Examine and discuss each of the following independent cases of charitable trust/institutions based on the relevant provisions of the Income-tax Act,…

As per section 13 (2) , if any part of the income or the property of the trust or institution is or continues to be lent to any “specified person” referred to in section 13 (3) for any period during the previous year without either adequate security or adequate interest or both, such income or property is to be deemed to have been used or applied for the benefit of a person referred to in section 13 (3) . In the present case, Mr. Rahul has made a substantial contribution of 1,70,000 which exceeds the limit of 1,00,000 to TMV Foundation, he would fall within the category of persons specified under section 13 (3) . TMV Foundation trust gave loan of 5lakhs out of the income of the trust without any security to Mr. Rahul though rate of interest i.e., 12% is higher than the market rate of 11.50%, such income/loan amount of 5lakhs is deemed to have been used or applied for the benefit of Mr. Rahul, being a person specified u/s 13 (3) . By virtue of section 13 (1) (c), the provisions of section 11 or 12 would not apply to such income to exclude from the total income of the P.Y. 2025-26. Consequently, the income of 5lakhs would be considered as specified income u/s 115BBI and be taxable @30%. Further, in terms of section 271AAE, penalty of 5lakhs would also be leviable, calculated at 100% of income provided as a benefit, where the violation is noticed for the first time during any previous year.