Quiz for the week (23 Sep 2024):
All Well Charity is a charitable trust recognised
under section 12AB which is engaged in running schools and colleges. During the
financial year 2023-24, it has gross receipt of Rs.900 lakhs and its
application by way of revenue expenditure was Rs.620 lakhs which included
interest of Rs 25 lakhs on moneys borrowed from a trustee. The trustee
originally pledged his property and availed loan which was given to the trust.
Interest payment by the trust to the trustee was equal to the amount of
interest payable by the trustee to the bank. Total amount of capital
expenditure of Rs.180 lakhs which included Rs.50 lakhs being the sum
accumulated for the said capital expenditure in the financial year 2022-23 under
section 11(2) and the balance was met from the current year income. Discuss the
consequence of the transaction and the tax payable by the trust.
Best Answer :
The following would be the computation of the income
of All Well Charity for the assessment year 2024-25:
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Rs. in lakhs
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Gross receipt
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900.00
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Less: 15% being automatic exclusion
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135.00
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765.00
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Less: Revenue expenditure
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620.00
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|
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145.00
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Less: Capital expenditure (Rs.180
Rs.50)
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130.00
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Net Income
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15.00
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It is presumed that in respect of interest expenditure
of Rs.25 lakhs tax was deducted at source for the interest payment made the
trustee who in turn borrowed from a bank by pledging his property. The rate of
interest for the loan received from the trustee would not be hit by section 13(1)
since the interest paid to trustee is equal to rate of interest charged by the
bank on the loan advanced to the said trustee.
The amount set apart being Rs.50 lakhs in the
financial year 2022-23 has been applied for the earmarked purpose in the financial
year 2023-24. This amount since identified and set apart in the earlier year
its application would not be considered for the purpose of computation of total
income of the trust of the assessment year 2024-25.
The trust has total income of Rs.15 lakhs on the
assumption that it has not applied for accumulation of income for any specific
purpose under section 11(2). This income of the trust would be its total
income which would be liable to tax at the rate applicable for individuals. The
tax liability hence would be Rs.1,56,000 including HEC @4%. |