Section 13(1)(c)(ii) of the Income Tax Act
Income-tax Act, 2025: ss.332–355
Section 13(1)(c)(ii) 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)(c)(ii) is Bureau of Indian Standards v. DGIT (358 ITR 78), cited in 58 of the 74 judgments on BharatTax that turn on this section.
Leading authorities on Section 13(1)(c)(ii)
Charging fees, even when having regard to the economic status of beneficiaries, is permissible for the sustenance of charitable activities, provided it is necessary for operation and running expenses and does not amount to carrying on trade or commerce. This applies even after the introduction of the proviso to Section 2(15) of the Income Tax Act, 1961.
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.
The burden of proof lies on the Assessing Officer (AO) to establish that a trust or charitable institution is hit by the provisions of Section 13. General allegations or mere transactions with interested persons are insufficient unless concrete benefit is proven.
A charitable trust can claim depreciation on a capital asset even if its cost was treated as application of income for charitable purposes. Allowing depreciation does not constitute double allowance.
The proviso to section 2(15) should not be invoked to deny exemption to a sports organization if its activities are not predominantly in the nature of trade, commerce, or business.
The income of a society for mutual benefits of its members is exempt from tax, as demonstrated in this case concerning a cooperative bank.
Income from sources such as fixed deposit interest, dividend income, and profits from the sale of investments are not taxable when they arise from a relationship of mutuality.
Exemption under Section 11 of the Income Tax Act is not denied to a trust where rent paid to a trustee for property is not excessive, even if the trustee is related to the settlors.
A reassessment order is invalid if the Assessing Officer initiates proceedings based on an alleged transaction but makes no addition to income in respect of that specific transaction in the final assessment order. The reassessment order must be based on actual findings, not merely on initial suspicions that are not substantiated.
