Taxation of public charitable trust
Kamal
(Querist) 06 October 2012
This query is : Resolved
There is a public charitable trust running a hospital. Its income includes voluntary contributions and hospital income. The trust has not applied for exemption u/s. 11 & 12 for the year under consideration. So, the exemption is not available for the said year.
Based on these facts, following are the queries.
1. What will be the treatment of voluntary contributions and hospital income under it act?
2. Whether hospital income be treated as business income? If yes then whether eligible for depreciation allowance? What will be the rate of tax?
3. A trust will be taxed as an AOP. What will be tax rates for above income and whether the benefit of exemption slab can be taken in this case?
Please cite relevant sections and/or cases.
Surrender K Singal
(Expert) 07 October 2012
Is your querry based on yearly exemption u/s 11 & 12 ? Please consider latest amendments / CBDT circulars if for the relevant year any such renewal of exemption is at all to be applied for ?
Other querries would be taken care of by relevant provisions as applicable to AOP !
All business incomes are eligible for various expenses / expenditure for earning such gross incomes;
Kamal
(Querist) 10 October 2012
Thank you for the information provided. Regarding this query, let me clarify that the public charitable trust, for the year under consideration, has not applied for exemption under u/s. 11 & 12. The query is to understand taxability of public charitable trusts which are not granted/ have not applied for exemption u/s. 11 & 12.
Ms.Nirmala P.Rao
(Expert) 13 October 2012
Dear Client,
The Hospital created under a Public Charitable Trust and the income arising therefrom including voluntary contributions to th extent they are applied for primary object of charitable purpose of a Public Nature are exempt from Tax to the extent they are applied for public charitable purpose under section 80 G of Income Tax Act.
And the rest would be liable to tax. You go through the following cases.
A trust created for charitable or religious purposes will enjoy the exemption although it is
named after a private person. [CWT v HEH The Nizam Supplemental & Religious Endowment
Trust (1973) 89 ITR 80 (AP)].
Where the primary objects are, charitable, exemption cannot be denied if a subsidiary
object is found to be non-charitable but which is intended to subserve the religious and
charitable objects. [Yograj Charity Trust v CIT (1976) 103 ITR 777 (SC)].
If the predominant object of the activity of a trust is of general public utility, it will not
loose its character of a charitable purpose merely because some profit arises from its activities.
[CIT v Ganesh Tam Laxinarain Goel (1984) 147 ITR 468 (MP)].
Business activity for non-charitable purpose and there was no material to hold that such
business was carried on by the assessee as means in the course of the actual carrying out of the
main or primary object. [CIT v Virudunagar Hindu Nadars Abiviruthi Panchukadai Mahamai
(1996) 219 ITR 303 (Mad)].
You can claim depreciation allowance as well in the above circumstances.
Ms.Nirmala P.Rao
Legal Expert
