Article
Normal and substantial profits – A new yardstick for charitable purpose
By Prachi Bhardwaj & Sanjhi Agarwal
The charitable trusts/institutions enjoy substantial income-tax benefits and hence are often subject to detailed scrutiny to ensure that commercial concerns are kept outside the boundaries of the tax-exempt status. Tracing the evolution of the definition of charitable purpose and its judicial interpretation, the article in this issue of Direct Tax Amicus explains the recent decision of the Supreme Court in the case of Ahmedabad Urban Development Authority. According to the authors, the Apex Court decision has brought a swirl for the General Public Utility (GPU) entities and their tax exemption status, as not only the predominant object test which was applied so far has been discarded, but a new test of nominal consideration/substantial profits has been devised to determine whether the threshold limit would become applicable. The authors also note that there is no set clarity on what constitutes as ‘nominal’ or ‘substantially’ high mark-up. Further, they point out that after the Supreme Court ruling, the GPU entities may to have re-visit the activities carried out by them and the pricing of sums charged in relation to such activities…
Notifications & Circulars
- Interest rates increased in schemes formulated to channelise savings from general public
- Public Investment fund is ‘specified person’ for purposes of Section 10(23FE)
- Federation Internationale de Football Association notified as ‘person’ under Section 10(39)
Ratio decidendi
- TDS deductible on Supplementary Commission, paid to the travel agents, under Section 194H which also recognizes indirect payments – Supreme Court
- Issuance of fresh show cause under Section 148, after change in incumbent AO, would not lead to dropping of previous show cause notice issued by previous AO – Supreme Court
- Section 80-IB deduction not available to manufacturer of ‘polyurethane foam’ even if foam subsequently used in making automobile seats – Supreme Court
- Pendency of assessee’s case in MAP resolution proceedings not entitles waiver of interest arising under Section 220(2) – Supreme Court
