Section 13(3) of the Income Tax Act
Income-tax Act, 2025: ss.332–355
Section 13(3) 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(3) is CIT v. Society of the Sisters of St. Anne (146 ITR 28), cited in 195 of the 563 judgments on BharatTax that turn on this section.
Leading authorities on Section 13(3)
Depreciation claimed by a charitable trust on its assets is an allowable application of income for computing exemption under Section 11, and this does not constitute a double deduction.
A charitable trust is allowed to claim depreciation on its assets for computing its income, even if the capital expenditure incurred on acquiring those assets was treated as an application of income in the year of acquisition.
Payments for computer software are treated as royalty income under Section 9(1)(vi) of the Income-tax Act, particularly concerning the expanded definition provided by Explanation 2 and Explanation 4.
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.
An organization qualifies as charitable under Section 2(15) only if its income and property are solely applied for its charitable objects and, upon dissolution, its residual assets are restricted for utilization exclusively for charitable purposes, not for distribution to members or as general state revenue.
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.
An object beneficial to a section of the public, as distinguished from an individual or group of individuals, qualifies as an object of general public utility under Section 2(15) and hence a charitable purpose. This applies even if the benefits are restricted to a specific caste, community, or professional group.
Depreciation is deductible when computing the income of a charitable trust under Section 11, and treating both depreciation and capital expenditure as an application of income for charitable purposes does not amount to a double deduction.
