11. Income from property
held for charitable or religious purposes.- (1) Subject
to the provisions of sections 60 to 63, the following income
shall not be included in the total income of the previous
year of the person in receipt of the income—
(a) income derived from property held under trust wholly
for charitable or religious purposes, to the extent to which
such income is applied to such purposes in India; and, where
any such income is accumulated or set apart for application
to such purposes in India, to the extent to which the income
so accumulated or set apart is not in excess of fifteen per
cent of the income from such property;
(b) income derived from property held under trust in part
only for such purposes, the trust having been created before
the commencement of this Act, to the extent to which such
income is applied to such purposes in India; and, where any
such income is finally set apart for application to such purposes
in India, to the extent to which the income so set apart is
not in excess of fifteen per cent of the income from such
property;
(c) income derived from property held under trust—
(i) created on or after the 1st day of April, 1952, for a
charitable purpose which tends to promote international welfare
in which India is interested, to the extent to which such
income is applied to such purposes outside India, and
(ii) for charitable or religious purposes, created before
the 1st day of April, 1952, to the extent to which such income
is applied to such purposes outside India:
Provided that the Board, by general or special order, has
directed in either case that it shall not be included in the
total income of the person in receipt of such income;
(d) income in the form of voluntary contributions made with
a specific direction that they shall form part of the corpus
of the trust or institution.
Explanation.—For the purposes of clauses (a) and (b),—
(1) in computing the fifteen per cent of the income which
may be accumulated or set apart, any such voluntary contributions
as are referred to in section 12 shall be deemed to be part
of the income;
(2) if, in the previous year, the income applied to charitable
or religious purposes in India falls short of eighty-five
per cent of the income derived during that year from property
held under trust, or, as the case may be, held under trust
in part, by any amount—
(i) for the reason that the whole or any part of the income
has not been received during that year, or
(ii) for any other reason, then—
(a) in the case referred to in sub-clause (i), so much of
the income applied to such purposes in India during the previous
year in which the income is received or during the previous
year immediately following as does not exceed the said amount,
and
(b) in the case referred to in sub-clause (ii), so much
of the income applied to such purposes in India during the
previous year immediately following the previous year in which
the income was derived as does not exceed the said amount,
may, at the option of the person in receipt of the income
(such option to be exercised in writing before the expiry
of the time allowed under sub-section (1) of section 139 for
furnishing the return of income) be deemed to be income applied
to such purposes during the previous year in which the income
was derived; and the income so deemed to have been applied
shall not be taken into account in calculating the amount
of income applied to such purposes, in the case referred to
in sub-clause (i), during the previous year in which the income
is received or during the previous year immediately following,
as the case may be, and, in the case referred to in sub-clause
(ii), during the previous year immediately following the previous
year in which the income was derived.
(1A) For the purposes of sub-section (1),—
(a) where a capital asset, being property held under trust
wholly for charitable or religious purposes, is transferred
and the whole or any part of the net consideration is utilised
for acquiring another capital asset to be so held, then, the
capital gain arising from the transfer shall be deemed to
have been applied to charitable or religious purposes to the
extent specified hereunder, namely:—
(i) where the whole of the net consideration is utilised
in acquiring the new capital asset, the whole of such capital
gain ;
(ii) where 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;
(b) where a capital asset, being property held under trust
in part only for such purposes, is transferred and the whole
or any part of the net consideration is utilised for acquiring
another capital asset to be so held, then, the appropriate
fraction of the capital gain arising from the transfer shall
be deemed to have been applied to charitable or religious
purposes to the extent specified hereunder, namely:—
(i) where the whole of the net consideration is utilised
in acquiring the new capital asset, the whole of the appropriate
fraction of such capital gain;
(ii) 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.
Explanation.—In this sub-section,—
(i) “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 purposes;
(ii) “cost of the transferred asset” means the
aggregate of the cost of acquisition (as ascertained for the
purposes of sections 48 and 49) of the capital asset which
is the subject of the transfer and the cost of any improvement
thereto within the meaning assigned to that expression in
sub-clause (b) of clause (1) of section 55;
(iii) “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.
