Tax Supplement 1
ASSESSMENT OF CHARITABLE TRUSTS
1. Shri Dubbawala Charitable Trust (Regd.) submits the particulars of its income/outgoing for the
pervious year 2008-2009 as below:
Rs
(i) Income from property held under trust for charitable purposes: 10,00,000
(Rs 5,20,000 out of Rs 10,00,000 is received in PY 2009-2010)
(ii) Voluntary contributions (out of which Rs 50,000 will form part of the corpus) 2,00,000
The trust spends Rs 2,77,500 during the previous year 2008-2009 for charitable purposes. In
respect of Rs 5,20,000, it has exercised its option to spend it within the permissible time-limit in
the year of receipt or in the year, immediately fol¬lowing the year of receipt.
The trust spends Rs 2,00,000 during the previous year 2008-2009 and Rs 1,00,000 during the
previous year 2009-2010. Compute and discuss the chargeabiliry of the income of the trust.
Solution : (a) Computation of taxable income and tax liability of the charitable trust for the PY
2008-2009/AY 2009-2010
Particulars Rs
(i) Income from property held under trust for charitable purposes
10,00,000
(ii) Voluntary contributions (Rs 2,00,000 - Rs 50,000) 1,50,000
11,50,000
Less: 15% set apart for future application 1,72,500
Balance 9,77,500
Less: Amount spent during the pervious year for charitable purposes 2,77,500
Balance 7,00,000
Less: Income not received during the previous year 2008-2009 5,20,000
Taxable income 1,80,000
Tax payable: Rate of tax
1,10,000 Nil
40,000 10% 4,000
30,000 20% 6,000
10,000
Add: Education Cess @ 2% 200
Add: SHEC @ 1% 100
Tax payable 10,300
(b) Previous year 2009-2010/AY 2010-2011
Income received during the pervious year 2008-2009 5,20,000
(i) Amount spent for charitable purposes during PY 2008-2009 2,00,000
(ii) Amount spent for charitable purposes during 2009-2010 1,00,000
Taxable income 2,20,000
2. Shri Mungeri Ram Temple Trust (Regd.) derived Rs 6,00,000 income from the property held
under charitable trust dur¬ing the pervious year 2008-2009. About 40% of the income has been
received by the end of the financial year. The trust could spend Rs 60,000 for charitable purposes
during the year 2008-2009 and 40% receipts, received by the year end in 2008-2009, are being
planned to be applied for charitable purposes during the previous year 2009-2010. Compute its
in-come for the said two years if the amount planned to be spent during pervious year 2009-2010
for charitable purposes is Rs 1,00,000.
2 Tax Supplement
Solution : (a) Computation of taxable income of charitable trust: PY 2008-2009/AY 2009-
2010.
Particulars Rs
Income from property held under trust 6,00,000
Less: 15% set apart for future application for charitable purposes 90,000
Balance 5,10,000
Less : Income applied for charitable purposes during the year 2008-2009 60,0000
Balance 4,50,000
Less: Income realised by the close of the previous year—40% of Rs. 6,00,000 2,40,000
Taxable income 2,10,000
(b) Previous year : 2008-2008/AY 2008-2010
Amount set apart in 2008-2009 to be applied for charitable
purposes in 2009-2010 = 2,40,000
Less: Amount applied for charitable purposes = 1,00,000
Taxable income 1,40,000
3. Devdas Charitable Trust submits the particulars of its receipts and outgoing during the previous
year 2008-2009.
as below: Rs
(i) Income from property held under trust for charitable purposes 20,00,000
(ii) Voluntary contribution (out of which Rs 5,00,000 will form part of the corpus) 15,00,000
(iii) Donations paid to blind charitable school 6,00,000
(iv) Scholarship paid to poor students 4,00,000
(v) Amount spent on holding free eye camps in urban slums 3,00,000
(vi) Amount set apart for setting up an old age home by March 2012 10,00,000
Compute the total income of the trust for the previous years 2007-2008 and 2013-2014 if it
spends Rs 5,00,000 during the previous year 2012-2013 and Rs 3,00,000 during the previous
year 2013-2014 in setting up the old age home.
Solution : (a) Computation of the taxable income of the trust for previous year 2007-2008/
AY 2008-2009.
Particulars Rs
(i) Income from property held under charitable trust 20,00,000
(ii) Income from voluntary contributions (Rs 15,00,000-Rs 5,00,000) 10,00,000
Total 30,00,000
Less: 15% set apart for future application 45,00.000
Balance 25,50,000
Less: Income applied for charitable purposes:
(i) Donations to blind charitable school 6,00,000
(ii) Scholarship to poor students 4,00,000
(iii) Free eye camps in urban slums 3,00,000
Total 13,00,000
Amount set apart for old age home 10,00,000 23,00,000
Taxable income 2,50,000
Tax Supplement 3
(b) Previous year 2013-2014 /AY 2014-2015:
Amount set apart for old age home 10,00,000
Less:
1. Amount spent during 2012-2013 5,00,000
2. Amount spent during 2012-2013 3,00,000
Taxable income 2,00,000
4. CD Charitable Trust furnishes the following particulars, for the year 2008-2009:
(i) Sale price of capital assets 15,30,000
(ii) Expenses incurred in connection with sale of the asset 30,000
(iii) Cost of the asset sold (purchased in 2007-2008) 5,00.000
(iv) Compute capital gain in the following cases:
(a) Cost of the new asset to be acquired 15,00,000
(b) Cost of the new asset to be acquired 8,00,000
(c) Cost of the new asset to be acquired 4,00,000
Solution: Computation of capital gain: PY 2008-2009/AY 2009-2010
Particulars Case-l Case-II Case-III
Rs Rs Rs
Sale price Less: 15,30,000 15,30,000 15,30,000
(i) Selling expenses (-) 30,000 (-) 30,000 (-) 30,000
(ii) Cost of the asset Short-term capital gain (-) 5,00,000 (-) 5,00,000 (-) 5,00,000
10,00,000 10,00,000 10,00,000
Less: Exemption in respect of capital gain 10,00,000 3,00,000 Nil
Taxable capital gain Nil 7,00,000 10,00,000
Note: 1. Cost of new asset - cost of asset sold: 8,00,000 - 5,00,000 = 3,00,000
2. Cost of new asset - cost of asset sold: 4,00,000 - 5,00,000 = Nil
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