Under section 10(23C)(iiiad) and (iiiae) of Income-tax Act, it is provided that the income of University/Educational institutions/hospitals/other institutions specified therein will be exempt provided they comply with the conditions stipulated therein. Also, it is provided that “aggregate annual receipts” of such institutions shall not exceed the amount of annual receipts as may be prescribed. Though annual receipts have been prescribed as Rs.1 crore vide Rule 2BC of Income-tax Rules, the word “annual receipts” have not been defined in the Income-tax Act.
It is not clear as to whether:

(a) for computing “annual receipts” only the receipts of such institutions from educational / hospital activities alone are to be considered each year;

(b) Certain receipts of such institutions that are not received on annual basis e.g. receipts from sale of property, equity shares and other proceeds on divestment are to be excluded from the computation of “annual receipts”;

(c) In certain cases where such charitable institutions receive donations in kind in the form of land, movable assets etc. whether “annual receipts” would exclude such receipts since they are not received annually.


It is suggested that “Annual Receipts” be clearly defined as income of the hospitals / educational institutions arising regularly/every year but excluding value of donation received in kind by way movable assets, land, hospitals/educational equipment, sale consideration received on disposal of land, shares or other movable property, hospital/educational equipment etc.

Further, it may be specifically provided that donations received towards corpus by way of land, movable assets are excluded from computation of “Annual Receipts” as prescribed under Rule 2BC of Income-tax Rules.


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