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Assessment of charitable trust?????

varun sharma ( CA Final , M.Com) (87 Points)

30 October 2009

helllo to all of you..

My query is regarding the assessment of charitable trust. My ques is A charitable is alllowed to take 100% exemption while calculating their income. means 100% exp of expediture made. so i a charitable trust purchase a capital asset ( condition r fulfillled) then trust is allowed to take the exp 100% of the amount on pur that capital asset. but whether the dep will also be allowed as an deduction on that particular asset.?? this is my doubt. In act it is written that dep is also allowed but practically dep made an objection sometimes that double benefit will not be allowed to assessee. Pls rep me with logical views of urs to justfy

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3 Replies

GAURAV BEHL (CA-FINAL ) (228 Points)
Replied 30 October 2009

dear varun sharma,

exemption is allowed to every charitable trust from taxability of its income.. now depreciation is an expense.

income=revenue -expense.

hence depreciation being an expense related to the revenue of a charitable trust it is allowed..

even if depreciation is disallowed it would be a mere bookish increase in the income of the trust which is already exempt ... amount of income does not matter at all.

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varun sharma ( CA Final , M.Com) (87 Points)
Replied 31 October 2009

Dear Gaurav i think u dont understand my ques fully. if u known abt the asst of charitable trust thn u know that all the income of charitable trust which is ''applied'' for that purpose is fully exempt. and u know the meaning of '' applied''. so Depericiation is also an application of income??? this is my ques. there is no specifically mentioned in the act. when the asset is purchased by chartiable trust and whether both benefit will be availbale or not i.e cost of capital asset expt and dep on that asset.... however A case was held : Institute of Banking Personnel Selection (BOM). in which the asset is only transfered to the charitable trust and no cost have been incured by trust and in this case dep benefit is allowed becuse asset is trfd by some one to trust free of cost..... now tell me now Gaurav

Sudarshan (27 Points)
Replied 14 November 2009

Dear Varun,

If the charitable trust has purchased the asset, then the cost of the asset shall be an application of income. However the depreciation on the cost of the asset cannot be treated as an application of income. Since this amounts to UNJUST ENRICHMENT. This was the view of the Hon'ble Supreme court in Escorts Ltd. [199 ITR 43] judgment. However if the trust receives the asset as a gift, then in that case depreciation can be claimed as in the case of Inst of Banking personnel selection.