/uploads/files/circular-21-2016.pdf

The document provides clarification regarding the cancellation of registration under section 12AA of the Income-tax Act, 1961 in certain circumstances. It discusses the exemption of income for charitable trusts or institutions under sections 11 and 12 of the Act, and the definition of "charitable purpose" under section 2(15). It also outlines the conditions under which the activities of a trust or institution will be deemed as "charitable" despite involving commercial activities.

Based on the provided circular from the Central Board of Direct Taxes.

 The key points are:
• Sections 11 and 12 of the Income-tax Act, 1961 exempt income of charitable trusts or institutions if the income is applied for charitable purposes and the institution is registered under section 12AA of the Act.
• Section 2(15) of the Act provides the definition of "charitable purpose," including the advancement of any other object of general public utility, provided it does not involve trade, commerce, or business for financial consideration.
• The proviso to section 2(15) sets a threshold for receipts from commercial activities, beyond which the institution may no longer be considered charitable and would not be eligible for tax exemption.
• It is clarified that it is not mandatory to cancel the registration of a charitable institution solely because the specified threshold in the proviso to section 2(15) is exceeded in a particular year, without any change in the nature of the institution's activities.
• The cancellation of registration should be initiated strictly in accordance with section 12AA(3) and 12AA(4) after carefully examining the applicability of these provisions.