Kalpesh Classes

Question 1 (ID 039) (Charitable Trust) (Revision ​​ / Home work)

The assessee, a Charitable Trust received donations exceeds Rs.8 lacs through the executor of a will. The executor gave a letter stating that the donation was made towards the corpus of the trust. In the will, executor was given the direction to donate the​​ said sum but was not mentioned that it was donated towards the corpus. Assessing officer was of the opinion that the executor cannot assume for himself any role other than the one envisaged in the will. Hence, the A.O. held the donations to be general donations. Do you agree?

Question 2 (ID 040) (Charitable Trust) (Revision ​​ / Home work)

The Assessee Company was incorporated and registered under Companies Act as a guarantee Company and the status was accepted by the revenue. It was not a company u/s.25 of​​ Companies Act. Can it automatically make the Assessee and AOP? The main object was of public utility and not of earning profit. So, subsidiary objects to be regarded as mere power for achieving the means.​​ ​​ 

Question 3 (ID 041) (Charitable Trust) (Revision ​​ / Home work)

A Charitable Trust applied for registration u/s 12A Commissioner made a number of suggestions for amendment of by-laws because he considered that if those clauses remain in the deed, trust will not be able to claim exemption u/s. 11. The trust wants to file a writ petition on the argument that the Commissioner is exceeding his powers. Do you find any merits in his claim ?

Question 4 (ID 031) (Trust with business income) (Revision ​​ / Home work)

A trust had main objects of educational, medical & relief to poor. It was authorized to establish, maintain & run such institutions to carry out the objectives, for the benefit of general public. One clause of the trust deed empowered the trustees to invest funds & carry on business. The trustees cached out the business of purchasing & selling cotton yam. The trust claims exemption for this income contending it to be income from property held for charitable purpose. A.O. denied it. Do you agree?

Question 5 (ID 032) (Trust with business income) (Revision ​​ / Home work)

Primary purpose of a company was provided specialized information in respect of circulation of newspapers & periodicals through the process of independent audit. Can it be said that it is engaged in activity of general public utility? Can it claim exemption u/s. 11? A.O. disallows the exemption for income from subscription, application fees & entrance fees. Is it correct?

Question 6 (ID 033) (Trust with business income) (Revision ​​ / Home work)

The Assessee, a charitable trust, received​​ certain amount from an industry to be spent for agricultural development and specially for organizing Kisan rally. According to A.O., the income is not for charitable purpose and it should be considered as taxable. According to assessing Officer (A.O.) the​​ receipt from the donor was not towards the corpus. Do you agree?

Question 7 (ID 034) (Violations) (Revision ​​ / Home work)

Assessee trust purchased a refrigerator & kept it at the residence of managing trustee before moving it into orphanage. Can it be said that trust property was used for the benefit of prohibited person u/s. 13(3) & accordingly can the exemption be denied? Assessee says, the words "Land, building & other property" refer to only immovable property. So refrigerator is not covered by it. What are your views?

Question 8 (ID 035) (Violations) (Revision ​​ / Home work)

Object of the assessee trust was to provide general & vocational education. Its funds were invested in 2 firms where does relatives of trustees were not only partners but also had a substantial interest. ​​ Can the trust claim exemption U/s. 11?

Question 9 (ID 036) (Violations) (Revision ​​ / Home work)

The assessee society registered u/s 12 gave money to an institution for utilisation whose objects were similar as per the bye-laws,​​ were similar to those of this society. Assessing officer held that the amount of investment or deposit was in infrigement of Sec. 13(1)(d) r.w. Sec. 11 (5). He denied ​​ the exemption u/s. 11. Is it justified?

Question 10 (ID 037) (Violations) (Revision ​​ /​​ Home work)

Author of the Trust is Mr. X His son has substantial interest in ABC Ltd. That company has donated shares to this trust The Assessing officer wants to deny exemption u/s 11 by invoking the provisions of sec 13(2). Do you agree ?​​ ​​ 

Question 11​​ (ID 038) (Violations) (Revision ​​ / Home work)

A trust was set up with the objects which included inter-alia to impact knowledge and education primarily in Gujarati Language, established and maintain institutions, reading rooms etc. and also promote social,​​ moral and religious standards of the members. AO denied the exemption u/s 11 by invoking the provisions of sec 13(i)(b) of the ground that Trust was established mainly for Gujarati speaking persons. Is it justified ?

Capital gains for Trust

Question (ID 032 020) (Charitable Trust)

Varinder Charitable Trust, a charitable Trust registered u/s 12A of the Income Tax Act, 1961 has sold the plot acquired two years back. The purchase price was Rs. 2,00,000. The sale consideration was Rs. 3,60,000. A sum of Rs. 10,000 was incurred in connection with the sale. The Trust acquired English mortgage [worth Rs. 3,10,000] of an Immovable property utilizing the sale proceeds. Is the Trust entitled to exemption u/s 11(1A)?

Questions 4-8 mark types

Question (ID 032 011) ​​ 

A public charitable trust registered under section 12A, for the previous year derived gross income of Rs.16 lakh , which consist of the following :​​ 

The trust applied a sum of Rs.11.60 lakh towards charitable purposes during the year,​​ which includes repayment of loan taken for construction of orphan home Rs.3.60 lakh.​​ 

Determine the taxable income of the trust.​​ 

Question (ID 62) (Charitable Trust)

XYZ is a public charitable trust created under a trust deed for providing relief to physically challenged persons and registered under section 12A. The following are the particulars of receipts of the trust during the year:

The trust applied Rs 18 lakh towards various activities and programmes undertaken for the benefit of physically challenged​​ persons during the year. The trust has also paid Rs. 8 lakh towards repayment of a loan taken two years back for the purpose of construction of its centre for training the handicapped persons in various handicraft works and sports.

Determine the tax liability, if any, of the trust and also state how the trust can mitigate such liability.

​​ 

Charitable purpose or objects​​ 

Question (ID 65) (Charitable Trust)

An institution having its main object as advancement of general public utility received 30 lakhs in​​ aggregate during year from an activity in the nature of trade. The total receipts of the institution, including donations, was 140 lakhs. It applied 85% of its total receipts from such activity during the same year for its main object i.e. advancement of​​ general public utility

1) What would be the tax consequence of such receipt and application thereof by the institution?

2) Would your answer be different if the institutions total receipts had been 150 lakhs (instead of 140 lakhs) in aggregate

3) What would be your answer if the main object of the institution is ‘relief of the poor’ and the institution receives 30 Iakhs from a trading activity, when its total receipts are 140 lakhs and applies 85% of the said receipts for its main object’

Question (ID 66)​​ (Charitable Trust)

A charitable trust derives its income from the business of providing mineral water to various companies situated in Software Technology Perk in Hyderabad. A sum of 30 lacs has been derived as net income from such business activity, which has been applied for the object of general public utility. The total receipts of the trust during the year was 140 lacs. Examine the taxability of application of the income, if the income so derived relates to the year. Would your answer be different if​​ the trust runs a school in a backward district end applies the profits from the business for such school’s activity?

Questions 7-12 mark types

​​ Question (ID 032 009) (Charitable Trust)

“Charities Unlimited” a charitable trust is running a hospital and​​ medical institution has made its services available to trustees of the trust. The value of medical service and hospital service made available to trustees of trust is Rs. 30,000. Other details of the income and expense of the trust is given below.​​ 

You are required to compute the total income of the trust.​​ 

Question (ID 032 010) (Charitable Trust)

X Public Charitable Trusts runs a hospital, which is derived income of Rs.250 lakh, from its operational activities. Expenses incurred to earn such income are Rs.55 lakh. Depreciation on various assets used in the hospital is Rs.15 lakh. Out of the income of Rs.250 lakh. the amount accrued but non received during the year is Rs.20 lakh. The institution earmarked and set apart Rs.30 lakh to give as advance for a building intended to be taken on lease for expansion of​​ the hospital, but the amount was paid on April 7, of assessment year, as the lease agreement could not be signed during the previous year. The trust has got an ERP package developed and installed by an IT company during the year. The total cost to the trust on account of the ERP package was Rs.85 lakh. Advice the trust on its total income, if the trust has incurred Rs.12 lakh for purchase of a number of desktop and laptop computers for use in the hospital.

