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ITA Chapter 17 P2

Joint and several liability of partners for tax payable by firm

  1. Every person who was, during the tax year, a partner of a firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other sum payable by the firm for the tax year, and all the provisions of this Act, so far as may be, shall apply to the assessment of such tax or imposition or levy of such penalty or other sum.

Firm dissolved or business discontinued

  1. Where a firm is dissolved or any business or profession carried on by it has been discontinued, the Assessing Officer shall make an assessment of the total income of the firm, as if no such dissolution or discontinuance had taken place, and all the provisions of this Act, including the provisions relating to the levy of a penalty or any other sum chargeable under any provision of this Act, shall apply, so far as may be, to such assessment.
  2. Regardless of the generality of sub-section (1), if the Assessing Officer or Joint Commissioner (Appeals) or Commissioner (Appeals), in the course of any proceeding under this Act in respect of any such firm as referred to in that sub-section, is satisfied that the firm was guilty of any of the acts specified in Chapter XXI, he may impose or direct the imposition of a penalty as per the provisions of that Chapter.
  3. Every person who was at the time of such dissolution or discontinuance a partner of the firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable for the amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall apply to any such assessment or imposition of penalty or other sum.
  4. Where such dissolution or discontinuance takes place after any proceedings in respect of a tax year have commenced, the proceedings may be continued against the person referred to in sub-section (3) from the stage at which the proceedings stood at the time of such dissolution or discontinuance, and all the provisions of this Act shall, so far as may be, apply accordingly.
  5. The provisions of this section shall not affect the provisions of section 302(4).

Liability of partners of limited liability partnership in liquidation

  1. Irrespective of anything contained in the Limited Liability Partnership Act, 2008 (6 of 2009), where any tax including penalty, interest, fee or any other sum payable under the Act is due and cannot be recovered from—
    1. the limited liability partnership in respect of any income of any tax year; or
    2. any other person in respect of any income of any tax year during which such other person was a limited liability partnership,
  2. then, in such case, every such person who was a partner of such limited liability partnership at any time during the relevant tax year, shall be jointly and severally liable for the payment of such tax due unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the limited liability partnership.

