Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

[Section 13(2)]- When an Income or Property of a Trust or Institution is deemed to have been used or applied for the benefit of a Person referred to in Section 13(3)

The income or the property of the trust or institution or any part of such income or property is to be deemed to have been used or applied for the benefit of a person referred to in section 13(3) in the following cases:

[Section 13(2)]- When an Income or Property of a Trust or Institution is deemed to have been used or applied for the benefit of a Person referred to in Section 13(3)
[Section 13(2)]- When an Income or Property of a Trust or Institution is deemed to have been used or applied for the benefit of a Person referred to in Section 13(3)

(1) [Section 13(2)(a)]- Interest free loan or loan without security  :

If any part of the income or the property of the Trust or institution is or continues to be lent to any person referred to in Section 13(3) for any period during the previous year without either adequate security or adequate interest or both. [Section 13(2)(a)]

(2) [Section 13(2)(b)]- Use of properties without charging adequate rent  :

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 section 13(3) for any period during the previous year without charging adequate rent or other compensation. [Section 13(2)(b)]

Letting out of Trust Property to an interested person is violation of section 13(2):

Where the trust property is let out to a partnership in which the trustee was a partner for a meagre rent, there is clear violation of the requirements of section 13(2Kb), so that the trust has to lose its exemption.

See also  [Section 80C]- Deduction in respect of Life Insurance Premium, Deferred Annuity, Contribution to Provident Fund, Subscription to certain Equity Shares or Debenture, etc.

(3) [Section 13(2)(c)]- Excessive payment for services:

If any amount is paid out of the resources of the trust or institution to any of the persons referred to in section 13(3) for services rendered to the trust or institution but such amount is in excess of a reasonable sum payable for such services. [Section 13(2)(c)]

(4) [Section 13(2)(d)]- Services of trust without adequate remuneration:

If the services of the trust or institution are made available to any person referred to Section 13(3) without adequate remuneration or other compensation. [Section 13(2)(d)]

(5) [Section 13(2)(e)]- Purchase of proper for trust for excessive consideration:

If any share, security or other property is purchased by or on behalf of the trust or institution from any person referred to in section 13(3) during the previous year for a consideration which is more than adequate. [Section l3(2)(e)]

(6) [Section 13(2)(f)]- Sale of trust property for inadequate consideration:

 If any share, security or other property is sold by or on behalf of the trust or institution to any person referred to in section 13(3) during the previous year for a consideration which is less than adequate. [Section 13(2)(f)]

(7) [Section 13(2)(g)]- Diversion of income or property exceeding Rs. 1,000.

 If any income or property of the trust or institution is diverted during the previous year in favour of any person referred to in section 13(3) provided the aggregate value of such income and property diverted exceeds Rs. 1,000 [Section 13(2)(g)]

See also  Location of Supplier and Place of Supply of Goods and Services under GST Law

(8) [Section 13(2)(h)]- Investment in substantial interest concerns:

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 1 .6.1971 in any concern in which any person referred to in section 13(3) has a substantial interest. [Section 13(2)(h)]

However, section 13(4) provides that where the aggregate of the funds invested in the said concern does not exceed 5% of the capital of that concern, the exemption under section 11 will be denied only in relation to such income as arises out of the said investment.

%d bloggers like this: