular religious community or caste.
Income received by a trust from sources like extra fees can be taxed at the maximum marginal rate, while other income remains eligible for exemption under Section 11 of the Income Tax Act.
Reopening of assessment beyond four years under Section 147 requires strict satisfaction of conditions precedent, including fresh tangible material, and cannot be based on a mere change of opinion from the original assessment. Further, debatable or interpretational issues cannot be adjusted during processing under Section 143(1).
