Earlier trust has been registered u/s 12A and its entire income has been exempt. However, Registration of trust has been cancelled by department. Now IT deptt. wants to levy tax on the ground that :
Since registration of trust has been withdrawn and it will be tentamount to transfer of assets from registered trust to unregistered trust. Hence, income has not been applied for specified objects and capital funds( Assets - Liabilities) lying at the time of withdrawl is taxable.
I wish to add here that entire income has been utilised for specified objects during exemption.
Tax Department Cancels Trust's Section 12A Registration, Seeks to Tax Capital Funds as Asset Transfer A trust, previously registered under section 12A and enjoying tax exemptions, had its registration canceled by the tax department. The department now seeks to impose taxes, arguing that the cancellation equates to transferring assets from a registered to an unregistered trust, making the capital funds taxable. The trust argues that all income was used for specified purposes during the exemption period. A respondent inquired if the issue had been clarified, indicating ongoing uncertainty or unresolved aspects in the discussion. (AI Summary)
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