Application for registration

  1. The following persons may, for claiming benefits under this Part as a registered non-profit organisation, make an application for registration in such form and manner, as may be prescribed, to the Principal Commissioner or Commissioner:—
    1. a public trust; or
    2. a society registered under the Societies Registration Act, 1860 (21 of 1860), or under any law in force in India; or
    3. a company registered under section 8 of the Companies Act, 2013 (18 of 2013) or the companies registered under section 25 of the Companies Act, 1956 (1 of 1956) and deemed to have been registered in pursuance of section 465(2)(g) of the Companies Act, 2013 (18 of 2013); or
    4. a University established by law or any other educational institution affiliated thereto or recognised by the Government; or
    5. an institution financed wholly or in part by the Government or a local authority; or
    6. any person as referred to in Schedule III (Table: Sl. No. 27) to (Table: Sl. No. 29) and (Table: Sl. No. 36) and in Schedule VII (Table: Sl. Nos. 17 to 19) and (Table: Sl. No. 42); or
    7. any other person notified by the Board in this behalf.
  2. A person referred to in sub-section (1) shall be eligible for registration, if—
    1. such person is constituted or registered or incorporated in India for carrying out one or more charitable purposes, as referred to in section 2(23) or one or more public religious purposes; and
    2. the properties of such person are held for the benefit of the general public under an irrevocable trust—
      1. wholly for charitable or religious purposes in India; or
      2. partly for charitable or religious purposes in India, if such person was constituted or registered or incorporated prior to the commencement of the Income-tax Act, 1961 (43 of 1961).
  3. Every application in respect of the cases specified in column B of the Table below shall be made to the Principal Commissioner or Commissioner within the time provided in column C of the said Table, who shall, on receipt of such application, follow the procedure provided in this section and shall pass an order within the time specified in column D of the said Table, and registration, if granted, shall be valid for a period specified in column E thereof.
  4. In case the application under sub-section (3) is made beyond the time allowed in column C of the Table specified in the said sub-section, the Principal Commissioner or Commissioner may, if he considers that there is a reasonable cause for delay in furnishing the application, condone such delay and such application shall be deemed to have been made within time.
  5. In case the application is made under sub-section (3) (Table: Sl. Nos. 3 to 7), and the total income of such applicant, without giving effect to the provisions of this Part, does not exceed five crore rupees during each of the two tax years, preceding the tax year in which such application is made, the provisions of (Table: Sl. Nos. 3.E to 7.E) of the said sub-section, shall have effect as if for the words “five years”, the words “ten years” had been substituted.
  6. If any application for registration is not made within the time specified in sub-section (3) (Table: Sl. No. 3.C, 4.C, 5.C or 7.C) and the delay in filing such application is not condoned under sub-section (4), such person shall be liable to pay tax on accreted income under section 352.
  7. The Principal Commissioner or Commissioner shall, on an application made by an applicant in any of the cases specified in sub-section (3) (Table: Sl. Nos. 2 to 7), call for such documents or information or make such inquiries as he thinks necessary in order to satisfy himself about the genuineness of activities, and the compliance of such requirements of any other law as are material for the purpose of achieving its objects, and—
    1. if he is so satisfied about the objects and the genuineness of the activities and compliance of such requirements of any other law in force, shall pass an order in writing granting registration; or
    2. if he is not so satisfied, after affording a reasonable opportunity of being heard to the applicant shall,—
      1. pass an order in writing rejecting the application, where the application was made in any of the cases specified in sub-section (3) (Table: Sl. No. 2 or 6); or
      2. pass an order in writing rejecting the application and also cancelling the registration in any other case specified in sub-section (3) (Table: Sl. No. 3, 4, 5 or 7),
      and send a copy of the said order to the applicant and the Assessing Officer.
  8. Where an application has been made in any of the cases specified in sub-section (3) (Table: Sl. No. 1), the Principal Commissioner or Commissioner shall grant provisional registration.
  9. Where the registration of a person, granted prior to the 1st April, 2021 under the specified provision of the Income-tax Act, 1961 (43 of 1961), has expired and such person makes an application for registration under this Part, the Principal Commissioner or Commissioner may, if he considers that there is a reasonable cause for delay in making such application, condone such delay and grant registration to such person under this Part within three months from the end of the month in which the application is made, which shall be valid for five years from the commencement of the tax year 2021-2022.
  10. The order under sub-sections (7), (8) and (9) shall be passed in the form and manner, as may be prescribed.

Switching over of regimes

  1. Nothing contained in section 11, other than Schedule II (Table: Sl. No. 1), Schedule III (Table: Sl. Nos. 27 to 29 and 36) and Schedule VII (Table: Sl. Nos. 10 to 19 and 42 to 45), shall exclude any income of a registered non-profit organisation from its total income for that tax year.
  2. The registration under section 332 shall cease to operate from the date on which the registered non-profit organisation is notified as specified in Schedule III (Table: Sl. No. 27, 28, 29 or 36) or Schedule VII (Table: Sl. No. 42), or from the 1st day of April of the tax year for a registered non-profit organisation which claims exemption under Schedule VII (Table: Sl. No. 43, 44 or 45).
  3. A person, whose registration ceases to operate under sub-section (2), may apply for registration under section 332 subject to the condition that the notification granting exemption to such person under Schedule III (Table: Sl. No. 27, 28, 29 or 36) or Schedule VII (Table: Sl. No. 42) ceases to have effect from the date on which the said registration is granted and thereafter shall not be entitled to exemption under the respective serial numbers of the said Schedules.

Tax on income of registered non-profit organisation

  1. The income-tax payable by a registered non-profit organisation on its total income for any tax year shall be the aggregate of the amounts calculated—
    1. at the rate of 30% on specified income for such tax year; and
    2. at the rate applicable on taxable regular income and any residual income for such tax year under other provisions of this Act.
  2. The provisions of this Chapter shall apply irrespective of anything to the contrary contained in any other provision of this Act other than sections 96 to 98.

