TaxTMI 
TaxTMI 
Section 11 not to apply in certain cases
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.... or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in ^28[sub-section (3), such part of income as referred to in sub-clauses (i) and (ii)]: Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution : Provided further that in the case of a trust for religious pur­poses or a religious institution (whenever created or estab­lished) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or ....
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....s of business, being profits and gains of any previous year relevant to the assessment year commencing on the 1st day of April, 1984 or any subsequent assessment year. Explanation.-Where the trust or institution has any other income in addition to profits and gains of business, the provisions of clause (iii) of this proviso shall not apply unless the trust or institution maintains separate books of account in respect of such business.] ^31[(iv) any asset referred to in sub-clauses (i), (ia) and (ii) of clause (b) of the third proviso to clause (23C) of section 10 or any accretion to the shares, forming part of the corpus mentioned in the said sub-clauses (i) and (ia) and voluntary contributions referred to in sub-clause (iv) of clause (b) of the said proviso.] ^10[Explanation.-For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to ....
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.... (h) if any funds of the trust or institution are, or continue to remain, invested for any period during the previous year (not being a period before the 1st day of January, 1971), in any concern in which any person referred to in sub-section (3) has a substantial interest. (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely :- (a) the author of the trust or the founder of the institution; ^32[(b) any person whose total contribution to the trust or institution, during the relevant previous year exceeds one lakh rupees, or, in aggregate up to the end of the relevant previous year exceeds ten lakh rupees, as the case may be;] (c) where such author, founder or person is a Hindu undivided family, a member of the family; ^15[(cc) any trustee of the trust or manager (by whatever name called) of the institution;] (d) any relative of any such author, founder, ^33[****] ^16[member, trustee or manager] as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), ^34[****] (c) ^17[, (cc)] and (d) has a substantial interest. (4) Notwithstanding anyth....
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....he total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year.] ^26[(9) Nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if- (i) the statement referred to in clause (a) of the said sub-section in respect of such income is not furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the said previous year.] ^30[(10) Where the provisions of sub-section (8) are applicable to any trust or institution or it violates the conditions specified under clause (b) or clause (ba) of sub-section (1) of section 12A, its income chargeable to tax shall be computed after allowing deduction for the expenditure (other than capital expenditure....
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....). Explanation 3.-For the purposes of this section, a person shall be deemed to have a substantial interest in a concern,- (i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than twenty per cent of the voting power are, at any time during the previous year, owned beneficially by such person or partly by such person and partly by one or more of the other persons referred to in sub-section (3); (ii) in the case of any other concern, if such person is entitled, or such person and one or more of the other persons referred to in sub-section (3) are entitled in the aggregate, at any time during the previous year, to not less than twenty per cent of the profits of such concern.] ***************** NOTES:- 1. Reintroduced vide Section 5 of the Direct Tax Laws (Amendment) Act, 1989 w.e.f. 1-4-1989 Earlier, Omitted vide Section 7 of the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 01-04-1989 before it was read as, "13. Section 11 not to apply in certain cases. - (1) Nothi....
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....erty of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3), - (a) if any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or both; (b) if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation; (c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services; (d) if the services of the trust or institution are made available to any person referred to in sub-sec....
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....ive" also includes a lineal descendant of a brother or sister. Explanation 2 : A trust or institution created or established for the benefit of Schedule Castes, backward classes, Scheduled Tribes or woman and children shall not be deemed to be trust or institution created or established for the benefit of a religious community or caste within the meaning of clause (b) of sub-section (1). Explanation 3 : For the purposes of this section, a person shall be deemed to have a substantial interest in a concern, - (i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than twenty per cent. of the voting power are, at any time during the previous year, owned beneficially by such person or partly by such person and partly by one or more of the other persons referred to in sub-section (3); (ii) in the case of any other concern, if such person is entitled, or such person and one or more of the other persons referred to in sub-section (3) are entitled in the aggregate, at any time during the previous year, to not le....
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....rust or institution of the previous year, the provisions of this section shall have effect only in respect of that part of the income of the trust or institution which does not exceed the amount so enduring or used or applied together with the value of the benefit aforesaid. Explanation 1.-For the purposes of sections 11 and 12 and this section, "trust" includes any other legal obligation and for the purposes of this section "relative" also includes a lineal descendant of a brother or sister. Explanation 2.-A trust or institution created or established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or women and children shall not be deemed to be a trust or institution created or established for the benefit of a religious community or caste within the meaning of sub-clause (i) of clause (b) of this section." And was Amended vide Section 5 of the Finance Act, 1966 w.e.f. 01-04-1966 And was Amended vide Section 5 of the Finance Act, 1963 w.e.f. 01-04-1962 2. Inserted vide Section 7 of the Finance Act, 1972 w.e.f. 01-04-1973 3. Omitted vide Section 7 of the Finance Act, 1983 w.e.f. 01-04-1984 be....
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.... Inserted vide Section 7 of the Finance Act, 1983 w.e.f. 01-04-1983 12. Substituted vide Section 7 of the Finance Act, 1972 w.e.f. 01-04-1973 before it was read as, "(g) if a substantial portion of the income or property of the trust or institution is diverted during the previous year in favour of any person referred to in sub-section (3); or" 13. Inserted vide Section 5 of the Taxation Laws (Amendment) Act, 1975 w.e.f. 01-04-1977 14. Substituted vide Section 9 of the Finance Act, 1994 w.e.f. 01-04-1995 before it was read as, "twenty-five" Earlier, Substituted vide Section 5 of the Taxation Laws (Amendment) Act, 1984 w.e.f. 01-04-1985 before it was read as, "five" 15. Inserted vide Section 7 of the Finance Act, 1972 w.e.f. 01-04-1973 16. Substituted vide Section 7 of the Finance Act, 1972 w.e.f. 01-04-1973 before it was read as, "or member" 17. Inserted vide Section 7 of the Finance Act, 1972 w.e.f. 01-04-1973 18. Inserted vide Section 7 of the Finance Act, 1983 w.e.f. 01-04-1983 19. Inserted vide Section 7 of the Finance Act, 1972 w.e.f. 01-04-1973 20. ....
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....st or institution on or after the 1st day of June, 1973, with a specific direction, that they shall form part of the corpus of the trust or institution, any form or mode, other than investment in shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) in a company (not being a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) or a corporation established by or under a Central, State or Provincial Act); (c) in any other case, the forms or modes referred to in sub-clause (i), sub-clause (ii), sub-clause (iii) and sub-clause (iv) of clause (a). (6) Nothing contained in clause (d) of sub-section (1) shall apply in relation to any monies accumulated or finally set apart and invested or deposited in the manner referred to in clause (b) of sub-section (2) of section 11." 22. Inserted vide Section 10 of the Finance Act, 2000 w.e.f. 01-04-2001 Earlier, Inserted vide Section 5 of the Taxation Laws (Amendment) Act, 1975 w.e.f. 01-04-1977 And was Omitted vide Section 7 of the Finance Act, 1983 w.e.f. 01-04-1983 before it was read....