c

125. Clarifications regarding Form Nos. 55 and 56 for grant of exemption

The Board have received a number of representations seeking clarifications in respect of various columns of Form No. 56 prescribed for grant of exemption under section 10(23C)(iv) and (v). The clarifications are as under :

Question (a) : Column 10 requires the ‘total income’ of the institution to be furnished.  Will it include the notional income which cannot be applied or invested in the manner laid down in clause (a) of the third proviso to section 10(23C)(iv) and (v ) ?

Answer : ‘Total income’ includes ‘National income’ may be shown separately in column 10 so that when the application of income is to be considered in column 11 of the form, the same can be considered in respect of actual income only and not in respect of notional income.

Question (b) : Column 11 refers to the amount of income ‘deemed to have been utilised’ for the objects of the trust but section 10(23C) does not refer to any deemed utilisation of income.  Does it imply that the provisions of section 11 will be applied while examining the claim for exemption under section 10(23C)(iv) and (v) ?

Answer : No. The term ‘deemed to have been utilised’ has been used to cover income of the type mentioned in Explanation 2 to sub-section (1) and in sub-section (1A) to section 11, so that such income may be excluded for determining compliance with the condition regarding application/accumulation of income to the objects of the trusts/institutions.

Question (c): In columns 16 and 17, information is required in respect of assets purchased from interested persons, or in respect of utilisation or application of income or property of the institution/trust for the benefit of any interested person.  Does it imply that provisions of sections 11 and 13 relating to ‘interested person’ will be applicable to the institutions seeking exemption under section 10(23C)(iv) and (v)?

Answer : In the amended Form No. 56, columns 16 and 17 seek information in respect of transactions contemplated in sub-section (2) and sub-section (3) of section 13 of the Income-tax Act.  This does not imply that the provisions of section 11 and section 13 will be applied. It will only enable the prescribed authority, i.e., DGIT(E), to know broadly that the institution/trust is working genuinely towards its objects.

Question (d) : The information asked for in column 18 is beyond the scope of section 10(23C)(iv) and (v) as the provisions of section 11(3) are not applicable to section 10(23C)(iv) and (v).  Has it not made column 18 redundant?

Answer : The provisions of section 11(3) are not applicable to section 10 (23C)(iv) and (v).  The information is being sought to know that there has been no violation of the conditions mentioned in the third proviso to sub-clause (v) of section 10(23C).

2. The clarifications given above will also apply mutatis mutandis to Form No. 55 for grant of exemption under section 10(23C) of the Income-tax Act, 1961.

Circular : No. 557, dated 19-3-1990.

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