Section 13(1)(c) of the Income Tax Act
The decision most relied on for Section 13(1)(c) is Indian Molasses Co. Pvt. Ltd. v. CIT (37 ITR 66), cited in 201 of the 173 judgments on BharatTax that turn on this section.
Leading authorities on Section 13(1)(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.
The amendment related to claiming depreciation for charitable trusts under Section 11(6) is prospectively applicable. This means depreciation on the opening balance of fixed assets cannot be denied if their cost was previously claimed as an application of income.
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.
When a charitable trust violates investment provisions under Sections 11(5) or 13(1)(d), or applies income for prohibited purposes under Section 13(1)(c), the denial of exemption under Section 11 and taxation under Section 164(2) applies only to the extent of such violation or diversion, not to the entire income of the trust.
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.
Orders passed by the Income Tax Appellate Tribunal are binding on all revenue authorities, including the Assessing Officer and Commissioner (Appeals), functioning under its jurisdiction. Judicial discipline requires subordinate authorities to follow these orders unreservedly, and failure to do so constitutes judicial impropriety and an error in law.
The right to life under Article 21 of the Indian Constitution includes the fundamental right to shelter, encompassing adequate living space, safe structures, clean surroundings, and essential amenities.
Activities carried out on commercial lines can still fall within the ambit of 'charitable objects' for the purpose of income tax exemptions, provided they align with the definition of charitable purpose.
A loan advanced by a charitable trust to another charitable trust can be treated as an application of income for the purpose of availing exemption under Section 11 of the Income-tax Act.
Violation of the conditions under Section 13 of the Income Tax Act does not automatically lead to the conclusion that the activities of a trust are not in accordance with its objects. The revenue must demonstrate that the dominant activities are in the nature of trade, commerce, or business, not merely based on the volume of receipts.
Judgments on Section 13(1)(c)
Showing 1–20 of 173 · Page 1 of 9