Regular income

  1. Regular income of any tax year of a registered non-profit organisation means—
    1. income from any charitable or religious activity, for which such non-profit organisation is registered, carried out by it in such tax year;
    2. income other than income covered in clause (e), derived from any property, deposit or investment held wholly for charitable or religious purposes by such registered non-profit organisation in such tax year;
    3. income other than income covered in clause (e), derived from any property, deposit or investment held in part for charitable and religious purposes by such registered non-profit organisation as referred in section 332(2)(b)(ii) in such tax year;
    4. voluntary contributions received by such registered non-profit organisation in such tax year; and
    5. gains of any commercial activity permissible under sections 344, 345 and 346, carried out by such registered non-profit organisation in such tax year, computed in such manner, as may be prescribed.

Taxable regular income

  1. The taxable regular income of a registered non-profit organisation for any tax year shall be—
    1. nil, where 85% or more of the regular income of such tax year has been applied as per provisions of section 341 or accumulated under section 342 for charitable or religious purposes, in such tax year as per the provisions of this Part; and
    2. in any other case, 85% of the regular income for such tax year as reduced by its application for charitable or religious purposes as per provisions of section 341 or accumulation thereof under section 342 in such tax year as per the provisions of this Part.

Specified income

  1. The specified income of a registered non-profit organisation shall mean the income as specified in column B of the Table below and shall be taxable in the year provided in the column C thereof:—

Income not to be included in regular income

  1. While computing the regular income of a registered non-profit organisation, the following income shall not be included:—
    1. income applied outside India, where the Board, by general or special order, directs that such income shall not be so included in its total income in case of a registered non-profit organisation—
      1. created before the 1st April, 1952 for charitable or religious purposes; or
      2. created on or after the 1st April, 1952 for charitable purposes where such application of income outside India tends to promote international welfare in which India is interested;
    2. the corpus donation received by the registered non-profit organisation under section 339.

Corpus donation

  1. Corpus donation means any donation made with a specific direction by the donor that it shall form part of the corpus of the registered non-profit organ- isation provided that such donation is invested or deposited in any of the modes permitted under section 350 maintained specifically for such corpus

Deemed corpus donation

  1. Where the property of a registered non-profit organisation includes any temple, mosque, gurudwara, church or other place notified under section 133(1)(b)(vi), any sum or sums received by such registered non-profit organisation as donation for the purpose of renovation or repair of such temple, mosque, gurudwara, church or other place, may, at its option, be deemed as forming part of the corpus under section 339, if it—
    1. maintains such corpus as separately identifiable;
    2. applies such corpus only for the purpose for which the donation was made;
    3. invests or deposits such corpus in any of the modes permitted under section 350; and
    4. does not apply such corpus for making donation to any person.

