Budget 2017: Clarity of procedure in respect of change or modifications of object and filing of return of income in case of entities exempt under sections 11 and 12
The existing provisions of section 12A of the Act provide for conditions for applicability of sections 11 and 12 in relation to the benefit of exemption in respect of income of any trust or institution.
Further, the provisions of section 12AA of the Act provide for registration of the trust or institution which entitles them to the benefit of sections 11 and 12. It also provides the circumstances under which registration can be cancelled, one such circumstance being satisfaction of the Principal Commissioner or Commissioner that its activities are not genuine or are not being carried out in accordance with its objects subsequent to grant of registration. However, at present there is no explicit provision in the Act which mandates said trust or institution to approach for fresh registration in the event of adoption or undertaking modifications of the objects after the registration has been granted.
Therefore, it is proposed to amend section 12A so as to provide that where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996] and, subsequently, it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, it shall be required to obtain fresh registration by making an application within a period of thirty days from the date of such adoption or modifications of the objects in the prescribed form and manner.
Further, as per the existing provisions of said section, the entities registered under section 1 2AA are required to file return of income under sub-section (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed u/s 139 of the Act or otherwise.
In order to provide clarity in this regard, it is proposed to further amend section 1 2A so as to provide for further condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act.
These amendments are clarificatory in nature.
These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years.
[Clauses 9 & 10]
Extract of relevant clause from Finance Bill, 2017
Amendment of section 12A.
9. In section 12A of the Income-tax Act, in sub-section (1), with effect from the 1st day of April, 2018,—
(i) after clause (aa), the following clause shall be inserted, namely:—
“(ab) the person in receipt of the income has made an application for registration of the trust or institution, in a case where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996], and, subsequently, it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, in the prescribed form and manner, within a period of thirty days from the date of said adoption or modification, to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA;”;
(ii) after clause (b), the following clause shall be inserted, namely:—
“(ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section.”.
Amendment of section 12AA.
10. In section 12AA of the Income-tax Act, with effect from the 1st day of April, 2018,—
(a) in sub-section (1), after the word, brackets and letters “clause (aa)”, the words, brackets and letters “or clause (ab)” shall be inserted;
(b) in sub-section (2), after the word, brackets and letters “clause (aa)”, the words, brackets and letters “or clause (ab)” shall be inserted.
