India: “General public utility” tax-exempt charitable institutions cannot undertake any unrelated trade or business

Supreme Court abandoned the “predominant object” test

GPU tax-exempt charitable institutions cannot undertake any unrelated trade or business

The Supreme Court held that a taxpayer claiming tax exemption under the “general public utility” (GPU) category for charitable institutions cannot undertake any trade, commerce, or business, or provide service in relation thereto for any consideration, unless such activities are conducted in the course of achieving the object of the GPU and the aggregate receipts from such activities do not exceed 20% of the taxpayer’s total receipts.

The Supreme Court thus abandoned the “predominant object” test it had previously applied in determining tax-exempt charitable status under the GPU category.

The case is:  ACIT (Exemptions) v. Ahmedabad Urban Development Authority. 

Read a November 2022 report [PDF 455 KB] prepared by the KPMG member firm in India

 

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