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(iii) being the last previous year of the period, for which the income is accumulated or set apart
but not utilised for the purpose for which it is so accumulated or set apart under clause (c);
or
(iv) in which it is credited or paid to any fund or institution or trust or any university or other
educational institution or any hospital or other medical institution under clause (d)].
(3A) Notwithstanding anything contained in sub-section (3), where due to circumstances beyond
the control of the person in receipt of the income, any income invested or deposited in accordance
with the provisions of clause (b) of sub-section (2) cannot be applied for the purpose for which it
was accumulated or set apart, the Assessing Officer may, on an application made to him in this
behalf, allow such person to apply such income for such other charitable or religious purpose in
India as is specified in the application by such person and as is in conformity with the objects of
the trust; and thereupon the provisions of sub-section (3) shall apply as if the purpose specified by
such person in the application under this sub-section were a purpose specified in the notice given
to the Assessing Officer under clause (a) of sub-section (2):
Provided that the Assessing Officer shall not allow application of such income by way of payment
or credit made for the purposes referred to in clause (d) of sub-section (3) of section 11:
Provided further that in case the trust or institution, which has invested or deposited its income in
accordance with the provisions of clause (b) of sub-section (2), is dissolved, the Assessing Officer
may allow application of such income for the purposes referred to in clause (d) of sub-section (3)
in the year in which such trust or institution was dissolved.
(4) For the purposes of this section "property held under trust" includes a business undertaking so
held, and where a claim is made that the income of any such undertaking shall not be included in
the total income of the persons in receipt thereof, the Assessing Officer shall have power to
determine the income of such undertaking in accordance with the provisions of this Act relating to
assessment; and where any income so determined is in excess of the income as shown in the
accounts of the undertaking, such excess shall be deemed to be applied to purposes other than
charitable or religious purposes.
(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in
relation to any income of a trust or an institution, being profits and gains of business, unless the
business is incidental to the attainment of the objectives of the trust or, as the case may be,
institution, and separate books of account are maintained by such trust or institution in respect of
such business.
(5) The forms and modes of investing or depositing the money referred to in clause (b) of sub-
section (2) shall be the following, namely :—
(i) investment in savings certificates as defined in clause (c) of section 2 of the Government
Savings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by
the Central Government under the Small Savings Schemes of that Government;
(ii) deposit in any account with the Post Office Savings Bank;
(iii) deposit in any account with a scheduled bank or a co-operative society engaged in carrying
on the business of banking (including a co-operative land mortgage bank or a co-operative
land development bank).
Explanation.—In this clause, "scheduled bank" means the State Bank of India constituted
under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the
State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank
constituted under section 3 of the Banking Companies (Acquisition and Transfer of
Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a
bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);
(iv) investment in units of the Unit Trust of India established under the Unit Trust of India Act,
1963 (52 of 1963);
(v) investment in any security for money created and issued by the Central Government or a
State Government;
(vi) investment in debentures issued by, or on behalf of, any company or corporation both the
principal whereof and the interest whereon are fully and unconditionally guaranteed by the
Central Government or by a State Government;
(vii) investment or deposit in any public sector company:
Provided that where an investment or deposit in any public sector company has been made
and such public sector company ceases to be a public sector company,—

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11/30/23, 9:41 AM Section wise contents

(A) such investment made in the shares of such company shall be deemed to be an
investment made under this clause for a period of three years from the date on which
such public sector company ceases to be a public sector company;
(B) such other investment or deposit shall be deemed to be an investment or deposit made
under this clause for the period up to the date on which such investment or deposit
becomes repayable by such company;
(viii) deposits with or investment in any bonds issued by a financial corporation which is engaged
in providing long-term finance for industrial development in India and which is eligible for
deduction under clause (viii) of sub-section (1) of section 36;
(ix) deposits with or investment in any bonds issued by a public company formed and registered
in India with the main object of carrying on the business of providing long-term finance for
construction or purchase of houses in India for residential purposes and which is eligible for
deduction under clause (viii) of sub-section (1) of section 36;
(ixa) deposits with or investment in any bonds issued by a public company formed and registered
in India with the main object of carrying on the business of providing long-term finance for
urban infrastructure in India.
Explanation.—For the purposes of this clause,—
(a) "long-term finance" means any loan or advance where the terms under which moneys
are loaned or advanced provide for repayment along with interest thereof during a
period of not less than five years;
(b) "public company" shall have the meaning assigned to it in section 349 of the
Companies Act, 1956 (1 of 1956);
(c) "urban infrastructure" means a project for providing potable water supply, sanitation
and sewerage, drainage, solid waste management, roads, bridges and flyovers or
urban transport;
(x) investment in immovable property.
Explanation.—"Immovable property" does not include any machinery or plant (other than
machinery or plant installed in a building for the convenient occupation of the building) even
though attached to, or permanently fastened to, anything attached to the earth;
(xi) deposits with the Industrial Development Bank of India established under the Industrial
Development Bank of India Act, 1964 (18 of 1964);
(xii) any other form or mode of investment or deposit as may be prescribed.50
(6) In this section where any income is required to be applied or accumulated or set apart for
application, then, for such purposes the income shall be determined without any deduction or
allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has
been claimed as an application of income under this section in the same or any other previous year.
(7) Where a trust or an institution has been granted registration under section 12AA or section
12AB or has obtained registration at any time under section 12A [as it stood before its amendment
by the Finance (No. 2) Act, 1996 (33 of 1996)] and the said registration is in force for any previous
year, then, nothing contained in section 10 [other than clause (1), clause (23C) 51-52[and clause
(46)] thereof] shall operate to exclude any income derived from the property held under trust from
the total income of the person in receipt thereof for that previous year:
Provided that such registration shall become inoperative from the date on which the trust or
institution is approved under clause (23C) of section 10 or is notified 53[under clause (46)] of the
said section, as the case may be, or the date on which this proviso has come into force, whichever
is later:
Provided further that the trust or institution, whose registration has become inoperative under the
first proviso, may apply to get its registration operative under section 12AA or section 12AB
subject to the condition that on doing so, the approval under clause (23C) of section 10 or
notification 53[under clause (46)] of the said section, as the case may be, to such trust or institution
shall cease to have any effect from the date on which the said registration becomes operative and
thereafter, it shall not be entitled to exemption under the respective clauses.
54
[Explanation.—For the purposes of this section, any sum payable by any trust or institution shall
be considered as application of income in the previous year in which such sum is actually paid by
it (irrespective of the previous year in which the liability to pay such sum was incurred by the trust
or institution according to the method of accounting regularly employed by it):
Provided that where during any previous year, any sum has been claimed to have been applied by
the trust or institution, such sum shall not be allowed as application in any subsequent previous
year.]

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