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Denial of Exemption under section 11 & 12 - Section 13(1) - Income Tax - Ready Reckoner - Income TaxExtract Denial of Exemption u/s 11 12 Section 13(1) Exemption u/s 11 12 shall NOT be available in following cases: Any part of income from the property held under a trust for private religious purposes which does not enure for the benefit of the public - However where the trust is for private religious purposes, the exclusion will not apply to that part of the income from property held under trust, which does not ensure for the benefit of the public. [Ganeshi Devi Rami Devi Charitable Trust vs CIT 1968 (7) TMI 6 - Calcutta High Court] Income for the benefit of particular religious community Entire income of a charitable trust/institution created for the benefit of any particular religious community or caste is not eligible for exemption under section 11 or 12 . A trust or institution created or established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or women and children shall not be deemed to be trust or institution created or established for the benefit of a religious community or caste within the meaning of section 13(1)(b) . Held that if the objects of the trust clearly shows that the trust is religious trust created exclusively for the benefit of the person belonging to a particular community, i.e. Muslim Community, then the assessee trust is is clearly hit the provisions of section 13(1)(b) . [Ghulam Mohidin Trustv. CIT 2000 (11) TMI 99 - Jammu and Kashmir High Court ] Income for the benefit of specified persons: If any part of income of a religious/ charitable trust/ institution ensures directly or indirectly for the benefit of any person specified in section 13(3) or any property of the trust is during the previous year applied or used directly or indirectly for the benefit of any person referred to in section 13(3), then entire income of such trust is not eligible for exemption under section 11 or12. This is obviously intended to ensure that the income of such a trust or institution is not diverted to the benefit of persons who are closely connected with the creation, establishment and conduct of the affairs of the trust or institution. If any part of income or any property of a trust or an institution is directly or indirectly applied or used for the benefit of interested person, then the entire income of such trust/institution will be liable to tax. [CIT vs St. Joseph s Convent Chandannagar Educational Society 2018 (5) TMI 1277 - Calcutta High Court] Investment or deposit of the funds of the trust/institution in modes or forms other than those specified u/s 11(5) - Entire income of a trust/ institution is not eligible for exemption u/s 11 12, if its funds are invested/ deposited otherwise than as specified under section 11(5). It has been clarified that investment in i. Shares of Public sector company and ii. Shares of depository will not amount to contravention to section 13(1)(d). Provided that nothing in this clause shall apply in relation to- Assets forming part of corpus Bonus shares allotted to trust or institution Debentures held by trust or institution Conversion of assets into those specified u/s 11(5) Profits and gains of business assessable for the AY 1984-85 and subsequent AYs. [CIT vs Bhai Mohan Singh Foundation 2017 (8) TMI 1404 - Delhi High Court] Meaning of Specified Persons - Section 13(3) : - For the purposes of section 13(3) the following are specified persons: the author of the trust or the founder of the institution any person who has made a total contribution (up to the end of the relevant previous year) of an amount exceeding 50,000 (substantial contributor) where such author or founder or substantial contributor is an HUF, a member of HUF any trustee of the trust or manager of the institution. any relative of such author, founder, substantial contributor, member, trustee or manager any concern in which any of the persons referred to above has a substantial interest.
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