Can Donor Be A Beneficiary?

Section 13 of the Income tax Act 1961
deals with conditions under which a charitable trust could lose its tax
exemption u/s 11 or 12 (the sections dealing with tax exemptions).

According to Section 13(1)(c)(ii)
Nothing contained in section 11 [or section 12] shall operate so as to exclude
from the total income of the previous year of the person in receipt thereof –
if any part of such income or any property of the trust or the institution
(whenever created or established) is during the previous year used or applied,
directly or indirectly for the benefit of any person referred to in
sub-section(3).

Now when we look at subsection (3) of
Section 13 it lists under sub-clause (b) “any person who has made a substantial
contribution to the trust or institution, [that is to say, any person whose
contribution up-to the end of the relevant previous year exceeds fifty thousand
rupees]”.

The Income tax Act adds the
provision:

“Provided that in the case of a trust
or institution created or established before the commencement of this Act, the
provisions of sub-clause (ii) shall not apply to any use or application,
whether directly or indirectly, of any part of such income or any property of
the trust or institution for the benefit of any person referred to in
sub-section (3), if such use or application is by way of compliance with a
mandatory term of the trust or a mandatory rule governing the institution.

Thus, a charitable institution may
lose its tax exemption if any income or property of the institution during a
financial year is applied, directly or indirectly for the benefit of any person
whose contribution exceeds fifty thousand rupees during that financial year.

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