Section 13(2)(g) of the Income Tax Act
Income-tax Act, 2025: ss.332–355
Section 13(2)(g) 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(2)(g) is Vanita Vishram Trust v. Chief Commissioner of Income (327 ITR 121), cited in 31 of the 53 judgments on BharatTax that turn on this section.
Leading authorities on Section 13(2)(g)
An institution must be established solely for educational purposes and not for commercial activities to be eligible for exemption under Section 10(23C)(vi). Pursuing objects other than education, or having objects that enable commercial activities, disqualifies the institution from such exemption.
An excess of income over expenditure does not, in itself, mean that an educational institution exists for profit, rather than solely for educational purposes. The primary purpose test is key.
The real income of a trust, not deemed income, is to be considered for accumulation. Deductions allowable in a normal commercial manner should be applied before determining the income to be excluded.
When assessing the reasonableness of expenses paid by an assessee to a related entity, the Assessing Officer (AO) bears the onus to provide material showing the unreasonableness of the payment. The reasonableness of rent paid by an assessee to a company where trustees are directors can be substantiated by a rental valuation report and by showing the AO has not brought any material to disprove its reasonableness.
