The Head of Accounts of Heathy Wealthy Foundation, a trust, established for the purpose of promotion of Yoga has approached you to guide about the…
CA Final · Direct Tax Laws and International Taxation · MTP · May 2024
The Head of Accounts of Heathy Wealthy Foundation, a trust, established for the purpose of promotion of Yoga has approached you to guide about the tax implications of the following: (i) During the financial year 2023-24, it received a voluntary contribution of 150 lakhs with a specific direction that it should form part of the corpus of the trust. The trust invested such amount in the shares of M/s. ABC Private Ltd., a private sector company. (ii) Apart from the above-mentioned 150 lakhs, during the financial year 2023-24, it received 80 lakhs as other voluntary contributions and 50 lakhs as fees towards providing Yoga classes.
Suggested Answer and Working Notes:
(i) Voluntary contribution of 150lakhs received with a specific direction that it will form part of corpus of the trust would be exempt from tax only if it is invested in any of the modes specified under section 11 (5) specifically maintained for such corpus. If the same is not so invested, then, it would not be exempt under section 11 (1) (d) for P.Y.2023-24. Investment in shares of private company is not a specified mode under section 11 (5) . Hence,150 lakhs received by Healthy Wealthy Foundation would not be exempt under section 11. (ii) Yoga is included in the definition of “charitable purpose” under section 2 (15) . Accordingly, voluntary contributions of 80lakhs and fees towards providing Yoga classes of 50lakhs would be income from property held for charitable purposes and eligible for unconditional exemption of 15% under section 11. Exemption will be available under section 11 subject to the fulfilment of the necessary conditions.
Topics: Assessment of Trusts and Institutions, Political Parties and Other Special Entities
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