Question (ID 22) (Charitable Trust)

AB Memorial​​ Trust which runs hospitals is registered under section 12A. Following particulars relevant for the previous year are furnished to compute tax liability of the trust.

• Income from running of hospitals: Rs. 14.25 lakh.

• Donation received (including anonymous donation Rs. 3 lakh): Rs. 5.75 lakh.

• Amount applied for the purposes of hospital: Rs. 13 lakh.

• The trust had accumulated Rs. 15 lakh under section 11(2) in the financial year 6 years back for a period of five years for extension of one of its hospitals. The​​ trust has spent Rs. 13.50 lakh for the said purpose till 01.04.PY.

Compute the taxable income of the trust and tax payable by AB Memorial Trust.

Question (ID 61) (Charitable Trust)

Jyoti Education Centre, a charitable institution registered under section​​ 12AA of the ​​ Income –tax Act runs school for primary and secondary education. The following particulars are furnished to you by the institution:​​ 

Compute total income of the institution and tax payable.

Question (ID 63) (Charitable Trust)​​ 

A public charitable trust registered under section 12AA runs a hospital and also a medical college. It furnishes you the following information for the year:

• Gross receipt 425 lakhs.

• Income from business - incidental to main objects 2 lakhs.

• Voluntary contributions received from public 32 Iakhs. It include corpus donation of ​​ 3 Iakhs and anonymous donation of ​​ 5 lakhs. (Voluntary contributions are included in Gross receipt given in (i) above.)

• Hospital operational expenses incurred 107 lakhs. This does not include capital expenditures and depreciation. 2 lakhs was paid in cash on 1st​​ July as advance salary to a Doctor working in hospital who was in urgent need for money for his personal purposes.

• Income from Medical College (solely for education purpose) 10 lakhs. Gross receipts of college for the year 90 Iakhs.

• Gross receipt given in (i) above includes a sum of ​​ 55 lakhs which has accrued but not received. However, a sum of ​​ 18 lakhs was received only on 31st day of March.

• The trust set apart 80 Iakhs for acquiring a building to expand its hospital. But the amount was paid in May of next year when sale deed was registered in its name.

• In June, the trust purchased​​ and installed new computer software for 28 lakhs. The rate of depreciation is 60% as per Income-tax Act, 1961.

• The trust incurred 35 lakhs towards purchase of laptops, computers and printers for the hospital.

• It repaid loan of 15 Iakhs taken earlier for construction of hospital building.

Compute the total income of the trust in order to avail maximum benefits within the four corners of law.

Question (ID 67) (Charitable Trust)​​ 

Mathi Charitable Trust registered under section 12AA, following cash system of accounting, furnishes you the following Information:​​ 

• Gross receipts from hospital by name “Full Cure” 400 lakhs.​​ 

• Gross receipts from college by name “India Arts College” 180 lakhs (offering recognized degree courses).​​ 

• Corpus donations by way of cheque 30 lakhs and by way of cash 5 lakhs.​​ 

• Anonymous donations by cash 10 lakhs.​​ 

• Administrative expenses for hospital 220 lakhs and for college 100 lakhs. The administrative expense includes rent of premises used for India Arts College on which tax is deducted in the month of June but the payment was made in the month of December.​​ 

• Fees not realized from patients and from students of the college as on March 6.5 lakhs.​​ 

• Depreciation on assets of the trust The entire cost of assets 300 lakhs claimed as application in the earlier years​​ 

• Acquired a building for 120 lakhs on 1st​​ June for expansion of hospital (cost of land included therein 100 lakhs). Stamp duty value of the land and building on the date of registration of sale deed 140 lakhs.​​ 

• The trust gave donation of 25 lakhs to Gandhiji Free Trust having Objects Of charitable nature registered under section 12AA but not similar to the objects of the donor trust.​​ 

You are required to compute the total income of the trust and its income-tax liability in such a manner that it can avail the optimal benefit within the four comers of the Income- Tax Act, 1961.​​ 

Note: The trust does not want to seek accumulation of income by virtue of section 11(2) of the Act.​​ 

List of Important Question to be glanced for Revision​​ before exam.

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