Section 13(1)(bb) — the law in short
What the courts have decided on section 13(1)(bb), 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 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.
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Addl CIT v Surat Art Silk Cloth Manufacturers Association
Supreme CourtHelps taxpayerSuperseded by amendment
Our trade association promotes commerce in our industry, but the work it does throws up a surplus every year. Does the surplus stop it being charitable?
No, not by itself. A five-judge Bench of the Supreme Court held that the test is whether the predominant object of the activity carried on in advancing an object of general public utility is to subserve the charitable purpose or to earn profit. Profit-making must be the end to which the activity is directed; it is not enough that the activity in fact results in profit. Where the dominant object is the charitable purpose, the character of the purpose is not lost merely because some profit arises. The exclusionary clause does not require the activity to be run so that it yields no surplus.
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.