Dear Sir,

You may discuss the issue with the chartered accountant in respect of financial impacts and you have to obtain permissions for converting and using such land to be used for commercial or residential purpose since it was primarily acquired for educational purpose.

An educational trust specifies that trust funds are to be used for education. In the trust document, the grantor names a trustee and beneficiaries, and also states how trust money is to be used. If the trust will become operational immediately, then the grantor "funds" the trust by transferring property into it. If the trust becomes operational upon the grantor's death, then the trust is funded when the grantor dies. When the trust becomes operational, the trustee controls trust property – and pays for the beneficiary's education -- according to the terms of the trust.

Trust property refers to the assets placed into a trust, which are controlled by the trustee on behalf of the trustor's beneficiaries.

 A settlor may decide to leave the Trust intact, with the Trust Deed in place, and simply transfer it to a new Trustee or the second way to transfer the assets of a Trust to a new one is to wind up the old Trust and transfer the assets to a new Trust. In both ways, you can transfer the assets to new trusts .

 The court also held that trustees of charitable and religious trusts have an obligation to act in the interest of the trust and its beneficiaries. Public interest demands that any transfer or alienation of trust property should be completely transparent, fair and based on public participation. Leave of the court is vital prior to transfer of property held by the trust as there is always the possibility of dissent from some trustees.

In Mohan Lall Seal and ors v Kanak Lall Seal and anr, Calcutta High Court stated that although the act directly applied to private trusts only, it laid down principles that were as much applicable to public as to private trusts.

The judgment places reliance upon the case of Venugopala Naidu & ors v Venkatarayulu Naidu Charities & ors in which the Supreme Court held that trustees and courts should consider the market value of any property to be sold. The Supreme Court reaffirmed its own decision in Chenchu Ram Reddy & anor v Government of Andhra Pradesh & ors in which it held that the property of religious and charitable endowments or institutions must be jealously protected because large segments of the community have beneficial interests in them. Sale by private negotiations not visible to the public eye should not therefore be permitted unless there are special reasons to justify them.

Hi,

You have an option of re-investment  to get the benefits under capital gains of the money comes from sale.

If there is any specific terms mentioned in the trust Deed regarding the disposal of the trust property , the same will be applicatble in disposal of the trust property while the trust is still active.

To transfer the assets of a educational trust  if it is registered as charitable trust  you need to obtain NOC from the Charity commissioner.

You can also aproch a civil court for  permission to sell if incase there is objection from the commissioner.

Tax is applicable on sale proceeds but you can avail benefits under provisions of capital gain by showing reinvesting it, your C.A can help you with it.

An educational trust has been allotted land but that land cannot be transferred to any other entity which carries another kind of operation/trade/profession.

You should notify the government about shelving your plans and then apply for this business. 

permission of the Charity Commissioner has to be obtained 

the trust will be incurring long term capital gains tax on transfer of the lands 

Dear sir,

1. An application has to be made to the Charity Commission and leave of court is necessary. The court must be satisfied with the reasons for accepting  such conversion

2. A conversion rate should be paid since it is for the use of commercial purposes. Educational trust is a charitable purpose, hence tax levied is much less than the tax levied for commercial purposes

3. Tax of conversion would be levied upon the sale proceeds

Thank you

1. Has such sale been allowed in the trust deed of the said Trust?

2. If yes, the it can be sold and the amount can be used for the purpose for which the Trust has been created.

3. The trust shall have to pay the capital gain tax unless its income/gain  has been exempted from paying income tax by law.

- As per Delhi High Court, Trust property cannot be sold /mortgaged or exchanged without without prior permission of the court. This order is applied for all trust, whether public or private.

- A private trust is created for the benefit of a particular group of individuals known as the beneficiary.