TRUST
Section 11(5) in The Income- Tax Act, 1995
(5) 1 The forms and modes of investing or depositing the money referred to in clause (b) of sub- section (2) shall be the following, namely:-
(i) investment in savings certificates as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 3 (46 of 1959 ), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government;
(ii) deposit in any account with the Post Office Savings Bank;
(iii) deposit in any account with a scheduled bank or a co- operative society engaged in carrying on the business of banking (including a co- operative land mortgage bank or a co- operative land development bank). Explanation.- In this clause," scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955 ), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959 ), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 19704 (5 of 1970 ) or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 198 05 (40 of 1980 ), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934 );
(iv) investment in units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963 );
(v) investment in any security for money created and issued by the Central Government or a State Government;
(vi) investment in debentures issued by, or on behalf of, any company or corporation both the principle whereof and the interest whereon are fully and unconditionally guaranteed by the Central Government or by a State Government;
(vii) investment or deposit in any 6 public sector company];
(viii) deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long- term finance for industrial development in India and which is approved by the
1. Inserted by the Finance Act, 1983, w. e. f. 1- 4- 1983.
4. Ibid.
5. Ibid.
6. Substituted for" Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956 )" by the Direct Tax Laws (Amendment) Act, 1989, w. e. f. 1- 4- 1989.
Central Government for the purposes of clause (viii) of sub- section (1) of section 36;
(ix) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long- term finance for construction or purchase of houses in India for residential purposes and which is approved by the Central Government for the purposes of clause (viii) of sub- section (1) of section 36;
(x) investment in immovable property. Explanation.-" Immovable property" does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth;]
(xi) 1 deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964 );]
(Xii) 2 any other form or mode of investment or deposit as may be prescribed.]
1. Inserted by the Finance Act, 1984, w. e. f. 1- 4- 1985.
2. Inserted by the Direct Tax Laws (Amendment) Act, 1989, w, e. f. 1- 4- 1989.
capital gains arising from the transaction in acquiring the new capital asset, the amount of capital gains so utilised would be regarded as having been applied to the charitable or religious purposes of the trust. 6 While under section 11 (1) (a) the tax will be levied in the year to which the income relates, under section 11 (3) the income would be chargeable in the year in which the amounts cease to be accumulated for the specific purpose mentioned. Thus when amounts are taxed under section 11 (3) the benefit which would have been available to a trust in respect of 25 per cent of its income or Rs. 10, 000 under section 11 (1) (a) would also be lost. 7 If a trust desires to accumulate income in excess of the limits specified in section 11 1 the conditions specified in section 11 (2) have to be fulfilled in respect of the entire accumulation and not merely in respect of the accumulation in excess of 25 per cent of the income. 5 The business income of a trust as disclosed by the accounts plus its other income will be the income of the trust for purposes of section 11 1. The trust must spend at least 75 per cent of this income and not accumulate more than 25 per cent thereof. Excess accumulation if any will become taxable under section 11 1. 9 Donations received by a charitable trust from the members of the public being capital receipts cannot be regarded as income of the trust. Accordingly donations should be excluded from the income of the trust for the purpose of calculating the accumulations limit of 25 per cent except in cases covered by section 12 (2) 10 With a view to expediting the disposal of applications filed by trusts for condoning the delay, the Board had passed a general order under section 119 (2) (b) by which the Commissioners have been authorised to admit belated applications under section 11 (2) read with rule 17.