The Balance Sheet of M/s SN Charitable Trust as on 31.1.2024, and its other information is given hereunder: Particulars ₹ in lakhs Liabilities…

CA Final · Direct Tax Laws and International Taxation · MTP · November 2024
The Balance Sheet of M/s SN Charitable Trust as on 31.1.2024, and its other information is given hereunder: Particulars ₹ in lakhs Liabilities Capital fund 800.00 Sundry creditors 335.00 Total 1135.00 Assets Assets Land (purchased in the year 2009) 100.00 Land and buildings purchased in the year 2015 800.00 2000 equity shares of 1000 each in M/s XP Ltd. shares are listed in Bombay Stock Exchange (at face value) 20.00 Balance in current account of a nationalized bank 10.00 Balanced in fixed deposits with scheduled banks 200.00 Cash in hand 3.50 Tax Deducted at Source 1.50 Total 1135.00 The application for registration was made on 15-4-2012 and registration under section 12AB of the Income-tax Act, 1961 was granted on 1-7-2012 to M/s SN Charitable Trust. However, the registration was cancelled on 31-1-2024. An appeal was preferred against the order of cancellation, which was dismissed by the Appellate authorities. The order confirming the cancellation was received on 31-3-2024. Additional Information: (1) Stamp duty value of the land (purchased in 2009) as on 31-1-2024 was - 120.00 lakhs but if sold in the open market, the property would fetch 250 lakhs as per a registered valuer's certificate. (2) Land and building (purchased in 2015), if sold in the open market will fetch 1000 lakhs as per a registered valuer's certificate. Stamp duty value as on 31-1-2024 was 1050 lakhs. (3) The highest and lowest value per share of M/s XP Ltd. traded on 31-1-2024 was 1099and 1051respectively. (4) Sundry Creditors include 30 lakhs provided on estimated basis to contractors for which no bills are received. Based on the above information, calculate the exit tax payable by the Charitable Trust and state the latest day on which the said tax has to be paid. Give working notes wherever necessary.

Suggested Answer and Working Notes:

Computation of exit tax payable by M/s SN Charitable Trust Particulars Amount (₹) Aggregate FMV of total assets as on 31.1.2024, being the specified date (date of order of cancellation of the registration) [See Working Note 1] 12,85,00,000 Less: Total liability computed in accordance with the prescribed method of valuation [See Working Note 2] 3,05,00,000 Accreted Income 9,80,00,000 Tax Liability @ 34.944% of 9,80,00,000 3,42,45,120 Working Note 1: Aggregate fair market value of total assets on the date of cancellation of the registration Valuation of Land, being an immovable property purchased in the year 2009 [Value of land purchased in the year 2009 not includible in the aggregate fair market value, since the exemption provisions under section 11 and 12 would apply from P.Y.2012-13, being the previous year in which application for registration of trust is made] - Valuation of Land and building, being an immovable property, purchased in 2015 [The fair market value of land and building would be higher of 1,000 lakhs i.e., price that the land and building would ordinarily fetch if sold in the open market as per registered valuer's certificate and - 1,050 lakhs, being stamp duty value as on the specified date i.e., 31.1.2024] 10,50,00,000 Valuation of Quoted equity shares in M/s XP Ltd. [2,000 x 1,075 per share] [The fair market value of quoted shares would be - 1,075 per share, being the average of the lowest (1, 051) and highest price (1, 099) of such shares on the specified date i.e., 31.1.2024] 21,50,000 Balance in current account of a nationalized bank 10,00,000 Balance in fixed deposits with scheduled banks 2,00,00,000 Cash in hand 3,50,000 12,85,00,000 Working Note 2 - Total liability Book value of liabilities in the balance sheet on specified date 11,35,00,000 Less: Capital fund 8,00,00,000 Less: Contingent liability on estimated basis to contractor for which no bills are received 30,00,000 Total liability of M/s SN Charitable Trust 3,05,00,000 The latest day on which such tax has to be paid is 14th April, 2024, being 14 days from 31.3.3024, the date on which the order confirming the cancellation is received.

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

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