Mr. X had built a temple on a piece of agricultural land belonging to himself in the year 1931/1932 and continued to run and manage the temple himself during his lifetime. After his demise, his lineal descendants have been running and maintaining the temple till date.

In the year 2015 a Trust (Religious) was formed and registered under Sec 12A/12AB of the IT Act,1961. One of the conditions imposed by the Dept at the time of registration was that the land on which the temple was built should be registered in the name of the Trust. Accordingly, the land, measuring 300 sq yards, was registered by way of a gift in the name of the Trust in March 2016. The Trust has been complying with all the requirements of the IT Act and filed its ITRs up to date.

The size of the Trust is very small. Its corpus is much less than Rs. 10 Lakhs and its annual income less than Rs.50,000/, coming from the corpus investments. In view of the compliance issues for a small Trust like this, we propose to surrender the 12AB registration.

The question now is concerning Sec 115TD implications. The Trust’s assets consist of a small amount of corpus fund invested in specified modes and the land as above that stands in the name of the Trust. There are no other assets. Even the value of the land is not significant because it is situated in a small village. But the problem is if the MMR rate of exit tax is calculated, roughly half of the corpus amount will go towards 115TD tax and the balance amount is not even enough to manage the temple.

Now our question is whether the land, on which the temple was constructed way back in the year 1931/32, could be excluded from the list of assets to be considered to determine the fair market value for payment of tax under Sec 115TD. The physical possession of the land was given away several decades ago when the temple was built. The subsequent execution of a registered gift deed to formalize the transfer of land to the newly formed trust is a necessary legal step. This action does not alter the historical fact that the asset was acquired and held for a charitable purpose for decades before the trust’s official registration.
Since no registered trust existed during the initial period starting from 1931/32, no income tax exemption under Section 11 or 12 had been claimed or allowed for that land during the period before registration became effective.

We wish to add that even after surrendering the registration, the Trust will continue as an unregistered trust and carry on with the same objectives as before.

We solicit your valued views with regard to excludability or otherwise of the land for the purpose of determining the fair market value of assets wrt the above section.