We are a registered religious & charitable trust (12A/12AB), Trust owns agricultural land and also maintains a goshala. Query on treatment of both for Section 11 purposes.
Q1 — Agricultural income & the 85% application requirement
• The trust earns agricultural income, which is exempt under Section 10(1) read with Section 2(1A).
• For computing the 85% application requirement under Section 11(1), does agricultural income form part of the trust’s “income derived from property held under trust”?
• i.e. must 85% of the agricultural income also be applied to charitable/religious objects, or does it stand excluded because it is already exempt independently of Section 11?
• If it is to be included, how is it reflected in ITR-7 and the Form 10B computation?
• Any settled position or case law on this point?
Q2 — Goshala: application of income vs. business income
• The trust runs a goshala as part of its objects. Some views suggest goshala receipts (e.g. sale of milk, dung, etc.) do not qualify under the exemption / are not treated as application of income — is this correct?
• If the goshala generates receipts, is it treated as a business incidental to the objects of the trust under Section 11(4A)?
• If so, is the trust required to maintain separate books of account / a separate ledger for the goshala to retain the exemption (as per Section 11(4A) and the Thanthi Trust ruling)?
• Does expenditure incurred on running the goshala count as “application of income” towards the 85%?
• Would gross receipts or net surplus be the relevant figure for the income computation?
Please help us in clarifying this issue..thanks
CAclubindia
