1. Eligible projects / Schemes: “Eligible project or scheme” means such project or scheme for promoting the social and economic welfare of, or the upliftment of, the public as the Central Govt. may, by notification in the official gazette, specify in this behalf on the recommendations of the National Committee.
2. National Committee: “National Committee” means the committee constituted by the Central Govt., from amongst persons of eminence in public life.
3. Eligible Expenditure:
- For all assesses: Payment to a public sector company, Local authority, approved association or institution, for carrying out approved eligible project. Certificate in Form no. 58A from the entity in respect of contributions made should be furnished.
- For Companies only: In respect of direct expenditure incurred on eligible project or scheme, Chartered Accountant’s Certificate in Form no. 58B should be furnished.
4. Amount of deduction: Actual payment or actual expenditure incurred.
5. No deduction: No deduction will be available under any other section in respect of expenditure incurred under this section.
6. Withdrawal of Exemption:
- Circumstances for withdrawal of exemption: The approving authority (National Committee) after giving reasonable opportunity for showing cause to the concerned association or institution or public sector company, local authority or association, as the case may be, withdraw the approval under the following circumstances-
- Where the National Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted or the project or scheme was notified, or
- The association or institution has failed to furnish a report in such form setting forth such particulars and within such time as may be prescribed.
- Forwarding proposal for withdrawal: The approving authority (National Committee) should forward the proposed withdrawal to the assessing officer having jurisdiction over the concerned association or institution or Public Sector Company or local authority.
7. Consequences of withdrawal of approval to eligible project or scheme:
- In case payment to a public sector company, Local authority, approved association or institution, the amount received shall be taxed in the hands of recipient as income of the previous year in which such withdrawal takes place.
- In case of expenditure incurred by a company, it shall be deemed as its income for the previous year in which such withdrawal takes place.
- Rate of Tax: Such income shall be taxed at the maximum marginal rate applicable for that year.
8. Subsequent withdrawal of approval: An assessee will not be denied his rightful deduction in respect of any sum paid to a Public Sector Company or local authority or association etc., merely on ground that-
- Approval granted to association or institution has been subsequently withdrawn, or
- Notification notifying eligible project or scheme carried out by Public Sector Company has been subsequently withdrawn.
