In the assessment of Charitable Trust, exemption u/s11 was rejected. What is the method of computation of Income? The view of the department is that entire income will be charged to tax. More importantly, no application of Income for charitable purposes will be considered.
To illustrate: Donations 100/- Interest Income ₹ 1000/- Lets us say application is ₹ 995/=. due to not filing the Form10B in time, Exemption rejected. Now the Department says ₹ 1,100/= will be taxed without giving recognition to ₹ 995/- spent towards objectives of the Trust. .
Denial of charitable exemption leads to taxation of full trust income unless registration is restored and compliance achieved. Denial of exemption u/s 11 leads to taxation of the trust's full income without recognition of amounts applied to charitable purposes when the exemption is not in effect by the statutory cutoff due to non compliance with required form filing. In that situation the trust must file an interim return and pay tax on its income until registration or approval is granted, making timely form compliance essential to preserve the exemption and the treatment of applied income. (AI Summary)
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