Examine the following based on the relevant provisions of the Income-tax Act, 1961 and judicial pronouncements: (i) Satvik public charitable trust…

(i) As per section 11(1A), where a capital asset held under trust (building, in this case) is transferred and only a part of the net consideration is utilized for acquiring another capital asset, the amount of capital gains deemed to have been utilised for charitable or religious purposes shall be the excess of the proceeds utilised over the cost of the asset transferred. In the present case, short-term capital gain of 2,00,000 [₹ 4,20,000 less - 2,20,000] would arise on transfer of building held under trust, as building is held for a period of not more than 24 months. Further, the trust has invested part of the net consideration i.e.,3,00,000 out of 4,20,000, in fixed deposits for the tenure of 2 years. Where the net consideration on sale of a capital asset is invested in fixed deposits, it is regarded as utilised for acquiring another capital asset³. Accordingly, capital gains utilised for investing in fixed deposits is deemed to be applied for charitable purpose. Since only a part of the net consideration of 3,00,000 out of 4,20,000 is utilized for investing in fixed deposits, the amount of short-term capital gains to the extent of 80,000 (being the excess of proceeds utilized i.e.,3,00,000 over cost of transferred asset i.e.,2,20,000) would be deemed to be utilised for charitable purpose. The balance of 1,20,000 is taxable in the hands of the trust. Applying such income to the objects of the trust would make the transaction, tax neutral. (ii) As per section 115BBC, anonymous donations received inter alia by trust or institution referred u/s 11 would be taxable @30% in excess of higher of - 5% of the total donations received by the assessee; or 1 lakh However, the provisions of section 115BBC would not apply to anonymous donation received by trusts/institutions created or established wholly for religious and charitable purposes (i.e. partly charitable and partly religious institutions/trusts) other than anonymous donation made with a specific direction that such donation is for any university or other educational institution or any hospital or other medical institution run by such trust or institution. In the present case, HelpAge trust is established for religious and charitable purposes and runs a temple and a school. During the P.Y. 2023-24, it received anonymous donation of 3crores for Temple and 8crores for School. Since it received anonymous donation separately for temple and school, the provisions of section 115BBC would not be attracted in respect of donations of 3crores received for Temple. However, the provisions of section 115BBC would be attracted in respect of anonymous donation received for school. (iii) Any voluntary contribution received by an electoral trust would be exempt, if such electoral trust: (i) distributes to a registered political party during the previous year, 95% of the aggregate donations received by it during the year along with the surplus if any, brought forward from any earlier previous year and (ii) functions in accordance with the rules made by the Central Government. The electoral trust may, for the purposes of managing its affairs, spend up to 5% of the total contributions received in a year subject to an aggregate limit of 5lakh in the first year of incorporation and 3lakh in subsequent years. The total contributions received in any financial year alongwith the surplus from any earlier financial year, if any, as reduced by the amount spent on managing its affairs, shall be the distributable contributions for the financial year. In the present case, M/s XYZ, an electoral trust incorporated in the year 2022, received voluntary contributions of 420lakhs and has brought forward surplus from earlier previous years is 18lakhs. It spent 8lakhs for the purpose of managing its affairs. However, it is eligible to spend 3lakhs being lower of - 21 lakhs, being 5% of total contributions i.e.,420 lakhs or 3 lakhs, since P.Y. 2023-24, being the subsequent year for the purpose of managing its affairs. Accordingly, M/s XYZ, an electoral trust can distribute its distributable contribution of 435lakhs [i.e.,420 lakhs plus 18lakhs less 3lakhs] as the same exceeds - 416.10 lakhs (i.e., 95% of 438 lakhs).