Section 13(1)(c) of the Income Tax Act
Income-tax Act, 2025: ss.332–355
Section 13(1)(c) 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) is Indian Molasses Co. Pvt. Ltd. v. CIT (37 ITR 66), cited in 206 of the 697 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.
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.
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.
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.
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.
Activities run on commercial lines do not fall within the ambit of charitable objects. Section 2(15) of the Income Tax Act, 1961, is applicable to such activities.
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.
