134. Where donations in kind are not in form of jewellery, furniture or any other notified article
Circular No. 580 was issued by the Central Board of Direct Taxes on 14 September 1990. Its subject is 134. Where donations in kind are not in form of jewellery, furniture or any other notified article.
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.
Holds that donations in kind used for a fund's or institution's objects count as application of income under section 10(23C), even where the article is not one the Board has notified. The third proviso to section 10(23C) requires the fund, trust or institution to apply or accumulate its income wholly and exclusively for its objects and not to invest or deposit its funds otherwise than in the section 11(5) modes, voluntary contributions received and kept in the form of jewellery, furniture or other notified articles being excepted. Where hospitals, creches, orphanages and schools receive books, clothes for the poor, grains, drugs, hospital equipment and the like and use them as such, the Board clarifies that those donations are income within section 2(24), and their use towards the objects is application of income within clause (a) of the third proviso, so exemption follows if the other conditions of section 10(23C)(iv) are met.
References from trusts and institutions raised a doubt whether exemption survived where donations in kind were not in the form of jewellery, furniture or other articles notified by the Board.
134. Where donations in kind are not in form of jewellery, furniture or any other notified article
1. Under section 10(23C)(iv) and (v) of the Income-tax Act, income received by certain charitable and religious funds, trusts and institutions is exempt from tax if the conditions specified for this purpose are satisfied. One such condition, as laid down in the third proviso to section 10(23C), is that the fund, trust or institution applies its income, or accumulates it for application, wholly and exclusively to the object for which it is established and it does not invest or deposit its funds (other than voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette specify) for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 of the Income-tax Act.
2. References have been received from various trusts and institutions pointing out that certain funds, trusts and institutions running hospitals, creches, orphanages, schools, etc., and enjoying exemption under section 10(23C)(iv) or (v), of the Income-tax Act, often receive donations in kind from various sources for application towards their charitable purposes. These contributions may be in the shape of books, clothes for the poor, grains to feed the poor, drugs, hospital equipment, etc. It has been pointed out that all these are used as such for the purposes of the fund, trust or institution.
3. A doubt has, however, been raised as to whether the fund, trust or institution would be eligible for the tax exemption under section 10(23C)(iv ) or (v ) of the Act even if the donations-in-kind are not in the form of jewellery, furniture or any other article notified by the Board for the purposes of these provisions.
4. Since the donations-in-kind, of the nature referred to above, received by a fund, trust or institution, would be income within the meaning of section 2(24) of the Income-tax Act, it is clarified that use of these towards objects for which the fund, trust or institution is established would be regarded as application of income of the fund, trust or institution within the meaning of clause (a) of the third proviso to section 10(23C). Accordingly, the fund, trust or institution would be eligible for the tax exemption if the other conditions specified in section 10 (23C)(iv) of the Income-tax Act are satisfied.
Circular : No. 580, dated 14-9-1990.
In an assessment of an approved fund or institution where donations in kind were treated as unapplied income, and in a renewal or approval enquiry into compliance with the provisos.
Source: the Income Tax Department’s own published text — its page for this instrument.
