125. Clarifications regarding Form Nos. 55 and 56 for grant of exemption
Circular No. 557 was issued by the Central Board of Direct Taxes on 19 March 1990. Its subject is 125. Clarifications regarding Form Nos. 55 and 56 for grant of exemption.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Answers four questions on how Form No. 56, the application for exemption under section 10(23C)(iv) and (v), is to be filled, and applies the same answers to Form No. 55. On column 10, total income takes in notional income, but the notional part may be shown separately so that when application of income is examined in column 11 only the actual income is looked at. On column 11, the words 'deemed to have been utilised' do not import section 11 into section 10(23C); they are used to cover income of the kind dealt with in Explanation 2 to section 11(1) and in section 11(1A), so that such income can be left out in judging compliance with the condition on application or accumulation. On columns 16 and 17, the information called for is about transactions of the kind in section 13(2) and section 13(3), and asking for it does not mean sections 11 and 13 will be applied; it lets the prescribed authority, the Director General of Income-tax (Exemptions), see broadly that the institution is genuinely working towards its objects. On column 18, section 11(3) indeed does not apply to section 10(23C)(iv) and (v), but the column is not redundant, the information being sought to see that the conditions in the third proviso to section 10(23C)(v) have not been violated.
A number of representations had been received seeking clarification on various columns of the form prescribed for the exemption.
125. Clarifications regarding Form Nos. 55 and 56 for grant of exemption
The Board have received a number of representations seeking clarifications in respect of various columns of Form No. 56 prescribed for grant of exemption under section 10(23C)(iv) and (v). The clarifications are as under :
Question (a) : Column 10 requires the ‘total income’ of the institution to be furnished. Will it include the notional income which cannot be applied or invested in the manner laid down in clause (a) of the third proviso to section 10(23C)(iv) and (v ) ?
Answer : ‘Total income’ includes ‘National income’ may be shown separately in column 10 so that when the application of income is to be considered in column 11 of the form, the same can be considered in respect of actual income only and not in respect of notional income.
Question (b) : Column 11 refers to the amount of income ‘deemed to have been utilised’ for the objects of the trust but section 10(23C) does not refer to any deemed utilisation of income. Does it imply that the provisions of section 11 will be applied while examining the claim for exemption under section 10(23C)(iv) and (v) ?
Answer : No. The term ‘deemed to have been utilised’ has been used to cover income of the type mentioned in Explanation 2 to sub-section (1) and in sub-section (1A) to section 11, so that such income may be excluded for determining compliance with the condition regarding application/accumulation of income to the objects of the trusts/institutions.
Question (c): In columns 16 and 17, information is required in respect of assets purchased from interested persons, or in respect of utilisation or application of income or property of the institution/trust for the benefit of any interested person. Does it imply that provisions of sections 11 and 13 relating to ‘interested person’ will be applicable to the institutions seeking exemption under section 10(23C)(iv) and (v)?
Answer : In the amended Form No. 56, columns 16 and 17 seek information in respect of transactions contemplated in sub-section (2) and sub-section (3) of section 13 of the Income-tax Act. This does not imply that the provisions of section 11 and section 13 will be applied. It will only enable the prescribed authority, i.e., DGIT(E), to know broadly that the institution/trust is working genuinely towards its objects.
Question (d) : The information asked for in column 18 is beyond the scope of section 10(23C)(iv) and (v) as the provisions of section 11(3) are not applicable to section 10(23C)(iv) and (v). Has it not made column 18 redundant?
Answer : The provisions of section 11(3) are not applicable to section 10 (23C)(iv) and (v). The information is being sought to know that there has been no violation of the conditions mentioned in the third proviso to sub-clause (v) of section 10(23C).
2. The clarifications given above will also apply mutatis mutandis to Form No. 55 for grant of exemption under section 10(23C) of the Income-tax Act, 1961.
Circular : No. 557, dated 19-3-1990.
When an application for approval under section 10(23C) is returned for incomplete columns, or when the exemption is questioned on the strength of what those columns disclose.
Forms it names. Form No. 55, Form No. 56
Source: the Income Tax Department’s own published text — its page for this instrument.