taxation of trusts

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In its recent ruling[1], the Income Tax Appellate Tribunal Bench at Delhi (ITAT) has reiterated the well-established principles, including (i) validity of Trusts; (iii) use of Trusts to hold treasury shares[2]; and (iii) the taxation of its income as a representative of the beneficiary/beneficiaries under the provisions of sections 160-166 of the Income-Tax Act, 1961 (IT Act). The ITAT further upheld the principle that trustees are to be assessed as ‘representative assessee’ in the same and like manner as beneficiaries and therefore, creation of a Trust is not a tax evasion device as the Trust will have the same tax liability and exemptions accruing to the beneficiary.Continue Reading Trust is Trustworthy, not a Device to Evade Tax: ITAT Delhi

claim of depreciation of assets and carry forward of expenditure by trusts

In a very recent judgment of Income Tax Appellate Tribunal, Delhi (ITAT) in DCIT(E) v. Smt. Angoori Devi Educational & Cultural Society (Angoori Devi),[1] two very important questions in relation to the taxation of trusts were discussed:

  1. Whether depreciation can be allowed on assets that were acquired out of contributions received, which were exempt from tax since the said expense was allowed as application of income in the past years under Section 11 of the Income Tax Act, 1961 (IT Act);
  2. Whether excess expenditure incurred by a trust in an earlier assessment year could be allowed to be set off against the income of the subsequent year, and in the event of delay in filing the return, whether such a carry forward can be disallowed under section 80 of the IT Act.

Continue Reading Delhi ITAT clarifies the issues around claim of depreciation of assets and carry forward of expenditure by trusts