Application of income

  1. The following sums shall be allowed as application of income to a registered non-profit organisation:—
    1. any sum, other than the sum referred to in clause (b), applied by it for charitable or religious purpose in India for which it is registered where such sum is paid during the tax year provided that the provisions of section 35(b)(i) and section 36(4), (5), (6) and (7) shall apply in respect of such sum; and
    2. 85% of the sum paid by way of donation made to any other registered non-profit organisation.
  2. The application of income under sub-section (1) shall include the following:—
    1. the amount invested or deposited back during the tax year, in the modes permitted under section 350 maintained specifically for such corpus, if—
      1. such investment or depositing back is made within five years from the end of the tax year in which such application of income was made from the corpus; and
      2. the application of income from the corpus is made after the 31st March, 2021 and there was no violation of any provision of this Part, or any corresponding provision of the Income-tax Act, 1961 (43 of 1961) with respect to such application;
    2. the amount repaid, during the tax year, towards any loan or borrowing where,—
      1. such repayment is within five years from the end of the tax year in which such application of income was made from the loan or borrowing; and
      2. the application of income from the loan or borrowing is made after the 31st March, 2021 and there was no violation of any provision of this Part, or any corresponding provision of the Income-tax Act, 1961 (43 of 1961) with respect to such application.
  3. The following claims shall not be allowed as application of income under sub-sections (1) and (2):—
    1. the deduction or allowance by way of depreciation or otherwise claimed in respect of an asset acquisition of which has been claimed as an application of income in the same or any other tax year under this Part or under any corresponding provision of the Income-tax Act, 1961 (43 of 1961); or
    2. a claim of set off or deduction or allowance of any excess application of any of the years preceding the tax year; or
    3. any sum paid as a corpus donation to any other registered non-profit organisation.
  4. An application from corpus, loan or borrowing, accumulated income, specified income or deemed accumulated income shall not be considered as application for the purpose of sub-sections (1) and (2).
  5. Where, in a tax year, the regular income applied by a registered non-profit organisation towards charitable or religious purposes in India, as per the provisions of sub-sections (1) to (4), is less than 85% of regular income, the shortfall, or any part thereof, at the option of the registered non-profit organisation, may be treated as deemed application.
  6. Any deemed application under sub-section (5) shall be applied by the registered non-profit organisation for its objects in India,—
    1. during the tax year in which the income is received or in the tax year immediately succeeding such tax year, where such shortfall is for the reason that the whole or any part of the income has not been received during that tax year;
    2. in the tax year immediately succeeding the tax year in which the income was derived, where such shortfall is for any other reason.
  7. The option under sub-section (5) shall be exercised on or before the due date specified in section 263(1) for furnishing the return of income for such tax year, in such form and manner, as may be prescribed.
  8. The application of income under sub-section (1) shall include deemed application under sub-section (5).
  9. Following income from capital gains shall be deemed as application of income—
    1. the capital gain from transfer of a capital asset, being property held under trust wholly for charitable or religious purposes, where the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held,—
      1. if the whole of the net consideration is utilised in acquiring the new capital asset, the whole of such capital gain;
      2. if only a part of the net consideration is utilised for acquiring the new capital asset, so much of such capital gain as is equal to the amount, if any, by which the amount so utilised exceeds the cost of the transferred asset;
    2. the appropriate fraction of the capital gain arising from the transfer of a capital asset, being property held under trust in part for charitable or religious purposes, where the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held,—
      1. if the cost of acquisition of the new capital asset acquired is not less than the net consideration in respect of the capital asset transferred, the whole of appropriate fraction of such capital gain;
      2. in any other case, so much of the appropriate fraction of the capital gain as is equal to the amount, if any, by which the appropriate fraction of the amount utilised for acquiring the new asset exceeds the appropriate fraction of the cost of the transferred asset.
  10. For the purposes of sub-section (9),—
    1. “appropriate fraction” means the fraction which represents the extent to which the income derived from the capital asset transferred was immediately before such transfer applicable to charitable or religious purpose;
    2. “cost of transferred asset” means the aggregate of the cost of acquisition (as ascertained for the purposes of sections 72 and 73) of the capital asset which is subject of the transfer and the cost of any improvement thereto within the meaning assigned to that expression in section 90(1)(b);
    3. “net consideration” means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.

Accumulated income

  1. A registered non-profit organisation may accumulate or set apart any part of its regular income during any tax year by furnishing a statement to the Assessing Officer in such form and manner, as may be prescribed, on or before the due date specified in section 263(1) for furnishing the return of income for such tax year stating therein the purpose and period, not exceeding five years, for which the income is being accumulated or set apart.
  2. The amount credited or paid by a registered non-profit organisation to any other registered non-profit organisation out of its income accumulated or set apart, shall not be treated as application of income.
  3. The period during which the income is not applied for the purpose for which it is so accumulated or set apart pursuant to an order or injunction of any court, shall be excluded from the said period of five years.
  4. The income accumulated or set apart under sub-section (1) shall be invested or deposited in any of the modes permitted under section 350, or applied for the purposes as stated in the prescribed form referred to in sub-section (1).
  5. The registered non-profit organisation may, for the change of purpose for which income has been accumulated or set apart, make an application to the Assessing Officer, in such form and manner, as may be prescribed.
  6. The Assessing Officer may, on an application made under sub-section (5) and subject to sub-section (2), allow the registered non-profit organisation to apply its income for such other charitable or religious purposes in India which are in conformity with its objects.
  7. Where a registered non-profit organisation is dissolved, the Assessing Officer may, on an application made by such registered non-profit organisation in such form and manner, as may be prescribed, allow application of such income to be made to any other registered non-profit organisation for the year in which it is dissolved.

