Capital Gains of a TRUST regd. u.s. 12A

[PMR Gowrissankar]

A Trust registered u.s. section 12A is getting income from capital gains by way of sale of capital assets i.e. lands( non agri.). Since the receipts are from sale of capital assets whether the same can be taken as capital receipts and these receipts can be excluded from the mandatory spending of 85% of gross receipts or 85% of the receipts are to be spent compulsorily in the year of receipt? Whether the Trust can be allowed to carry forward the short fall if any? Is it mandatory to invest the proceeds in Fixed Assets only or the same can be utilised for the regular expenditure or for meeting the objects of the trust ?

[CAGOPALJI AGRAWAL]

For the purpose of application of income, it is not relevant whether receipt is of revenue nature or capital. The sale consideration may be applied either for capital expenditure or revenue expenditure but of course, acquired asset must be meant for charitable purposes.

AI Summary

Application of trust income: capital receipts may be applied for capital or revenue purposes if used for charitable objects. Sale proceeds from capital assets held by a registered charitable trust may be applied either for capital expenditure or for revenue expenditure for the trust, and the crucial requirement is that the acquired asset or the expenditure must be meant for and applied to the trust's charitable purposes; the capital/revenue label of the receipt is not decisive for application of income.