Amount received - Trust

This query is : Resolved

Shri Shri (Querist)
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01 December 2022 Dear all, I am facing below case kindly help me clarify

Case:
Moon ltd Public Limited company (unlisted) is engaged in Agricultural business which has hospital facilities for its staff.

Sun Ltd (Exempted trust) charitable organization (charity arm of Moon Ltd group - Separate entity) is now willing to finance the hospital facilities of Moon Ltd.

Sun Ltd (Trust) & Moon Ltd (Company) are related parties ( Directors)

Now the MoM of Sun Ltd states that Sun Ltd can finance by advancing money to Moon & in turn moon can run the hospital.

I want to know Tax aspects of both companies & also accounting / auditor observations if any

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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01 December 2022 Disclosure is required, in a note to the accounts, where the reporting charity enters into a related party transaction.
Such payment by charitable trust to the company is taxable as it will not be considered as charitable activities as it's beneficial to a business entity.

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