Section 2 (15) of the Income Tax Act 1961 :-
“charitable purpose” includes relief of the poor, education, yoga, {yoga inserted by the Finance Act, 2015, w.e.f. 1-4-2016} medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:
Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year;
Following proviso shall be substituted for the existing first and second provisos to clause (15) of section 2 by the Finance Act, 2015, w.e.f. 1-4-2016 :
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless—
(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and
(ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;
Section 11 of the Income-tax Act deals with exemption to charitable trusts and institutions. The primary condition for grant of exemption to a trust or institution under the said section is that the income derived from property held under trust should be applied for charitable purposes in India.
‘Charitable purpose’ is defined in section 2(15) of the Act. The first proviso to clause (15) of section 2,inter alia, provides that advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.
However, as per the second proviso, this restriction shall not apply if the aggregate value of the receipts from the activities referred above is twenty five lakh rupees or less in the previous year.
The institutions which, as part of genuine charitable activities, undertake activities like publishing books or holding program on yoga or other programs as part of actual carrying out of the objects which are of charitable nature were being put to hardship due to first and second proviso to section 2(15).
The activity of Yoga has been one of the focus areas in the present times and international recognition has also been granted to it by the United Nations. Therefore the provisions of the Income-tax Act have been amended to include ‘yoga’ as a specific category in the definition of charitable purpose on the lines of education.
In order to ensure appropriate balance between the object of preventing business activity in the garb of charity and at the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution, the definition of ‘charitable purpose’ in the Income tax Act has been amended to provide that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless,-
(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and
(ii) the aggregate receipts from such activity or activities, during the previous year, do not exceed twenty percent. of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year .
Applicability: – These amendments take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.
Source ;EXPLANATORY NOTES TO THE PROVISIONS OF THE FINANCE ACT, 2015 issued by CBDT on 27.11.2015, Section 2(15) of the Income Tax Act