Section 16 in The Kerala Agricultural Income Tax Act, 1991
16. Charitable Trusts and Institutions.
(1)Subject to the provisions of this Act the total agricultural income of any charitable trust does not include,(a)any agricultural income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in the State; and, where any such income is accumulated or set apart for application to such purposes in the State, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent of the agricultural income from such property;(b)any agricultural Income derived from property held under trust in part only for such purposes, to the extent to which such income is applied to such purposes in the State; and, where any such income is finally set apart for application to such purpose in the State, to the extent to which the income so set apart is not in excess of twenty-five percent of the agricultural income from such property.Explanation: - For the purposes of clauses (a) and (b), if in the previous year, the agricultural income applied to charitable or religious purposes in the State falls short of seventy-five percent of the agricultural income derived during that year from property held under trust or; as the case may be, held under trust in part by any amount-(i)for tile reason that the whole or any part of the agricultural income has not been received during that year, or(ii)for any other reason, then-(a)in the case referred to in clause (i) so much of the agricultural income applied to such purposes in the State during the previous year in which the agricultural income is received or during the previous year immediately following as does not exceed the said amount, and(b)in the case referred to in clause (ii) so much of the agricultural income applied to such purposes in the State during the previous year immediately following the previous year in which the agricultural income was derived as does not exceed the said amount, may, at the option of the person in receipt of the agricultural income [such option to be exercised in writing before the expiry of the time allowed under sub-section (1) or sub-section (2) of Section 35 whether fixed originally or on extension for furnishing the return of agricultural income], be deemed to be agricultural income applied to such purposes during the previous year in which the agricultural income was derived; and the agricultural income so deemed to have been applied shall not be taken into account in calculating the amount of agricultural income applied to such purposes, in the case referred to in clause (i), during the previous year in which the agricultural income is received or during the previous year immediately following, as the case may be, and, in the case referred to in clause (ii), during the previous year immediately following the previous year in which the agricultural income was derived.(2)Where any agricultural income in respect of which an option is exercised under the Explanation to sub-section (1) is not applied to charitable or religious purposes in the State during the period referred to in clause (a) or, as the case may be in clause (b) of the said Explanation, then such income shall be deemed to be the income of the person in receipt thereof: -(a)in the case referred to in clause (i) of the said Explanation, of the previous year immediately following the previous year in which the income was received, or(b)in the case referred to in clause (ii) of the said Explanation, of the previous year immediately following the previous year in which the income was derived.(3)Where seventy-five per cent of the agricultural income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in the State during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in the State, such income so accumulated or set apart shall not be included in the total agricultural income of the previous year of the person in receipt of the income provided the following conditions are complied with, namely:-(a)such person specifies, by notice in writing given to the Agricultural Income tax Officer in the prescribed manner, the purpose for which the agricultural income is being accumulated or set apart and the period for which the agricultural income is to be accumulated or set apart, which shall in no case exceed ten years;(b)the money so accumulated or set apart is. -(i)invested in any Government security as defined in , clause (2) of Section 2 of the Public Debt Act, 1944 (Central Act 18 of 1944), or in any other security which may be approved by the State Government in this behalf, or(ii)deposited in any account with the Post Office Savings Bank including deposits made under the Post Office (Time Deposits) Rules, 1970 or a scheduled bank or a cooperative society engaged in carrying on the business of banking (including the Kerala State co-operative Agricultural and Rural Development Bank), or(iii)deposited in an account with the Kerala Financial Corporation established under the State Financial Corporations Act, 1951 (Central Act 63 of 1951),Explanation: - For the purposes of sub-clause (ii), "Scheduled bank" means the State Bank of India constituted under the State India Act, 1955, a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, a corresponding new bank constituted under Section 3 of the Banking Companies (Acquisition and Transfer of undertakings) Act, 1970, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 or any other bank, being a bank included in the second schedule to the Reserve Bank of India Act, 1934.(4)Any Agricultural income referred to in sub-section (3) which,(a)is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or(b)ceases to remain invested in any security referred to in sub clause (i) or deposited in any account referred to in sub-clause (ii) or sub-clause (iii) of clause (b) of that sub-section, or(c)is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in sub-clause (a) of that sub-section or in the year immediately following the expiry thereof, shall be deemed to be the agricultural income of such person of the previous year in which it is so applied or cease, to be so accumulated or set apart or ceases to remain so invested or deposited, or, as the case may be, of the previous year immediately following the expiry of the period aforesaid.