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Navigating the exemption labyrinth – Pitfalls in the way of charitable institutes
By Tanmay Bhatnagar
The article in this issue of Direct Tax Amicus discusses the labyrinth of exemption available to charitable institutes under the Income Tax Act, 1961. Considering the changing landscape of the exemption regime, right from Finance Act, 2014 till the recent Finance Act, 2023, the article notes that the provisions relating to the exemption regimes under Sections 10(23C) and 11 of the Income Tax Act have undergone a multitude of wide-ranging changes having an impact on nearly every aspect associated with the operation of educational and medical institutes, resulting in a situation where a mere procedural lapse can have far reaching consequences. Analysing various procedural lapses, the article notes that any charitable entity which even inadvertently commits any lapse would potentially face a heavy tax burden. According to the author, not only would such a charitable entity have to pay tax on its accreted income, but it would also be barred from making a fresh application in the future for claiming exemption under either Section 10(23C) or Section 11. The author though notes that the benefit of a substantive provision of law should not be denied due to a mere procedural lapse, according to him, considering the express intention behind the amendments vide the Finance Act, 2023 and other changes, it would be interesting to see how the income-tax department deals with the situation.
Notifications & Circulars
Timeline extension of relaxation for electronic filing of Form 10F
Tax deduction at source on salary payments by an employer under the new tax regime clarified
No-deduction certificate under Section 195(3) – Procedure, format, and standards for filling an application therefor specified
Manner for making PAN inoperative and the resulting consequences, prescribed
Ratio decidendi
Consideration for sub-licensing ‘sponsorship rights’ cannot be considered ‘royalty’ under the India-Malaysia DTAA – ITAT Mumbai
Limitation of Benefits (LoB) clause of the DTAA cannot be invoked when the non-resident has an active business role – ITAT Mumbai
Prospective operation of Supreme Court decision in New Noble Education is only with respect to interpretation of term ‘solely’ under Section 10(23C) and not ‘education’ – ITAT Ahmedabad
CBDT Circular No. 3/2022 dated 3 February 2022, requiring sperate notification for applicability of MFN clause, cannot be applied retrospectively – ITAT Mumbai
Pending scrutiny assessment, not a valid ground for withholding refund under Section 241A – Delhi High Court
Reassessment notice in the name of a non-existent entity pursuant to amalgamation is void even if it pertains to a transaction of a period prior to such amalgamation – Bombay High Court