Deemed accumulated income

  1. The regular income, as reduced by the application of income as per the provisions of section 341 and accumulated or set apart income under section 342, to the extent of 15% of regular income, shall be considered as deemed accumulated income and where such deemed accumulated income is invested or deposited, it shall be invested or deposited in any of the modes permitted under section 350.
  2. The deemed accumulated income under this section shall not be considered as accumulated income for the purposes of section 342.

Business undertaking held as property

  1. Where the property held by a registered non-profit organisation includes a business undertaking, and where a claim is made that the income of any such undertaking is eligible for benefits under this Part, then the Assessing Officer shall have the power to determine the income of such business undertaking as per the provisions of this Act.

Restriction on commercial activities by a registered non-profit organisation

  1. A registered non-profit organisation (other than a registered non-profit organisation mentioned in section 346) shall not carry out any commercial activity unless—
    1. such commercial activity is incidental to the attainment of the objectives of the registered non-profit organisation; and
    2. separate books of account are maintained for such activities.

Restriction on commercial activities by registered non-profit organisation, carrying out advancement of any other object of general public utility

  1. No registered non-profit organisation, carrying out advancement of any other object of general public utility, shall carry out any commercial activity unless,—
    1. such commercial activity is undertaken in the course of actual carrying out of advancement of any object of the general public utility;
    2. the aggregate receipts from such commercial activity or activities do not exceed 20% of the total receipts of such registered non-profit organisation of the relevant tax year; and
    3. separate books of account are maintained by such registered non-profit organisation for such activities.

Books of account

  1. Where the total income of a registered non-profit organisation, without giving effect to the provisions of this Part, exceeds the maximum amount which is not chargeable to income-tax in any tax year, such registered non-profit organisation shall be required to keep and maintain the books of account and other documents in such form and manner and at such place, as may be prescribed.

Audit

  1. Where the total income of a registered non-profit organisation, without giving effect to the provisions of this Part, exceeds the maximum amount which is not chargeable to income-tax in any tax year, the accounts of such registered non-profit organisation for that tax year shall be audited by an accountant and the person in receipt of the income shall be required to furnish a report of an audit of such income by such date in the prescribed form, duly signed and verified by such accountant and setting forth such particulars, as may be prescribed.

Return of income

  1. Where the total income of a registered non-profit organisation, without giving effect to the provisions of this Part, exceeds the maximum amount which is not chargeable to income-tax in any tax year, it shall furnish the return of income for that tax year as per the provisions of section 263(1)(a)(iii) and (2), within the time limit allowed under section 263(1)(c) or 263(4).

Permitted modes of investment

  1. The modes of investing or depositing the money under this Part, shall be such as specified in Schedule XVI.
  2. The modes of investing or depositing money under this Part, other than the modes specified in Schedule XVI, shall be specified by the Central Government, by notification.

