M/s Sunshine Care Foundation, a trust registered under section 12AB of the Income-tax Act, 1961, which runs a hospital, also paid consultancy fees…
CA Final · Direct Tax Laws and International Taxation · MTP · May 2026
M/s Sunshine Care Foundation, a trust registered under section 12AB of the Income-tax Act, 1961, which runs a hospital, also paid consultancy fees of 1,20,000 to Dr. Amit Verma on 31.08.2025. The trust did not deduct TDS on consultancy fees paid to the doctor. 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,36,000 being 30% of 1,20,000 would not be treated as application of income for non-deduction of tax at source on the consultancy fees paid to Mr. Amit by M/s Sunshine Care Foundation.
Topics: Assessment of Trusts and Institutions, Political Parties and Other Special Entities
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