Section 11(4) — the law in short
What the courts have decided on section 11(4), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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ACIT v Ahmedabad Urban Development Authority
Supreme CourtCuts both ways
We charge fees for our public utility work. Does that cost us charitable status under s.2(15)?
Only if the fees are pitched above cost. Charging on a cost or nominal mark-up basis is not trade, commerce or business; charges noticeably higher than cost are. Even permissible commercial activity must be carried on in the actual course of achieving the general public utility object, and receipts from it must stay within 20 per cent of total receipts.
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ACIT v Thanthi Trust
Supreme CourtCuts both ways
Our trust runs a business and puts the profit into its objects. Does s.11(4A) still deny the exemption?
No, on this decision. The Supreme Court read the substituted s.11(4A), in force from 1 April 1992, as more beneficial to a trust than the sub-section it replaced, and held that a business whose income is used by the trust to achieve its objectives is a business incidental to the attainment of those objectives. The trust ran a newspaper, applied the income to education and relief of the poor, and kept separate books, and was held entitled to s.11 from assessment year 1992-93 onwards. Read the disposal whole: for the earlier years, decided under s.11(4A) as it stood before that substitution, the exemption for the newspaper income was refused.
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.
