INCOME TAX

INSTRUCTION NO. 1983/2000

 Dated: May 10, 2000

Section(s) Referred: 172

Statute: Income - Tax Act, 1961

Sub:- Processing of applications for notification u/s 10(23C)(v) of the Income Tax Act, 1961 Guidelines regarding.

1. Section 10(23C)(v) of the IT Act, 1961 provides for the exemption of the Income of any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes. The Central Government is empowered to notify such trusts or institutions.

2. Section 80G of the IT Act provides for deduction in respect of donations to approve funds and charitable institutions established in India for charitable purpose. Explanation 3 to Section 80G, however, excludes any purpose, the whole or substantially the whole of which is of a religious nature from the purview of "charitable purpose". Section 10(23C)(v) and Section 80 G are, therefore, to this extent mutually exclusive.

3. The finance Act has inserted sub-section 5B in section 80G of the IT Act w.e.f. 1.4.2000 which extends benefits of the section to such institutions or funds which also incur expenditure of a religious nature during any previous year for an amount not exceeding five percent of their total income.

4. An examination of applications received u/s 10(23C)(v) of the IT Act. 1961 for notification of institutions/trusts of religious or charitable nature reveals that in various cases this aspect is overlooked. Approvals u/s 80G of the IT Act, 1961 are granted by CIT even to those institutions/trusts which are notified under Section 10(23C)(v) but where expenditure of a religious nature incurred by such funds or institutions exceeds 5 percent of its total income for that previous year rendering it ineligible for the purposes of Section 80G.

5. As the Central Government may notify any trust or institution established wholly for public religious or wholly for public religious and charitable purposes, field formation should in each case, examine the aspect whether any expenditure of a religious nature has been incurred in excess of the permissible limit of five percent of the total income of that trust/institution in that previous year and make a specific mention of the same in their report. In case, where such limit is found to be have been exceeded, remedial action may be taken forthwith.

This may be brought to the notice of all officers working in your regions.

(SAMAR BHADRA)