Section 11(6) of the Income Tax Act
Income-tax Act, 2025: ss.332–355
Section 11(6) falls under section 11 of the Income-tax Act, 1961, which corresponds to sections 332 to 355 of the Income-tax Act, 2025, the provisions on registered non-profit organisations.
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 11(6) is CIT v. Institute of Banking Personnel Selection (264 ITR 110), cited in 398 of the 264 judgments on BharatTax that turn on this section.
Leading authorities on Section 11(6)
Depreciation is allowable on assets for which the cost has been fully allowed as an application of income under Section 11 in previous years, when computing the income of a charitable trust. Charitable trusts are also entitled to carry forward their deficit.
Depreciation claimed by a charitable trust on its assets is an allowable application of income for computing exemption under Section 11, and this does not constitute a double deduction.
A charitable trust is allowed to claim depreciation on its assets for computing its income, even if the capital expenditure incurred on acquiring those assets was treated as an application of income in the year of acquisition.
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.
An excess of expenditure incurred by a charitable trust in previous years can be adjusted against the income of a subsequent year, and this adjustment is considered an application of income for charitable purposes under Section 11.
A charitable trust may adjust expenditure incurred for religious or charitable purposes in an earlier year against the income of a subsequent year, which is considered an application of income for the subsequent year under Section 11. This principle is guided by commercial considerations and the benevolent intent of Section 11.
Depreciation is deductible when computing the income of a charitable trust under Section 11, and treating both depreciation and capital expenditure as an application of income for charitable purposes does not amount to a double deduction.
Shares held as corpus by a trust, which were a precondition for notification under Section 10(23C), cannot be deemed to forfeit exemption under Section 13(1)(d) and Section 13(2)(h).
The case is cited for the proposition that various other decisions, including those concerning software consultants, Anil Corporation, and Sunbeam Auto Ltd., are relevant in a tax matter.