Specified violation

  1. The following shall constitute specified violation by a registered non-profit organisation:—
    1. where any income of the registered non-profit organisation has been applied, other than for its objects; or
    2. it carries out any commercial activity in contravention of the provisions of section 345;
    3. where it has applied any part of its total income for private religious purposes, which does not enure for the benefit of the public; or
    4. where a registered non-profit organisation, created or established after the commencement of this Act for charitable purpose, has applied any part of its income for the benefit of any particular religious community or caste other than the Scheduled Castes or the Scheduled Tribes or backward classes or women and children; or
    5. where any activity being carried out by the registered non-profit organisation is not genuine or is not being carried out in accordance with all or any of the conditions subject to which it was registered; or
    6. the registered non-profit organisation has not complied with the requirements of any other law as referred under section 332(7)(a) and the order, direction or decree, holding that such non-compliance has occurred, has either not been disputed, or has attained finality; or
    7. the application referred to in section 332(1) contains any false or incorrect information.
  2. Where,—
    1. the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any tax year;
    2. the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under section 270(13) for any tax year; or
    3. a registered non-profit organisation has been selected as per the risk management strategy formulated by the Board for any tax year,
    the Principal Commissioner or Commissioner shall—
    1. call for such documents or information from the registered non-profit organisation, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence of any specified violation;
    2. pass an order in writing,—
      1. either cancelling the registration of such registered non-profit organisation, after affording a reasonable opportunity of being heard, for such tax year and all subsequent tax years, if he is satisfied that one or more specified violations have taken place; or
      2. not cancelling the registration of such registered non-profit organisation, if he is not satisfied about the occurrence of any specified violation.
    3. forward a copy of the order passed under clause (ii) to the Assessing Officer and such registered non-profit organisation.
  3. The order under sub-section (2)(ii) shall be passed before the expiry of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, calling for any document or information, or for making any inquiry, under clause (i) of the said sub-section.

Tax on accreted income

  1. Every specified person shall, in addition to the income-tax chargeable in respect of his total income, be liable to pay additional income-tax on accreted income at the maximum marginal rate in any of the cases specified in column B of the Table in sub-section (4).
  2. The accreted income referred to in sub-section (1) shall be computed using the following formula:—
    1. A = B – C
    2. B = Aggregate fair market value of the total assets of the specified person, as on the date specified in column C of the Table in sub-section (4), computed in accordance with such method of valuation, as may be prescribed;
    3. C = Total liability of such specified person, as on the date specified in column C of the said Table, computed in accordance with such method of valuation, as may be prescribed.
  3. The accreted income, computed as per the provisions of sub-section (2) shall be reduced by such amount of accreted income as is attributable to specified assets, and liabilities, if any, related to such assets.
  4. The specified person and the principal officer or trustee of such specified person shall be liable to pay the tax on accreted income to the credit of the Central Government within fourteen days from the due date specified in column D of the Table below.
  5. The payment of tax on the accreted income by the specified person under this section shall be deemed as the final payment of tax in respect of the said income and no further credit therefor shall be claimed by, or any deduction be allowed to, the specified person or any other person in respect of the amount of tax so paid under any other provision of this Act.
  6. Where the specified person, or the principal officer or trustee of such specified person, fails to pay the whole or any part of the tax on the accreted income within the time allowed under sub-section (4), such specified person, principal officer or trustee shall be liable to pay simple interest, computed as per the following formula:—
    1. I = 1% of (T × P)
    2. I = interest;
    3. T = tax on accreted income; and
    4. P = number of months beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid including part thereof.
  7. All the provisions of this Act shall apply for the collection and recovery of income-tax in respect of the amount of tax payable by the specified person, principal officer or trustee and the following persons shall be deemed to be assessee in default:—
    1. the specified person and principal officer or the trustee of such specified person;
    2. the person to whom any asset forming part of the computation of accreted income under sub-section (2) has been transferred, where the tax on accreted income is payable under the cases specified in sub-section (4) (Table: Sl. No. 9).
  8. Subject to the provisions of sub-section (7), the liability of the person referred to in clause (b) of the said sub-section shall be limited to the extent to which the asset received by him is capable of meeting the liability.

