Tax Exemption Under Section 10(23C)
Most
NGOs in India claim exemption u/s 11 by registering u/s 12AA of the Income tax
Act 1961. However, a few also claim tax exemption under the relatively less
known Section 10(23C). Three questions are frequently asked:
NGOs in India claim exemption u/s 11 by registering u/s 12AA of the Income tax
Act 1961. However, a few also claim tax exemption under the relatively less
known Section 10(23C). Three questions are frequently asked:
Q. 1. What is the benefit of registration u/s 10(23C)
over registration u/s 12AA?
over registration u/s 12AA?
A. 1. Earlier there were several benefits that
organisations registered u/s 10(23C)(iv) & (v) enjoyed, including no
requirement to file tax returns, no requirement to spend 85% of the income on
objects, etc. However, with various amendments over the last 16 years,
compliance for an organization registered u/s 10(23C) (iv) & (v) is now
more or less on par with one resisted u/s 12AA
organisations registered u/s 10(23C)(iv) & (v) enjoyed, including no
requirement to file tax returns, no requirement to spend 85% of the income on
objects, etc. However, with various amendments over the last 16 years,
compliance for an organization registered u/s 10(23C) (iv) & (v) is now
more or less on par with one resisted u/s 12AA
Q. 2. Can every NGO register u/s 10(23C) (iv) & (v)?
A. 2. Broadly speaking exemption u/s 10(23C) (iv)
& (v) can be availed by universities, educational institutions, hospitals
and medical institutions.
& (v) can be availed by universities, educational institutions, hospitals
and medical institutions.
Q. 3) Can an NGO be registered under both?
A. 3. Yes. An institution registered under
10(23C) (iv) & (v) may also be registered u/s 12AA and the vice versa.
10(23C) (iv) & (v) may also be registered u/s 12AA and the vice versa.
Application Process
Application
in the prescribed form No 56 should be submitted to the Director General
(Income tax – Exemptions), through the commissioner of income tax, having
jurisdiction over the trust or institution.
in the prescribed form No 56 should be submitted to the Director General
(Income tax – Exemptions), through the commissioner of income tax, having
jurisdiction over the trust or institution.
Sections
11 & 10(23C) are mutually exclusive
11 & 10(23C) are mutually exclusive
Exemption u/s 10(23C) (iv) or (v) can
be obtained by a charitable institution, in addition to the exemption granted
u/s 11 which also deals generally with charitable or religious activities.
be obtained by a charitable institution, in addition to the exemption granted
u/s 11 which also deals generally with charitable or religious activities.
Notably
Section 10(23C) does not prescribe any stipulation which makes registration u/s
12AA a mandatory condition. The provisions of section 11 and 10(23C) are two
parallel regimes and operate independently in their respective realms.
Section 10(23C) does not prescribe any stipulation which makes registration u/s
12AA a mandatory condition. The provisions of section 11 and 10(23C) are two
parallel regimes and operate independently in their respective realms.
Relevant Case laws
·
In Commissioner Of Income tax
Vs. Mahasabha Gurukul Vidyapeeth Haryana (2010) 326 ITR 25 (Pun), it was held
that Exemption u/s 11 was allowable to the assessee Society running an
educational institution which was registered u/s 12A, once it is held that all
requisite conditions for exemption u/s 11 have been met, even if conditions u/s 10(23C)(vi) have not been complied with, there
will be no bar to seek exemption u/s 11.
Conversely, while claiming the exemption u/s 10(23) (vi), it is not
required to fulfill the conditions mentioned u/s 11 as also exemption u/s
10(23)(vi). Exemption u/s 10(23)(vi) can
be claimed by the assessee without applying for registration us 12A.
In Commissioner Of Income tax
Vs. Mahasabha Gurukul Vidyapeeth Haryana (2010) 326 ITR 25 (Pun), it was held
that Exemption u/s 11 was allowable to the assessee Society running an
educational institution which was registered u/s 12A, once it is held that all
requisite conditions for exemption u/s 11 have been met, even if conditions u/s 10(23C)(vi) have not been complied with, there
will be no bar to seek exemption u/s 11.
Conversely, while claiming the exemption u/s 10(23) (vi), it is not
required to fulfill the conditions mentioned u/s 11 as also exemption u/s
10(23)(vi). Exemption u/s 10(23)(vi) can
be claimed by the assessee without applying for registration us 12A.
·
In the case of Commissioner of
Income tax Vs. Jeevan Deep Charitable Trust (2014) 361 ITR 0143 (All) the
assessee was registered u/s. 12A as being a charitable institution. However,
its claim for exemption u/s. 10(23C)(vi) was rejected on the ground that the
institution was not solely established for the educational purposes. Relying on
the same, assessee’s registration u/s. 12A was cancelled by CIT. The High Court held that exemption u/s.
10(23C)(vi) can be claimed by an assessee without applying for registration
u/s. 12A as it is not required to fulfill the conditions mentioned u/s. 11 and
hence the registration u/s 12A was restored.
In the case of Commissioner of
Income tax Vs. Jeevan Deep Charitable Trust (2014) 361 ITR 0143 (All) the
assessee was registered u/s. 12A as being a charitable institution. However,
its claim for exemption u/s. 10(23C)(vi) was rejected on the ground that the
institution was not solely established for the educational purposes. Relying on
the same, assessee’s registration u/s. 12A was cancelled by CIT. The High Court held that exemption u/s.
10(23C)(vi) can be claimed by an assessee without applying for registration
u/s. 12A as it is not required to fulfill the conditions mentioned u/s. 11 and
hence the registration u/s 12A was restored.
To
know more about CAP’s legal advisory write to – connect@capindia.in
know more about CAP’s legal advisory write to – connect@capindia.in
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Income tax exemptions