Tax computation of a charitable trust.

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This query is : Resolved

manojvijay (Querist)

29 April 2013 ACCORDING TO ME, THE TAX COMPUTATION OF A CHARITABLE TRUST IS BASED ON CASH FLOW.IT IS NOT BASED ON THE RESULT OF INCOME AND EXPENDITURE ACCOUNT.

85% OF TOTAL INCOME TO BE UTILIZED IN THE YEAR OF RECEIPT FOR ITS OBJECTS WITH IN INDIA.

WHILE WE CALCULATING THE REMAINING 15% EXEMPTED PORTION,THE CALCULATION IS BASED ON THE TOTAL INCOME CREDITED DURING THE YEAR.

THE ITO TOOK THE 15% ON THE NET SURPLUS OF INCOME AND EXPENDITURE AND MADE THE ASSESSMENT ACCORDINGLY. YOU FEEL ANY JUSTIFICATION ON IT? IF YES PLEASE CONVEY ME.

CA Bijal Shah

CA Bijal Shah (Expert)

30 April 2013 In case of Charitable Trust exemption is for the amount they utilised for charitable purposes. As Trust are not created for the profit purposes to tax them on profit/ net surplus is not proper. If trust has utilised the amount they received for the charitable purpose acoording to time limit no need to tax them at all.
And yes for 85% of income received one have the option to accumulate or set apart it for application in future year.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

30 April 2013 ITO's calculation is wrong because accumulation to the extent of section 11(1)(a) & (b) has to be calculated on gross income.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)

12 June 2013 The percentage of 85% and 15% is based on the Gross income received and not that of net profit. If of the gross 85% is not spent for the purpose of charitable purpose then the entire profit is to be taxed. The expenses should be on charitable purpose and for no other purpose.

Here the ITO is incorrect for taking the income of 15% on the basis of Net Profit. You can file rectification u/s 154 or file the appeal u/s 246A

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