Other violations

  1. Where any registered non-profit organisation—
    1. fails to maintain books of account under section 347; or
    2. fails to get books of account audited under section 348; or
    3. fails to furnish its return of income under section 349; or
    4. carrying out advancement of any other object of general public utility, carries out any commercial activity in contravention of the provisions of section 346,
    during any tax year, its regular income for such tax year as reduced by the expenditure referred to in sub-section (3) shall be taxable regular income which shall be chargeable to tax as per the provisions of section 334.
  2. Irrespective of the provisions of section 338, any specified income and residual income of the registered non-profit organisation, which is not included in sub-section (1) shall also be chargeable to tax under the provisions of section 334.
  3. The expenditure referred to in sub-section (1) shall be the expenditure incurred in India (other than capital expenditure) for the objects of the registered non-profit organisation, subject to the fulfilment of the following conditions:—
    1. such expenditure shall be incurred in India;
    2. such expenditure shall be for the objects of the registered non-profit organisation;
    3. such expenditure is not made from the corpus standing to the credit of the registered non-profit organisation as on the end of the tax year immediately preceding the tax year for which income is being computed;
    4. such expenditure is not out of any loan or borrowing;
    5. the claim of depreciation is not in respect of an asset, acquisition of which has been claimed as application of income, in the same or any other tax year;
    6. such expenditure is not in the form of any contribution or donation to any person;
    7. such expenditure is not on account of a payment or aggregate of payments made to a person in contravention to the provisions of section 36(4), (5), (6) and (7); and
    8. such payment is allowable under section 35(b)(i).
  4. For the purposes of this section, no set off or deduction or allowance of any application or expenditure other than those referred to in sub-section (3) shall be allowed.

Application for approval for purpose of section 133(1)(b)(ii)

  1. A registered non-profit organisation or a person referred to in Schedule VII (Table: Sl. No. 1) may, for the purpose of section 133(1)(b)(ii), make an application for approval in such form and manner, as may be prescribed, to the Principal Commissioner or Commissioner, subject to the following conditions:—
    1. it is not expressed to be for the benefit of any particular religious community or caste;
    2. it is established in India for a charitable purpose and does not incur any expenditure of an amount exceeding 5% of its total income during a tax year which is of a religious nature;
    3. the instrument under which it is constituted does not, or the rules governing it do not, contain any provision for the transfer at any time of the whole or any part of its assets for any purpose other than a charitable purpose;
    4. it maintains regular accounts of its receipts and expenditure;
    5. it prepares such statement for such period, as may be prescribed, and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time, as may be prescribed;
    6. it delivers to the said prescribed authority, a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under clause (e) in such form and verified in such manner, as may be prescribed; and
    7. it furnishes a certificate to the donor specifying the amount of donation within such period from the date of receipt of the donation containing the requisite particulars in manner, as may be prescribed.
  2. The application under sub-section (1) shall be made in respect of the cases referred to in column B of the Table below within the time limit provided in column C of the said Table and the Principal Commissioner or Commissioner, on receipt of such application, shall follow the procedure provided in sub-sections (3) and (4), and shall pass an order in writing within the time limit provided in column D and approval, if granted, shall be valid for a period provided in column E of the said Table.
  3. Where an application has been made in any of the cases specified under sub-section (2) (Table: Sl. Nos. 2 to 5), the Principal Commissioner or Commissioner shall call for such documents or information or make such inquiries as he thinks necessary in order to satisfy himself about the genuineness of the activities, and compliance of such requirements of any other law in force, as are material for the purposes of achieving its objects, and—
    1. if he is so satisfied about the objects and the genuineness of the activities and compliance of such requirements of any other law in force, he shall pass an order in writing approving it; or
    2. if he is not so satisfied, after affording a reasonable opportunity of being heard,—
      1. shall pass an order in writing rejecting the application, where the application was made in any of the cases specified in sub-section (2) (Table: Sl. No. 2); and
      2. in any other case, shall pass an order in writing rejecting the application and also cancelling the approval,
      and send a copy of the order to the applicant and the Assessing Officer.
  4. Where an application has been made in any of the cases specified in sub-section (2) (Table: Sl. No. 1), the Principal Commissioner or Commissioner shall pass an order granting provisional approval.

Merger of registered non-profit organisation in certain cases

  1. Where any registered non-profit organisation merges with any other registered non-profit organisation, the provisions of section 352 shall not apply if,—
    1. the other registered non-profit organisation has same or similar objects; and
    2. the said merger fulfils such conditions as may be prescribed.

