Utilization of income from trust property

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Sunil Garg (Querist)
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18 August 2011 In income & expenditure statement, A Trust has transferred the income to Corpus Fund for the purpose of purchasing land, building and trust's capital assets, which was purchased/invested during the year. So that the surplus income may remain below 15%.
Whether allowable? If not, how to purchase Trust's capital assets/building in absence non availability of Funds?

CA Hardik Bunha

CA Hardik Bunha (Expert)
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18 August 2011 as per It Act it must be 15%. Trust should maintain its profit 85% for its object. It is not allowable. Trust can take loan from its member. When after few years Trust got sufficient profit paid loan to members. But be careful that during that period member should not ceased.

Sunil Garg

Sunil Garg (Querist)
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20 August 2011 u didn't understand the question...

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H B BHASKAR SHENOY

H B BHASKAR SHENOY (Expert)
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20 August 2011 Sunil, your question has two parts.
1. Can revenue funds be transferred to a corpus for acquistion of capital assets by a trust?
Yes - read options under section 11 to be declared to the Assessing Officer before due date for filing of returns. You anweer lies there.
2. How can the trust buy property when there are no funds available?
No- it can't buy. for that matter even you and i cannot buy if we don't have funds. However, note: For a trust to buy property out of revenue funds where such property is to be used for its objectives, will be considered as applied to objectives. So they may not have a problem if you are considering a situation where they have general revenue funds but no earmarked funds.