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Query regarding Charitable trust

Sarvesh Kumar Singh (Student CA Final (Articled Asst.)) (170 Points)

09 July 2011

Case : A charitable organisation is running a school. ESI authotities have imposed a penalty or Rs. 28000/- for non deduction and deposit of ESI on school and the school dep[osited the amount.

My Q. is whether the penalty deposited by school should be treated as application of income or not. because the payment of income tax is treated as application of income which is disallowed in PGBP.

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3 Replies

kanagaraj (CHARTERED ACCOUNTANT) (793 Points)
Replied 11 July 2011

Dear Sarvesh, I don't think the ESI act is applicable to schools running by charitable trsut. Because the Act particularly mention that any factory or establishments are coming under the purview of the Act. Since the school does'nt satisfy both, the applicablity is a question mark.However any penalty cannot be taken as application of income.

Sarvesh Kumar Singh (Student CA Final (Articled Asst.)) (170 Points)
Replied 11 July 2011

APPLICABILITY OF THE ESI ACT The ESI Act applies to any premises/precincts, where 10 or more persons are employed. The “appropriate Government” State or Central is empowered to extend the provisions of the ESI Act to various classes of establishments, industrial, commercial, agricultural or otherwise in nature. Under these enabling provisions, most of the State Govts. have extended the ESI Act to certain specific classes of establishments, such as, Medical and Educational Institutes, shops, hotels, restaurants, cinemas, preview theatres, motor transport undertakings, newspaper and advertising establishments etc., employing 10 or more persons. So the ESI act is applicable to all charitable Institutions like schools, hospitals etc. please refer ESI website. i.e. www.esic.nic.in before getting to any conclusion.

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 11 July 2011

transfer the amount to workmen welfare account as the amount has been paid for employees only, through there is no direct benefit to employees with the funds remitted,