In order to have a charity, you must have a source of income

ICAI won the Income Tax Exemption Case in the High Court – Scope of the term “Charitable Purpose” defined by the High Court – In order to have a charity, you must have a source of income – Section 10(23C)(iv) September 2, 2009.

Director General of Income Tax (Exemption) has denied the exemption to Institute of Chartered Accountants of India (ICAI) under Section 10(23C)(iv) of the Income Tax Act, 1961 on the basis of following allegation:

“During the financial year 2003-04, 2004-05, 2005-06 and 2006-07, the Petitioner Foundation has mainly done contract work, for which it has received certain payments. These activities are basically the jobs done for third parties, for consideration received. Therefore, the Petitioner Foundation is providing professional services on regular basis, which amounts to doing business of providing professional services. Since professional services is a commercial activity, it cannot be taken as a ‘charitable activity’.”

While allowing the exemption u/s 10(23C)(iv) and issuing writ of direction/mandamus, honorable High Court of Delhi has observed the followings:

1. There is not even an iota of doubt that the Petitioner Foundation is involved in education and, thus, meets the description of „charitable institution.

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