Charitable Trusts

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K P Pani Raj (Querist)
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07 August 2007 What is the distinction between section 11(4) and the provisions of section 11(4A) of the Income Tax Act, 1961?

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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19 August 2007 U/s 11(4A) Income from business of a trust is exempted if the conditions in that section are met .

U/s 11(4)....even if it is claimed that income is exempted .....AO may compute the business income as per IT Act...and if assessed income is higher than book...the excess will be deemed as not applied for charitable purposes and the consequences will follow.

Theses sections read as follows:
11(4) For the purposes of this section “property held under trust” includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the 35[Assessing] Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes 36[* * *].

11(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business.]

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