(1B) Where any income in respect of which an option is exercised
under clause (2) of the Explanation to sub-section (1) is
not applied to charitable or religious purposes in India during
the period referred to in sub-clause (a) or, as the case may
be, sub-clause (b), of the said clause, then, such income
shall be deemed to be the income of the person in receipt
thereof—
(a) in the case referred to in sub-clause (i) of the said
clause, of the previous year immediately following the previous
year in which the income was received; or
(b) in the case referred to in sub-clause (ii) of the said
clause, of the previous year immediately following the previous
year in which the income was derived.
(2) Where eighty-five per cent of the income referred to
in clause (a) or clause (b) of sub-section (1) read with the
Explanation to that sub-section is not applied, or is not
deemed to have been applied, to charitable or religious purposes
in India during the previous year but is accumulated or set
apart, either in whole or in part, for application to such
purposes in India, such income so accumulated or set apart
shall not be included in the total income of the previous
year of the person in receipt of the income, provided the
following conditions are complied with, namely:—
(a) such person specifies, by notice in writing given to
the Assessing Officer in the prescribed manner, the purpose
for which the income is being accumulated or set apart and
the period for which the income is to be accumulated or set
apart, which shall in no case exceed ten years;
(b) the money so accumulated or set apart is invested or
deposited in the forms or modes specified in sub-section (5):
Provided that in computing the period of ten years referred
to in clause (a), the period during which the income could
not be applied for the purpose for which it is so accumulated
or set apart, due to an order or injunction of any court,
shall be excluded:
Provided further that in respect of any income accumulated
or set apart on or after the 1st day of April, 2001, the provisions
of this sub-section shall have effect as if for the words
“ten years” at both the places where they occur,
the words “five years” had been substituted.
Explanation.—Any amount credited or paid, out of income
referred to in clause (a) or clause (b) of sub-section (1),
read with the Explanation to that sub-section, which is not
applied, but is accumulated or set apart, to any trust or
institution registered under section 12AA or to any fund or
institution or trust or any university or other educational
institution or any hospital or other medical institution referred
to in sub-clause (iv) or sub-clause (v) or sub-clause (vi)
or sub-clause (via) of clause (23C) of section 10, shall not
be treated as application of income for charitable or religious
purposes, either during the period of accumulation or thereafter.
(3) Any income referred to in sub-section (2) which—
(a) is applied to purposes other than charitable or religious
purposes as aforesaid or ceases to be accumulated or set apart
for application thereto, or
(b) ceases to remain invested or deposited in any of the
forms or modes specified in sub-section (5), or
(c) is not utilised for the purpose for which it is so accumulated
or set apart during the period referred to in clause (a) of
that sub-section or in the year immediately following the
expiry thereof,
(d) is credited or paid to any trust or institution registered
under section 12AA or to any fund or institution or trust
or any university or other educational institution or any
hospital or other medical institution referred to in sub-clause
(iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via)
of clause (23C) of section 10,
shall be deemed to be the income of such person of the previous
year in which it is so applied or ceases to be so accumulated
or set apart or ceases to remain so invested or deposited
or credited or paid or, as the case may be, of the previous
year immediately following the expiry of the period aforesaid.
(3A) Notwithstanding anything contained in sub-section (3),
where due to circumstances beyond the control of the person
in receipt of the income, any income invested or deposited
in accordance with the provisions of clause (b) of sub-section
(2) cannot be applied for the purpose for which it was accumulated
or set apart, the Assessing Officer may, on an application
made to him in this behalf, allow such person to apply such
income for such other charitable or religious purpose in India
as is specified in the application by such person and as is
in conformity with the objects of the trust; and thereupon
the provisions of sub-section (3) shall apply as if the purpose
specified by such person in the application under this sub-section
were a purpose specified in the notice given to the Assessing
Officer under clause (a) of sub-section (2):
Provided that the Assessing Officer shall not allow application
of such income by way of payment or credit made for the purposes
referred to in clause (d) of sub-section (3) of section 11:
Provided further that in case the trust or institution, which
has invested or deposited its income in accordance with the
provisions of clause (b) of sub-section (2), is dissolved,
the Assessing Officer may allow application of such income
for the purposes referred to in clause (d) of sub-section
(3) in the year in which such trust or institution was dissolved.
