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Section 11 exempts income from property held for “charitable purposes”. What is meant by “charitable purpose”?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 asked

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Hi, “Charitable purpose” under Income Tax law as it now stands includes, (a) relief of the poor (b) education, (c) medical relief, (d) preservation of the environment (including watersheds, forests and wildlife), (e) preservation of monuments or places or objects of artistic or historic interest, and (f) advancement of any other object of general public utility (as distinguished from benefit of individuals or narrowly defined interest groups).

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

“Charitable purpose” under Income Tax law as it now stands includes, (a) relief of the poor (b) education, (c) medical relief, (d) preservation of the environment (including watersheds, forests and wildlife), (e) preservation of monuments or places or objects of artistic or historic interest, and (f) advancement of any other object of general public utility (as distinguished from benefit of individuals or narrowly defined interest groups).

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

"Charitable purpose" includes relief of poor, education, medical relief, and the advancement of any other object of general public utility. Before proceeding further, it may be pointed out that the words "not involving the carrying on of any activity of profit", finding place in the section at the end of the words "objects of general public utility", were omitted by the Finance Act, 1983, with effect from 1-04-1984. Therefore, the cases relied upon under the old definition will not come to the aid of the revenue. This definition does not make a distinction between the institutions carrying on any activity for profit or nonprofit institutions. It is further seen that punctuation, and the word "and" are used after medical relief and, therefore, the words "relief of poor, education, medical relief stand on different footing than the words "advancement of any other object of general public utility". The Hon'ble Supreme Court has pointed out that private profit motive is manifestly excluded by the words "general public utility", but these words qualify the words "advancement of any other object". Therefore, we are of the considered view that relief of poor, education and medical relief are charitable activities per se and if any institution is carrying out any of these objects, then, such an institution will be pursuing a charitable purpose."

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Section 2(15) of the Income Tax Act, 1961 defines the term "Charitable Purpose". "charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. It had been provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of income from such activity, unless - (1) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; or (2) the aggregate receipts from such activity during the previous year do not exceed twenty percent of the total receipts of the trust or institution of that previous year.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

“Charitable purpose” under Income Tax law as it now stands includes, (a) relief of the poor (b) education, (c) medical relief, (d) preservation of the environment (including watersheds, forests and wildlife), (e) preservation of monuments or places or objects of artistic or historic interest, and (f) advancement of any other object of general public utility (as distinguished from benefit of individuals or narrowly defined interest groups). From 01.04.2009 onwards, “advancement of any other object of general public utility” does not include carrying on of business activity of any kind, regardless of the manner in which income earned from such business activity is intended to be utilized (an exception, has been made in cases where receipts from such business activity do not exceed Rs. 10 lakhs, which stands increased to Rs.25 lakhs w.e.f. 01.04.2012). For a detailed discussion regarding the expressions “charitable purpose”, “relief of the poor”, “education”, “medical relief”, and “advancement of any other object of general public utility”, please see Chapter-3. Thanks

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