Capital Expenditure of a Trust

Sir,

A Charitable trust is running only from the Donation received from the public.  Trust is not exempted under Section 12A /12AA.  Now, the trust wants to buy a Vehicle for trust activities.  There is no Reserve in the Balance Sheet.  If the trust purchases a Vehicle from the donation part, there will be a surplus in the Income and Expenditure account results Income tax.  

Can any body help me in this regard?

 

Thank you Sir,

Here is more clarification:

Trust is working only on the receipt of Donation.  and it is not covered under Section 12A.  So, all receipt is taxable subject to revenue expenditure.  If the trust purchases a vehicle or expenses on any Capital Good, it will not be reflected in the Income & Expenditure account.  So, indirectly the amount of expended for the purchase of fixed assets out of donation is being taxed.

Is it correct.  If yes, then please also suggest to save tax.  Is there any change is Donation is received for purchase of asset specifically.

Regards,

Replies (6)
Quick Summary
This discussion addresses the capital expenditure of a charitable trust that operates solely on public donations and is not registered under Section 12A/12AA. The core issue is how purchasing assets like a vehicle impacts the trust's taxable income, as such capital expenses aren't reflected in the Income & Expenditure account, potentially leading to the donation amount being taxed indirectly. The conversation explores whether this is correct and seeks advice on tax-saving strategies, including scenarios where donations are specifically for asset purchase.

Capital expenditure of trust is as per sec 12A

There will no surplus in income as its an expense. There will be no surplus in expense as its accumulated expense. 

Dr. Bank 50k

Cr. Donation 50k

when you receive donation

Dr. Car 30k

Cr. Bank 30k

when you used that to purchase car

the surplus 50k-30k=20k will be taxed. 50k also will be taxed anyways cause your not exempted under that section. So why worry

Can any body help me in this regard?

As per Your noted comment is right...
But,
What You want exactly...??
Better to ask your doubts and needs...

Then only you can get exact solution from our CCI Experts...

Otherwise You got replies like above ways...
Is there an agreed resolution for purchasing the car from the BOARD OF TRUSTEE

Yes Sir.  Resolution has been passed.

Then proceed, but ensure must be used for thevpurpose of business

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