Budget 2011-12 – Definition of "charitable purpose" – Monetary Limit u/s. 2(15) increased to 25 Lakh

Definition of “charitable purpose”

For the purposes of the Income-tax Act, “charitable purpose” has been defined in section 2(15) which, among others, includes “the advancement of any other object of general public utility”. However, “the advancement of any other object of general public utility” is not a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity and receipts from such activities is ten lakh rupees or more in the previous year.

It is proposed to amend section 2(15) to enhance the current monetary limit in respect of receipts from such activities from ten lakhs rupees to twenty-five lakhs rupees.

This amendment is proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 and subsequent years.

Note to above Amendment

Clause 3 of the Bill seeks to amend section 2 of the Income-tax Act relating to definitions.

The existing provisions contained in clause (15) of the aforesaid section defines “charitable purpose” to include relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wild life)and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility.

The first proviso to the aforesaid clause (15) provides that the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.

The second proviso to the said clause provides that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to in the first proviso is ten lakh rupees or less in the previous year.

It is proposed to amend the said second proviso to provide that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to in the first proviso is twenty-five lakh rupees or less in the previous year.

This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-2013 and subsequent years.

Clause 3 As Provided in Finance Act:-

Amendment of section

3. In section 2 of the Income-tax Act, in clause (15), in the second proviso, for the words “ten lakh 30 rupees”, the words “twenty-five lakh rupees” shall be substituted with effect from the 1st day of April, 2012.