INCOME TAX

INSTRUCTION NO. 1948/1998

 Dated: May 4, 1998

Subject :- Processing of applications for notification u/s 10(23C) (iv)/(v) of Income-tax Act, 1961-guide lines regarding.

Earlier Board have issued instruction No. 1868, dated 3rd December, 1990 in F. No. 197/79/90-ITA-I setting out guidelines for sending reports to CBDT for notification of a case under Section 10(23C)(iv)/(v).

2. It has been observed in the reports of various cases received in CBDT that if an institution has not applied 70% of its income on its objects during the same year, the case is not recommended for notification u/s 10(23C) (iv)/(v) merely on this ground and is stated that conditions contained in instruction No. 1868 are not fulfilled

3. The issue has been examined. Application of income of a trust or institution referred to in clause (iv) or (v) are discussed in 3rd proviso of clause (23C) of Section 10 which is reproduced is under:--

"Provided also that the fund or trust or institution referred to in sub-clause (iv) or sub-clause (v)

(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established; and

(b) does not invest or deposit its funds other than-

(i) any assets held by the fund, trust or institution where such assets form part of the corpus of the fund, trust or institution as on the 1st day of June, 1973;

(ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the fund, trust or institution before the 1st day of March, 1983;

(iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i), by way of bonus shares allotted to the fund, trust or institution;

(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article ,is the Board may, by notification in the Official Gazette, specify,

for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of Section 11.

4. In view of the above stated provisions of law, it is clarified that if any institution applies its income or accumulates it for application, wholly and exclusively to the objects for which it is established and invests its surplus in the modes specified u/s 11(5) of Income-tax Act, 1961, the institutions are eligible for exemption u/s 10(23C)(iv)/(v) of Income-tax Act provided other conditions contained therein are fulfilled. The condition vis-a-vis application of income to the tune of 75% of the income as required u/s It during the same financial year is not a prerequisite for notification u/s 10(23C)(iv)/(v). This aspect may be kept in mind while preparing report under section 10(23C) (iv)/(v).

F. No. 197/43/97-ITA-I

H.K.CHOUDHARY
Under Secretary