| QUERY: | The Finance Act 2015 has inserted one proviso to section 2(15) of the Act, instead of the provisos, what was need to change the provisos? |
| ANSWER: | Section 2(15) of the Act, defines a “charitable purpose”. The primary condition for grant of exemption to a trust or institution under section 11 of the Act is that the income derived from the property held under trust should be applied for charitable purpose in India. Section 2(15) inter-alia provides that advancement of any other object of general public utility shall not be charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering services in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity. However, at present, this restriction shall not apply if the aggregate value of the receipts from the activities referred to above is twenty five lakh rupees or less in the previous year. The institutions which as part of genuine charitable activities, undertake incidental activities like publishing books or other programmes as part of actual carrying out of the objects which are of charitable nature are put to hardship due to present proviso to section 2(15). Therefore, now the advancement of any other object of general public utility is concerned, there is a need is to ensure appropriate balance being drawn between the object of the preventing business activity in the garb of charity, and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution. Hence, the definition of charitable purpose has been amended by inserting new proviso from the assessment year 2016/17 instead of existing two provisos to mitigate the hardship caused to genuine charitable trust or institution. So, now, the advancement of any other object of general public utility shall not be a charitable purpose; if it involves the carrying on the activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless a) Such activity is undertaken the course of actual carrying out of such advancement of any other object of general public utility, and b) The aggregate receipts from such activity or activities during the previous year, do not excess twenty percent (20%) (instead of fixed amount of rupees twenty five lakh or more) of the total receipts of the trust or institution undertaking such activity or activities for the previous year. |
| EXPERT: | CA. H. N. Motiwalla |
| SECTION(S): | 11, 2(15) |
| GENRE: | Taxation (Domestic) |
| CATCH WORDS: | charitable purpose, Finance Act 2015, Objects of the Trust |
Opinion Of Eminent Legal Luminaries On Controversial Issues
What Was Need To Change The Provisos, If One Provision Is Inserted In Section 2(15)?
Posted in Income-tax
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