Section 13(1)(d) of the Income Tax Act
Income-tax Act, 2025: ss.332–355
Section 13(1)(d) 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)(d) is 1. Father Mullers Charitable Institutions 363 IT 230 (Kar.) 2. DIT(E) v. Sheth Mafatlal Gagalbhai Foundation Trust (249 ITR 533), cited in 108 of the 306 judgments on BharatTax that turn on this section.
Leading authorities on Section 13(1)(d)
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.
Violation of investment mandates under Section 13(1)(d) of the Income Tax Act, 1961, for a charitable trust results in the complete denial of exemption under Section 11 of the Act.
A charitable trust can claim exemption for specific income streams under Section 10, such as dividend income under Section 10(34), independently of the provisions of Section 11. Income exempted under Section 10 is not restricted or overridden by Section 11 for trusts.
Income earned from investments or deposits made in violation of Section 13(1)(d) of the Income Tax Act is taxable, but only to the extent of the income so earned, not the entire corpus. Circular No. 387, dated 06.07.1994, supports this interpretation and binds the revenue authorities.
Donations made for a specific purpose are considered capital in nature and cannot be applied for charitable or religious purposes, thus not being deemed income from property for the purposes of Section 11 of the Income Tax Act.
When an exemption is denied under Section 13(1)(c) or (d), the denial of exemption applies only to the portion of income that violates these provisions, not the entire income.
An interest-free loan provided by one charitable society to another, both registered under Section 12AA and possessing similar objectives, does not contravene Section 13(1)(d) read with Section 11(5) of the Income Tax Act, as such loans are not classified as investments or deposits.
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).
