Mandatory application of income by charitable trusts/ institutions under section 10(23C)

Issue/Justification

Application of income is mandatory by charitable trusts/institutions including those enjoying benefits under section 10(23C) to its objects, subject to accumulation of not more than 15% of its income including income from voluntary contributions. Similar provisions under section 11(1) read with section 12(1) exclude ‘corpus donations’ (voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution) from the mandatory requirement of application of the income. No such provision has been made in section 10(23C). This will compel the Institutions coming within the scope of section 10(23C) to apply even their corpus donations to the day today activities for getting the exemption. This will be prejudicial to them because they cannot build up the corpus fund.

Suggestion

Section 10(23C) should be amended to specifically exclude ‘corpus donations’ from the requirement of mandatory application of income by such trusts / institutions.

(SUGGESTIONS FOR RATIONALIZATION OF THE PROVISIONS OF DIRECT TAX LAWS)

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax

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