Section 341 — Application of income

(1) The following sums shall be allowed as application of income to a
registered non-profit organisation:—
( a) any sum, other than the sum referred to in clause (b), applied by it for
charitable or religious purpose in India for which it is registered where
such sum is paid during the tax year provided that the provisions of
section 35(b)(i) and section 36(4), (5), (6) and (7) shall apply in respect
of such sum; and
( b) 85% of the sum paid by way of donation made to any other registered
non-profit organisation.
(2) The application of income under sub-section (1) shall include the following:—
( a) the amount invested or deposited back during the tax year, in the modes
permitted under section 350 maintained specifically for such corpus, if—
( i) such investment or depositing back is made within five years from
the end of the tax year in which such application of income was
made from the corpus; and
( ii) the application of income from the corpus is made after the 31st
March, 2021 and there was no violation of any provision of this
Part, or any corresponding provision of the Income-tax Act, 1961
(43 of 1961) with respect to such application;
( b) the amount repaid, during the tax year, towards any loan or borrowing
where,—
( i) such repayment is within five years from the end of the tax year
in which such application of income was made from the loan or
borrowing; and
( ii) the application of income from the loan or borrowing is made after
the 31st March, 2021 and there was no violation of any provision
of this Part, or any corresponding provision of the Income-tax Act,
1961 (43 of 1961) with respect to such application.
(3) The following claims shall not be allowed as application of income under
sub-sections (1) and (2):—
( a) the deduction or allowance by way of depreciation or otherwise claimed
in respect of an asset acquisition of which has been claimed as an ap -
plication of income in the same or any other tax year under this Part or
under any corresponding provision of the Income-tax Act, 1961 (43 of
1961); or
( b) a claim of set off or deduction or allowance of any excess application of
any of the years preceding the tax year; or
( c) any sum paid as a corpus donation to any other registered non-profit
organisation.
(4) An application from corpus, loan or borrowing, accumulated income, specified
income or deemed accumulated income shall not be considered as application for
the purpose of sub-sections (1) and (2).
(5) Where, in a tax year, the regular income applied by a registered non-profit
organisation towards charitable or religious purposes in India, as per the provisions
of sub-sections (1) to (4), is less than 85% of regular income, the shortfall, or any
part thereof, at the option of the registered non-profit organisation, may be treated
as deemed application.
(6) Any deemed application under sub-section (5) shall be applied by the registered
non-profit organisation for its objects in India,—
( a) during the tax year in which the income is received or in the tax year
immediately succeeding such tax year, where such shortfall is for the
reason that the whole or any part of the income has not been received
during that tax year;
( b) in the tax year immediately succeeding the tax year in which the income
was derived, where such shortfall is for any other reason.
(7) The option under sub-section (5) shall be exercised on or before the due date
specified in section 263(1) for furnishing the return of income for such tax year, in
such form and manner, as may be prescribed.
(8) The application of income under sub-section (1) shall include deemed applica-
tion under sub-section (5).
(9) Following income from capital gains shall be deemed as application of income—
( a) the capital gain from transfer of a capital asset, being property held un-
der trust wholly for charitable or religious purposes, where the whole or
any part of the net consideration is utilised for acquiring another capital
asset to be so held,—
( i) if the whole of the net consideration is utilised in acquiring the new
capital asset, the whole of such capital gain;
( ii) if only a part of the net consideration is utilised for acquiring the
new capital asset, so much of such capital gain as is equal to the
amount, if any, by which the amount so utilised exceeds the cost
of the transferred asset;
( b) the appropriate fraction of the capital gain arising from the transfer of
a capital asset, being property held under trust in part for charitable or
religious purposes, where the whole or any part of the net consideration
is utilised for acquiring another capital asset to be so held,—
( i) if the cost of acquisition of the new capital asset acquired is not less
than the net consideration in respect of the capital asset transferred,
the whole of appropriate fraction of such capital gain;
( ii) in any other case, so much of the appropriate fraction of the capital
gain as is equal to the amount, if any, by which the appropriate
fraction of the amount utilised for acquiring the new asset exceeds
the appropriate fraction of the cost of the transferred asset.
(10) For the purposes of sub-section (9),—
( a) “appropriate fraction” means the fraction which represents the extent to
which the income derived from the capital asset transferred was imme-
diately before such transfer applicable to charitable or religious purpose;
( b) “cost of transferred asset” means the aggregate of the cost of acquisition
(as ascertained for the purposes of sections 72 and 73) of the capital
asset which is subject of the transfer and the cost of any improvement
thereto within the meaning assigned to that expression in section
90(1)(b);
( c) “net consideration” means the full value of the consideration received
or accruing as a result of the transfer of the capital asset as reduced by
any expenditure incurred wholly and exclusively in connection with such
transfer.