M/s Medi Care Foundation, a trust registered u/s 12AB of the Income-tax Act, 1961, which runs a hospital also paid consultancy fees - 1,00,000 to…
CA Final · Direct Tax Laws and International Taxation · PYQS · May 2025
M/s Medi Care Foundation, a trust registered u/s 12AB of the Income-tax Act, 1961, which runs a hospital also paid consultancy fees - 1,00,000 to Mr. Suresh, a doctor on 31.08.2024. The trust did not deduct the TDS on consultancy fees paid to doctors. The accountant of the trust claims that the trust is not liable to tax audit under section 44AB (being a trust), therefore it is out of the purview of section 194J.
Suggested Answer and Working Notes:
A trust is required to deduct tax at source u/s 194J even if it is not subjected to tax audit u/s 44AB. Moreover, as per Explanation 3 to section 11 (1) , where tax has not been deducted at source on any expenditure, 30% of disallowance of expenditure for non-deduction of tax at source under section 40(a)(ia) would mutatis mutandis apply to a trust in determining application of income. Accordingly,30,000 being 30% of 1,00,000 would not be treated as application of income for non-deduction of tax at source on the consultancy fees paid to Mr. Suresh by M/s Medi Care Foundation.
Topics: Assessment of Trusts and Institutions, Political Parties and Other Special Entities
Related Questions in this Topic
- Examine the following independent case scenarios of charitable trust/institutions based on the provisions of the Income-...
- Mr. Kunal Verma, a resident individual and partner in a consulting firm, filed his return of income for the assessment y...
- Swadeshi Electoral trust is an Electoral Trust incorporated on 1st May 2026* and approved by CBDT in accordance with the...
- Sarvseva Trust is a charitable trust registered under Section 12AB with the main object of relief of poor. The trust rec...
- M. Foundations is a charitable trust registered under Section 12AB of IT Act 1961. During the FY 25-26, it derived an in...