Entities involved in trade would cease to be a charitable institution: SC

This judgement could have wide ramifications as the charitable institutions involved in any trade or commerce in the name of said provision could come under its radar

Any entity or institution involved in any trade or commerce under the guise of ‘general public utility’ will cease to be a ‘charitable institution’ and therefore, cannot claim tax exemption under the Income-Tax (I-T) Act, the Supreme Court (SC) ruled on Wednesday.

Two key issues were heard by the apex court.

One, scope of the expression ‘general public utility’ (deals with benefit to a section of the public) for claiming tax exemption as ‘charitable institution’.

Two, scope of exemption to educational institutions claiming tax exemption as ‘charitable institution’.

The expression ‘charitable purpose’ has been defined under certain clauses which include