Charitable Trust

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A charitable trust registered under sections 12AA and 80G received a significant sum for building construction, with TDS deducted under section 194C. The core question is whether this TDS deduction impacts the trust's tax exemptions. Clarification is sought on whether the funds are considered a donation or payment for construction services. If it's payment for services and exceeds 20% of total receipts, it could jeopardise the 12AA exemption, unless it's incidental to the trust's main charitable purpose.

r gurucharan

r gurucharan (Querist)

21 September 2020 Dear Sir,

Trust registered u/s 12AA and also eligible u/s 80G. Received Rs. 40 lacs after deducting tax u/s 194C towards consturuction of building. The amount is disbursed by a public limited company.

Query:
1. The trust received donation after deducting of TDS, whether it will loose the benefit of exemption u/s 12AA and u/s 80G.

please guide me with help of relevant provision under income tax.

regards,

R. Gurucharan.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

21 September 2020 Kindly clarify the trust received donation or payment for construction services.

r gurucharan

r gurucharan (Querist)

22 September 2020 Dear sir,
trust received Rs. 40.00 lacs toward the consturction of the building after deduction TDS u/s 194C.
regards,

R. Gurucharan.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

22 September 2020 If the receipt related to construction services rendered by the trust, it will be considered as business income.
If the such business income exceed 20% of total receipts then it will loose 12AA exemption.

Such activity of trade/commerce/business is undertaken in the course of the actual carrying out of such advancement of any other object of general public utility and
the aggregate receipts from such activity/ activities during the financial year does not exceed 20% of the total receipts of the said trust or institution during that financial year

r gurucharan

r gurucharan (Querist)

22 September 2020 Dear Sir,

The main activity of the trust is rending the education for physically challenged students. Additional building is required for the above activity. For the same, MRPL transfered the funds after deducting the tds U/s 194C. The amount is purely for the purpose of education of the physically challenged students.

regards,

R. Gurucharan.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

22 September 2020 Who contributed the building and in whose PAN TDS remitted.

r gurucharan

r gurucharan (Querist)

22 September 2020 Dear Sir,

contribution done by MRPL, mangalore. TDS deducted by MRPL in the PAN No. of Trust.

regards,

R. Gurucharan

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

22 September 2020 Who constructed the building, the contractor.

r gurucharan

r gurucharan (Querist)

22 September 2020 Dear Sir,

The construction of the building is executed by the Trust. The payment of the contractor is made by the donar ie. MRPL.

regards,

R. Gurucharan.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

22 September 2020 TDS should have been deducted in the PAN of the contractor while making payment by MRPL.
Now ask MRPL to correct the TDS return. No TDS can be deducted on the PAN of the trust.

r gurucharan

r gurucharan (Querist)

22 September 2020 Thanks for valuable suggestions.

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