Section 13(1)(b) of the Income Tax Act
Income-tax Act, 2025: ss.332–355
Section 13(1)(b) falls under section 13 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 13(1)(b) is CIT v. Dawoodi Bohra Jamat (364 ITR 31), cited in 83 of the 211 judgments on BharatTax that turn on this section.
Leading authorities on Section 13(1)(b)
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.
An object beneficial to a section of the public, as distinguished from an individual or group of individuals, qualifies as an object of general public utility under Section 2(15) and hence a charitable purpose. This applies even if the benefits are restricted to a specific caste, community, or professional group.
Section 13(1)(b) of the Income-tax Act applies to composite trusts that engage in both religious and charitable activities, meaning such trusts may be excluded from exemption under Section 11.
Once an Assessing Officer forms a reason to believe that income has escaped assessment and issues a notice under section 148, they can assess or reassess income related to other issues not originally included in the reasons recorded.
Section 13(1)(b) of the Income Tax Act is applicable at the stage of granting exemption, not during the process of granting registration under section 12A/12AB, provided the trust's objects are charitable in character for the general public at large and not solely for the benefit of a particular religious community.
A charitable trust established for the benefit of a specific community is disqualified from exemption under section 11 if it extends benefits to other communities, as this violates the provisions of section 13(1)(b).
The Commissioner of Income-tax (Exemptions) cannot invoke Section 13(1)(b) at the stage of granting registration under Section 12AB, especially when the assessee has a valid registration. Section 13(1)(b) is only attracted after the assessee has crossed the hurdle of being eligible for exemption under Section 11 by obtaining registration.
Section 13(1)(b) cannot be invoked at the stage of registration under Section 12A; it is attracted only at the time of assessment for exemption under Section 11.
The Commissioner is not competent to invoke provisions of Sections 11, 12, and 13 of the Income Tax Act for the purpose of declining registration under Section 12AA. These provisions are intended for the Assessing Officer's jurisdiction during assessment proceedings, not for granting registration.
The Assessing Officer can invoke provisions of Section 13 of the Income-tax Act, 1961, while framing an assessment, but the Commissioner cannot invoke these provisions to decline registration under Section 12AA of the Act.