(5)Notwithstanding anything contained in sub-section (4) where, due to circumstances beyond the control of the person in receipt of the agricultural income, any such income invested or deposited in accordance with the provisions of clause (b) of sub-section (3) cannot be applied for the purpose for which it was accumulated or set apart, the Agricultural Income tax Officer may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in the State as is specified in the application by such person and as is in conformity with the objects of the trust; and thereupon the provisions of sub section (4) shall apply as if the purpose specified by such person in the application under this sub-section were a purpose specified in the notice given to the Agricultural Income tax Officer under clause (a) of sub-section (3).(6)Nothing contained in clause (a) or clause (b) of sub-section (1) shall operate so as to exclude from the total agricultural income of the previous year of the person in receipt thereof-(a)any part of the agricultural income from the property held under trust for private religious purposes which does not ensure for the benefit of the public;(b)in the case of a trust for charitable purposes or a charitable institution, any agricultural income thereof, if the trust or institution is created or established for the benefit of any particular religious community or caste;(c)in the case of a trust for charitable or religious purposes or a charitable or religious institution any agricultural income thereof-(i)if under the terms of the trust or the rules governing the institution any part of such income ensure; or(ii)if any part of such income or any property of the trust or institution is during the previous year, used or applied, directly or indirectly for the benefit of any person referred to in sub-section (8).(7)Without prejudice to the generality of the provisions of clause (c) of sub-section (6), the income or the property of the trust or institution or any part of such income or property of the trust or institution shall for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in subsection (8),-(a)if any part of the income or property of the trust or institution is, or continues to be, lent to any person referred to in sub-section (8) for any period during the previous year without either adequate security or adequate Interest or both;(b)if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (8) out of the resources of the trust or institution, for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services;(c)if a substantial portion of the income or property of the trust or institution is diverted during the previous year in favour of any person referred to in sub-section (8);(d)if any funds of the trust or institution are, or continue to remain, invested for any period during the previous year in any concern in which any person referred to in sub-section (8) has a substantial interest.(8)The persons referred to in sub-section (7) are the following namely: -(a)the author of the trust or the founder of the institution;(b)any person who has made a substantial contribution to the trust or institution;(c)any trustee of the trust or manager (by whatever it, name called) of the institution;(d)any relative of any such author, founder, person or member as aforesaid;(e)any concern in which any of the person referred to in clauses (a), (b), (c) and (d) has a substantial interest.(9)For the purposes of this section, -(a)"Trust" means a trust created for charitable purposes and includes any oth9r legal obligations and "relative", in relation to an individual means-(i)spouse of the individual;(ii)brother or sister of the individual;(iii)brother or sister of the spouse of the individual;(iv)any lineal ascendant or descendant of the individual;(v)any lineal ascendant or descendant of the spouse of the individual;(vi)spouse of a person referred to in sub-clause (ii), sub-clause(iii), sub clause (iv) or sub clause (v);(vii)any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.(b)a trust or institution created or established for the benefit of Schedule castes, Backward Classes, Scheduled Tribes or women and children shall not be deemed to be a trust or institution created or established for the benefit of a religious community or caste within the meaning of clause (b) of sub-section (6);(c)"Charitable purposes" include relief of the poor, education, medical relief and the advancement of any other object of public utility;(d)a person shall be deemed to have a substantial interest in a concern-(i)in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) carrying not less than twenty percent of the voting power are, at any time during the previous year, owned beneficially by such person or partly by such person and part by one or, more of the other persons referred to in sub-section (8).(ii)in the case of any other concern, if such person is entitled, or such person and one or more of the other persons referred to in sub-section (8) are entitled in the aggregate, at any time during the previous year to not less than twenty per cent of the profits of such concern.(10)Any trust or institution created for charitable or religious purposes may make an application in the prescribed form and in the prescribed manner to the Deputy Commissioner of Agricultural Income Tax within six months from the date of commencement of this Act or from the date of creation of the trust or institution, whichever is later, along with a copy of the instrument creating the trust or the bye-law of the institution as the case may be, for registration: Provided that the Deputy Commissioner may admit an application for registration presented after the above date if he is satisfied that there was sufficient reason for not presenting an application in time.(11)The Deputy Commissioner may, on receipt of the application if he is satisfied that the trust or the institution is created for religious or charitable purposes and not for avoiding or reducing the tax payable under this Act, may grant registration to such trust or institution: Provided that before passing an order rejecting an application for registration the applicant shall be given an opportunity of being heard.(12)If the Deputy Commissioner is satisfied that any trust or institution registered under this section, is not utilising the agricultural income in accordance with the provisions in the instrument or deed creating the trust or institution or otherwise tries to avoid or reduce the tax payable under this Act he may cancel the registration after giving the trust or institution a responsible opportunity of being heard.(13)A trust or institution which is not registered in the manner provided in sub-section (10) above or the registration of which has been cancelled under this section shall be liable to tax on the total agricultural income and the provisions of this Chapter shall not apply to such trust or institution.
