Section 40(a) Vs Trust Income-Case Law

IT : Disallowances u/s 40(a) are not applicable to computation of income of charitable trust/institution u/s 11.

• Section 40 is applicable only when deductions under sections 30 to 38 are being made in computing the income chargeable under the head "profits and gains of business or profession" under section 28. The exception in section 40 is carved out, only for the purpose of section 28 and not for computing the exemption of income of a charitable trust under section 11. The disallowance made under section 40(a) will only go to enhance the business profit of an assessee whose income is assessable under section 28 and not otherwise. Hence, provisions of section 40(a) are not applicable in case of charitable trust or institution where income and expenditure is computed in terms of section 11 - [2012] 21 taxmann.com 321 (Mumbai - Trib.)