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October 2023

Charitable Trusts Exemption – Application in India or Purposes in India

By Pradip Kapasi | Gautam Nayak | Bhadresh Doshi
Chartered Accountants
Reading Time 21 mins

ISSUE FOR CONSIDERATION

Under the provisions of section 11(1)(a), a charitable or religious trust is entitled to exemption of income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India.

An issue has arisen before the courts as to whether exemption is available for such trusts in cases where income is spent outside India for the benefit of charitable purposes in India. In other words, whether for a valid exemption, the application of income is required to be made in India or it is sufficient that the purpose for which the income is applied is in India in order to be eligible for the benefit of exemption.

While the Delhi High Court has taken the view that the spending or application has to be in India, a contrary view has been taken by the Karnataka High Court, holding that the application has to be for purposes in India.

NATIONAL ASSOCIATION OF SOFTWARE AND SERVICES COMPANIES’ CASE

The issue first came up before the Delhi High Court in the case of DIT(E) vs. National Association of Software and Services Companies 345 ITR 362.

In this case, the assessee, an associat

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