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Applicability of sec 40A(3) for trusts

Ganesh Dowlath (21 Points)

16 June 2017

Is the above mentioned section applicable for charitable trusts in their application of income

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10 Replies

rama krishnan (12234 Points)
Replied 16 June 2017

yes ofcourse it'll be applicable but however it'll not have any impact on total income if the trust was got registered u/s. 12AA.

rama krishnan (12234 Points)
Replied 16 June 2017

yes ofcourse it'll be applicable but however it'll not have any impact on total income if the trust was got registered u/s. 12AA.

Ganesh Dowlath (21 Points)
Replied 16 June 2017

This means charitable trusts registered under 12AA can spend any amount in cash in their activities?

rama krishnan (12234 Points)
Replied 16 June 2017

yes ofcourse, unless the registration is revoked, disallowance made under any provisions of income act is futile only

Ganesh Dowlath (21 Points)
Replied 16 June 2017

Ok thank you

rama krishnan (12234 Points)
Replied 16 June 2017

85% of the trust's income should be utilised for the charitable activities and due to this disallowances, If the expenses threshold fall short of 85% then those amounts can be charged to income tax

Ganesh Dowlath (21 Points)
Replied 16 June 2017

But if we see sec 40A(3) it talks about Assesses having income from business or profession then how it applies to registered trust

CA. RAGHAV GARG (CHARTERED ACCOUNTANT) (710 Points)
Replied 17 June 2017

yes mr rama krishna.. section do not apply to trust generally as they do not have income from business and profession and the section is related to business and profession

rama krishnan (12234 Points)
Replied 17 June 2017

Explanation.—Where the trust or institution has any other income in addition to profits and gains of business, the provisions of clause [iii] of this proviso shall not apply unless the trust or institution maintains separate books of account in respect of such business.

I think all the provisions that applies to pgbp Will apply to trust's also...let me come with some case laws