“Section 13(2)(c)”
The decision most relied on for Section 13(2)(c) is Indian Molasses Co. Pvt. Ltd. v. CIT (37 ITR 66), cited in 206 judgments on BharatTax.
Leading authorities on Section 13(2)(c)
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.
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.
Charitable institutions are entitled to claim depreciation on assets even when the cost of acquisition has already been treated as an application of income for exemption purposes, as this does not constitute a double deduction.
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.
Not every item of receivables appearing in the accounts of an entity dealing with foreign associated enterprises automatically constitutes an international transaction under Section 92B. A separate adjustment for interest on outstanding receivables is not permissible if the working capital adjustment has already factored in their impact.
When computing the income of a charitable trust for exemption under Section 11, depreciation must be allowed as an application of income based on commercial principles. This does not constitute a double deduction.
The State Government's power to levy Forest Development Tax (FDT) under Section 98-A of the Act is limited to specific bodies. Notifying 'lease holders of mines and quarries situated in forest area' as such a body may be ultra vires the section.
