Section 11(1)(a)

Section 11(1)(a) — the law in short

What the courts have decided on section 11(1)(a), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Rajasthan and Gujarati Charitable Foundation Supreme CourtHelps taxpayerSuperseded by amendment
  We treated a building's full cost as application of income. Can we also claim depreciation on it?
  Yes on the law as it stood, but read the editor's note before using this for a current year. The Court held that treating the whole acquisition cost as application under s.11(1)(a) does not bar a s.32 depreciation claim on the same asset, rejected the double benefit objection, and allowed the depreciation to be carried forward.
• S.Rm.M.Ct.M. Tiruppani Trust v CIT Supreme CourtHelps taxpayer
  My trust filed Form 10 to accumulate income but then spent the money on a hospital building instead of buying government securities. Have I lost the exemption altogether?
  No. The Supreme Court held that a trust which fails the conditions of section 11(2) still keeps the whole of the exemption section 11(1)(a) gives it. Income actually applied to charitable purposes in India is exempt whether or not a declaration was filed, and buying a building to be used as a hospital is such an application. On top of that the trust may accumulate up to 25 per cent of its total income - the limit then in force - and claim exemption on that accumulation without investing it in government securities. Section 11(2) only lifts the ceiling; it does not cut down section 11(1).
• Ahmedabad Rana Caste Association v CIT Supreme CourtHelps taxpayer
  Our trust benefits one caste. Can that be a charitable purpose at all?
  Yes. It is not necessary that the object benefit the whole of mankind or all persons in a country; it is enough that a section of the public, as distinguished from specified individuals, is intended to be benefited. The Supreme Court held that the members of the Rana caste of Ahmedabad — whether natives or admitted to the caste under custom or usage — are united by a quality that is impersonal, so they form a section of the public and the trust's objects were charitable.
• Rashtrotthana Sahitya and Mudrana Trust v ITO (Exemptions) Ward 2, Bangalore ITATHelps taxpayerValidity unconfirmed
  From AY 2022-23 my spending out of a bank loan is not application, and I claim it when I repay. The officer says that is a double deduction. How do I prove it is not?
  By showing that you reduced the application of income in the year you took the loan by the amount borrowed, and claimed nothing then. On that evidence the Bangalore Tribunal deleted the disallowance of Rs.1,63,86,245 of loan repayment: the trust had claimed application only on repayment and not when the borrowed funds were spent, so there was no double deduction, and the lower authorities had ignored the computations and accounts filed and proceeded on a presumption.
• Saguna Rural Foundation v Exemption Ward 2(3), Mumbai ITATHelps taxpayerValidity unconfirmed
  CPC denied my s.11(2) accumulation because Form 10 was filed after the s.139(1) due date, and the CIT(A) said s.13(9) settles it. Can the Tribunal still help me?
  Yes. Following the jurisdictional High Court in CIT v Sakal Relief Fund, the Mumbai Tribunal held that filing Form No. 10 before completion of assessment satisfies s.11(2), so a s.143(1) denial founded only on the s.139(1) due date cannot stand. The matter was restored to the Assessing Officer for the limited purpose of checking that the stated purpose of accumulation matches the objects and is backed by a trustees' resolution, with an express direction not to deny exemption on merely technical grounds.
• JITO Incubation and Innovation Foundation v CIT (Exemption), Mumbai ITATHelps taxpayerValidity unconfirmed
  The CIT(E) refused my Form 10AB because the memorandum says the objects may be carried out in India 'and elsewhere'. Is a possible application of funds outside India a ground to refuse registration?
  No. What the Commissioner has to satisfy himself about at the registration stage under s.12AB(1)(b) is the objects of the trust, the genuineness of its activities and compliance with other laws material to achieving its objects. Whether income has actually been applied within or outside India is a question that arises only when exemption under s.11 is claimed, and refusing registration on that ground is premature.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.