(4) For the purposes of this section “property held
under trust” includes a business undertaking so held,
and where a claim is made that the income of any such undertaking
shall not be included in the total income of the persons in
receipt thereof, the Assessing Officer shall have power to
determine the income of such undertaking in accordance with
the provisions of this Act relating to assessment; and where
any income so determined is in excess of the income as shown
in the accounts of the undertaking, such excess shall be deemed
to be applied to purposes other than charitable or religious
purposes .
(4A) Sub-section (1) or sub-section (2) or sub-section (3)
or sub-section (3A) shall not apply in relation to any income
of a trust or an institution, being profits and gains of business,
unless the business is incidental to the attainment of the
objectives of the trust or, as the case may be, institution,
and separate books of account are maintained by such trust
or institution in respect of such business.
(5) The forms and modes of investing or depositing the money
referred to in clause (b) of sub-section (2) shall be the
following, namely :—
(i) investment in savings certificates as defined in clause
(c) of section 293 of the Government Savings Certificates
Act, 1959 (46 of 1959), and any other securities or certificates
issued by the Central Government under the Small Savings Schemes
of that Government;
(ii) deposit in any account with the Post Office Savings
Bank;
(iii) deposit in any account with a scheduled bank or a
co-operative society engaged in carrying on the business of
banking (including a co-operative land mortgage bank or a
co-operative land development bank).
Explanation.—In this clause, “scheduled bank”
means the State Bank of India constituted under the State
Bank of India Act, 1955 (23 of 1955), a subsidiary bank as
defined in the State Bank of India (Subsidiary Banks) Act,
1959 (38 of 1959), a corresponding new bank constituted under
section 3 of the Banking Companies (Acquisition and Transfer
of Undertakings) Act, 1970 (5 of 1970), or under section 3
of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1980 (40 of 1980), or any other bank being a bank included
in the Second Schedule to the Reserve Bank of India Act, 1934
(2 of 1934);
(iv) investment in units of the Unit Trust of India established
under the Unit Trust of India Act, 1963 (52 of 1963);
(v) investment in any security for money created and issued
by the Central Government or a State Government;
(vi) investment in debentures issued by, or on behalf of,
any company or corporation both the principal whereof and
the interest whereon are fully and unconditionally guaranteed
by the Central Government or by a State Government;
(vii) investment or deposit in any public sector company:
Provided that where an investment or deposit in any public
sector company has been made and such public sector company
ceases to be a public sector company,—
(A) such investment made in the shares of such company shall
be deemed to be an investment made under this clause for a
period of three years from the date on which such public sector
company ceases to be a public sector company;
(B) such other investment or deposit shall be deemed to
be an investment or deposit made under this clause for the
period up to the date on which such investment or deposit
becomes repayable by such company;
(viii) deposits with or investment in any bonds issued by
a financial corporation which is engaged in providing long-term
finance for industrial development in India and which is eligible
for deduction under clause (viii) of sub-section (1) of section
36;
(ix) deposits with or investment in any bonds issued by a
public company formed and registered in India with the main
object of carrying on the business of providing long-term
finance for construction or purchase of houses in India for
residential purposes and which is eligible for deduction under
clause (viii) of sub-section (1) of section 36;
(ixa) deposits with or investment in any bonds issued by
a public company formed and registered in India with the main
object of carrying on the business of providing long-term
finance for urban infrastructure in India.
Explanation.—For the purposes of this clause,—
(a) “long-term finance” means any loan or advance
where the terms under which moneys are loaned or advanced
provide for repayment along with interest thereof during a
period of not less than five years;
(b) “public company” shall have the meaning
assigned to it in section 3 of the Companies Act, 1956 (1
of 1956);
(c) “urban infrastructure” means a project for
providing potable water supply, sanitation and sewerage, drainage,
solid waste management, roads, bridges and flyovers or urban
transport;
(x) investment in immovable property.
Explanation.—“Immovable property” does not
include any machinery or plant (other than machinery or plant
installed in a building for the convenient occupation of the
building) even though attached to, or permanently fastened
to, anything attached to the earth;
(xi) deposits with the Industrial Development Bank of India
established under the Industrial Development Bank of India
Act, 1964 (18 of 1964);
(xii) any other form or mode of investment or deposit as
may be prescribed.
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