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The Supreme Court has pronounced a significant judgment on the scope of exemption for charitable purposes under Section 2(15) of the Income Tax Act 1961 in relation to statutory authorities and professional bodies. One among the appeals related to the Institute of Chartered Accountants of India (
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FAQ :
Yes, statutory bodies like the ICAI can claim income tax exemption if the amounts they charge are nominal and used to cover their costs.
The revenue department disputed the ICAI's tax exemption, while the ICAI argued that its activities were not profit-oriented and that collected fees were used for infrastructure development and capital expenditure.
The Supreme Court held that bodies created by statute to regulate professions, prescribe compulsory courses, and monitor members do not automatically carry on business or commercial activities.
Income may be considered commercial if the body charges fees significantly higher than costs (with more than a nominal mark-up) or provides services like registration or coaching at markedly higher prices.
If receipts are deemed commercial, the regulatory body must comply with the quantitative limits prescribed in the proviso to Section 2(15) of the Income Tax Act to be considered for 'charitable purpose' exemption.
Yes, the ruling also applies to statutory bodies that certify products based on qualification standards, treating them similarly to professional regulatory bodies.
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