Charitable trust-applicability of sec. 40a(3)


04 September 2012

My client is a charitable trust having the benefit of registration u/s 12A of the Income-tax Act. During the financial year relevant to assessment year 2010-11 there were riots in the place where it has been functioning. While making some payments cash payments were made in excess of Rs.20,000/- in respect of certain expenses. The query is since the charitable trust is not a business concern and even if the donations are charged to tax they are not to be charged u/s 28 of Income-tax Act, whether provisions of sec. 40A(3) are applicable in this case. I feel if donations are charged to tax in certain circumstances, they are to be charged as income from other sources in terms of sec. 56 and not as business income u/s 28. Kindly clarify. Will be grateful if any case law in this regard is mentioned.

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