Mr. Shyam is the founder of UVX Trust, a public charitable trust registered u/s 12A of the Income-tax Act, 1961. The trust runs a hospital for the…

CA Final · Direct Tax Laws and International Taxation · MTP · May 2024
Mr. Shyam is the founder of UVX Trust, a public charitable trust registered u/s 12A of the Income-tax Act, 1961. The trust runs a hospital for the treatment of various diseases. Mr. Umesh, son of Mr. Shyam, was admitted in May 2023 in the hospital for treatment. He was charged a total fee of 2.20 lakhs as against the amount of 3.50 lakhs charged by the hospital for similar treatment to the general public. The Board of trustees were served with a notice by the income tax authorities for cancellation of registration u/s 12AB. Discuss whether registration can be denied to the trust. What are the further tax implications?

Suggested Answer and Working Notes:

As per section 13 (6) , UVX Trust shall not be denied the benefit of exemption under section 11 in respect of its entire income merely due to the reason that the benefit of medical facilities have been provided to Mr. Umesh, son of Mr. Shyam, being the specified person. Accordingly, the registration of UVX Trust cannot be cancelled by the Income-tax authorities on this basis. As per section 12 (2) , the value of medical facilities provided to Mr. Umesh, being the specified person, at a concessional rate would be deemed to be the income of the trust and such income would not be eligible for exemption under section 11. Hence,1,30,000, being the concessional value of medical services would be deemed to be the income of UVX Trust. The remaining income would be eligible for benefit of section 11.

Topics: Assessment of Trusts and Institutions, Political Parties and Other Special Entities

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