Interpretation

  1. For the purposes of this Part,—
    1. “anonymous donation” means any voluntary contribution referred to in section 2(49)(c), where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars, as may be prescribed;
    2. “approval” means an approval under the second proviso to section 80G(5) of the Income-tax Act, 1961 (43 of 1961) or section 354;
    3. “cancellation” includes withdrawal;
    4. “donation” means any voluntary contribution received by a registered non-profit organisation from any person;
    5. “commercial activity” means any 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;
    6. “registration” includes provisional registration, provisional approval or approval, as referred to in the second proviso to section 10(23C) or 12AB(1) of the Income-tax Act, 1961 (43 of 1961) and under section 332, but shall not include approval under the second proviso to section 80G(5) of the said Act or section 354;
    7. “registered non-profit organisation” means any person having a valid registration under any specified provision and such registration has not been cancelled;
    8. “related person” means any of the following persons:—
      1. the author or the founder of the registered non-profit organisation;
      2. any person whose total contribution to such registered non-profit organisation, during the relevant tax year exceeds ₹1,00,000, or, in aggregate up to the end of the relevant tax year exceeds ten lakh rupees, as the case may be;
      3. where such author, founder or person is a Hindu undivided family, a member of the family;
      4. any trustee or manager (by whatever name called) of the registered non-profit organisation;
      5. any relative of any persons referred to in sub-clause (i), (iii) or (iv);
      6. any concern in which any of the persons referred to in sub-clause (i), (iii), (iv) or (v) has a substantial interest.
    9. “relative”, in relation to an individual, means—
      1. spouse of the individual;
      2. brother or sister of the individual;
      3. brother or sister of the spouse of the individual;
      4. any lineal ascendant (maternal or paternal) or descendant of the individual;
      5. any lineal ascendant (maternal or paternal) or descendant of the spouse of the individual;
      6. spouse of a person referred to in sub-clause (ii), (iii), (iv) or (v);
      7. any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.
    10. “residual income” means the total income without giving effect to the provisions of this Part, as reduced by regular income and specified income;
    11. “specified asset” means any asset which is established to have been directly acquired by the specified person—
      1. out of its income of the nature referred to in Schedule II (Table: Sl. No. 1);
      2. during the period beginning from the date of its creation or establishment and ending on the date from which the registration under specified provision became effective, if the specified person has not been allowed any benefit under this Part or under sections 11 and 12 or section 10(23C)(iv) or (v) or (vi) or (via) of the Income-tax Act, 1961 (43 of 1961) during the said period, where provisions of the first proviso or the second proviso to section 12A(2) or the eighth proviso to section 10(23C) of the said Act, are not applicable;
      3. during the period beginning from the date of its creation or establishment and ending on the date from which the registration under specified provision became effective due to the provisions of the first proviso or the second proviso to section 12A(2) or the eighth proviso to section 10(23C), where provisions of the first proviso or the second proviso to section 12A(2) or the eighth proviso to section 10(23C), of the Income-tax Act, 1961 (43 of 1961), are applicable; and
      4. which has been transferred to any other specified person within twelve months from the end of the month in which the dissolution takes place in respect of a case specified in section 352(4) (Table: Sl. No. 9).
    12. “specified person” means any person which is registered under any specified provision at any time since its incorporation or creation;
    13. “specified provision” means section 12A, 12AA or 12AB or section 10(23C) of the Income-tax Act, 1961 (43 of 1961) or section 332;
    14. “substantial interest”, in relation to a person in a concern, means—
      1. in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than 20% of the voting power are, at any time during the tax year, owned beneficially by such person or partly by such person and partly by one or more of the other related persons; or
      2. in the case of any other concern, if such person is entitled, or such person and one or more of the other related persons are entitled in the aggregate at any time during the tax year, to not less than 20% of the profits of such concern;
    15. “value” means the value of any benefit or facility granted or provided free of cost or at concessional rate to any related person;
    16. “wholly for charitable or religious purposes” shall mean wholly for charitable purposes or wholly for religious purposes or wholly for charitable and religious purposes.

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