A not-for-profit trust, engaged in philanthropic activities, operates both an educational institution and a hospital. During P.Y. 2024-25, the trust…

CA Final · Direct Tax Laws and International Taxation · MTP · May 2025
A not-for-profit trust, engaged in philanthropic activities, operates both an educational institution and a hospital. During P.Y. 2024-25, the trust recorded annual receipts of 4.5 crores from its educational institution and - 4.5 crores from its hospital. The trust seeks to claim exemption separately under section 10(23C)(iiiad) for the educational institution and section 10(23C)(iiiae) for the hospital, on the basis that the receipts for each entity individually do not exceed 5 crores, the threshold specified for exemption under the respective provisions. Can it do so? Examine.

Suggested Answer and Working Notes:

As per Explanation below to section 10(23C)(iiiae), it has been clarified that the limit of annual receipts of 5crore is qua ‘taxpayer' and not qua 'activity'. Therefore, if the aggregate annual receipts from educational activity and medical activity exceeds 5crores, then exemption under sub-clause (iiiad) and (iiiae) cannot be availed. Since, in the present case, the aggregate annual receipt of 9crores (₹ 4.5 crores of educational institution and - 4.5 crores from hospital) exceeds the threshold of 5crores, exemption under section 10(23C)(iiiad) and (iiiae) cannot be availed, even though the individual receipts have not exceeded 5crores.

Topics: Assessment of Trusts and Institutions, Political Parties and Other Special Entities

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