Section 164(2) of the Income Tax Act
Income-tax Act, 2025: s.307
Section 164(2) falls under section 164 of the Income-tax Act, 1961, which corresponds to section 307 (Charge of tax where share of beneficiaries unknown) of the Income-tax Act, 2025.
Read section 307 of the 2025 Act
Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.
The decision most relied on for Section 164(2) 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 122 judgments on BharatTax that turn on this section.
Leading authorities on Section 164(2)
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.
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.
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.
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.
Assessment proceedings before the Income-tax Officer are judicial proceedings. The assessee has a right to inspect the record and all relevant documents before being called upon to lead evidence in rebuttal.
Remuneration drawn by heads of charitable institutions is permissible if it is neither excessive nor unreasonable, and the department cannot dictate the methods of operation.
