Examine the following independent case scenarios of charitable trust/institutions based on the provisions of the Income-tax Act, 1961: (i) Sahitya…

(i) Section 11 (7) provides that where a trust has been granted registration under section 12AB and the registration is in force for a previous year, then, such trust cannot claim any exemption under any provision of section 10 [other than exemption of agricultural income under section 10 (1) ]. Therefore, a charitable trust cannot claim exemption under section 10 (15) in respect of interest income, since it has voluntarily opted for the special dispensation under sections 11 to 13, and consequently has to be governed by the provisions of these sections. However, it can claim exemption under section 10 (1) in respect of agricultural income, since section 11 (7) provides an exception in respect of such income. Therefore, the claim of Sahitya charitable trust, as regards exemption under section 10 (15) , is not correct. (ii) As per section 13 (3) , a relative (wife, in this case) of the founder is regarded as a specified person, and therefore any use or application of the income or property of the trust for her benefit attracts examination under section 13. Further, section 13 (2) (b) provides that where any land, building or other property of the trust is made available for the use of a specified person without charging adequate rent or compensation, such use shall be deemed to be application of trust property for the benefit of that person. In the present case, the trust has charged rent of 20,000 per month whereas the prevailing market rent for similar properties is 70,000 per month, which clearly indicates that the rent charged is not adequate. Consequently, the provisions of section 13 (1) (c) become applicable and such part of income or property would not be eligible for exemption and would be taxed under section 115BBI at 30%. Further, to avoid income of the trusts or institutions to be used for the benefit of specified persons under section 13 (3) , penalty is leviable under 271AAE on the amount of income provided as a benefit. (iii) Mr. Karan's status has to be examined with reference to section 13 (3) (b), which provides that any person whose contribution during the relevant previous year exceeds 1lakh, or whose aggregate contribution up to the end of the relevant previous year exceeds 10lakh, shall be treated as a specified person. In the present case, although Mr. Karan contributed only - 75,000 during the Financial Year 2025-26, his aggregate contribution to the trust amounts to 10,25,000, which exceeds the prescribed aggregate limit of 10lakh. Therefore, he qualifies as a person referred to in section 13 (3) , and any use or application of the income or property of the trust for his direct or indirect benefit will attract the provisions of section 13 (1) (c). During the year, the trust sold hospital furniture to Mr. Karan for 1,20,000 against a fair market value of 2,80,000. Since the property has been sold for inadequate consideration to a specified person, the transaction falls within the scope of section 13 (2) (f), which deems such arrangements as application of trust property for the benefit of a specified person. As a result, the provisions of section 13 (1) (c) become applicable and such part of income or property would not be eligible for exemption and would be taxed under section 115BBI at 30%. Further, to avoid income of the trusts or institutions to be used for the benefit of specified persons under section 13 (3) , penalty is leviable under 271AAE on the amount of income provided as a benefit.