Filing & Reporting Form 10B (From A.Y. 2023-24 & Onwards)

Applicability

Form 10B notified vide Notification No. 7/2023 dated 21st February 2023 is applicable from Assessment Year 2023-24 onwards i.e. for A.Y. 2023-24 and upcoming years. However, old Form 10B is also available on portal and is applicable till Assessment Year 2022-23 only. For filings upto Assessment Years 2022-23, Form 10B is available on e-Filing portal and can be accessed at– “e-File —–> Income Tax Forms —-> File Income Tax Forms —> Persons not dependent on any Source of Income—-> Form 10B” for assignment to CA. or Alternatively, the form can be assigned using “My CA” functionality as well. Hence, re-notified Form 10B shall be applicable where any of the below mentioned conditions are satisfied-

The total income of auditee, without giving effect to the provisions of below mentioned clauses/sections, as applicable-

a) sub-clauses (iv), (v), (vi) and (via) of clause 23C of section 10

b) sections 11 and 12 of the Act, exceeds rupees five Crores during the previous year

Auditee has received any foreign contribution during the previous year

Auditee has applied any part of its income outside India during the previous year. For more details, Rule 16CC and Rule 17B of Income tax Rules, 1962 may be referred.

Here Auditee, Any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub – clauses (iv), (v), (vi) or (via) of clause (23C) of section 10 of the Act or any trust or institution referred to in sections 11 or 12 of the Act shall be referred as “auditee” in this form.

Process to file Form 10B (A.Y. 2023-24 onwards) on e-Filing portal

Follow the below steps for filing Form 10B:

Step-1: Taxpayer can assign Form 10B (AY 2023-24 onwards) to CA, from E-file form mode —->. Step-2: CA can check the assignment in “For your action tab” under worklist—>

Step 3: CA can either accept or reject the assignment—–>

Step 4: In case CA accepts the assignments, he/she needs to upload the JSON along with PDF attachments under offline mode of filing—–>

Step 5 : Once CA submits the JSON with valid attachments, taxpayer either has to accept/reject the form uploaded by CA through the Wordlist’s “For Your Action” tab.

Due Date for filing Form 10 B.

Section 12A(1)(ba) provides that the provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of section 139(4A), within the time allowed under 139(1) or 139(4) of the Act.

The due date of furnishing Audit reports in Form 10B/Form 10BB for the Financial Year 2022-23, which is 30.09. 2023 has now been extended by the Central Board of Direct Taxes (CBDT) to 31.10. 2023. The due date of furnishing of Return of Income in Form ITR-7 for Assessment Year 2023-24, which is 31.10.2023 is also extended to 30.11.2023 through CBDT Circular No. 16/2023 in 225/177/2023/ITA-II dated 18.09.2023.

An Offline utility can be downloaded

An offline utility can be downloaded. Path to download: Income Tax Department-> Go to download section——> Income tax forms——> Form 10B (A.Y.2023- 24 onwards) —–> click on form utility. Alternatively, CA can access this path by clicking on download button under offline utility option at the time of uploading form. Always keep in mind to use the latest version of utility, available on E-filling portal to download and upload the json. When user completes other panels in the form then only the panels of schedules will be available to fill.

Uploading of Form

Resolution: • For CAs, only DSC option is available for uploading of Form.

• For taxpayers (auditee) other than companies, both DSC and EVC options are available to accept the form uploaded by CA.
• For Companies, only DSC option is available to accept the form uploaded by CA. For Rule 16CC

Foreign contribution

Rule 17B, the word “foreign contribution’’ shall have the same meaning assigned to it in clause (h) of sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010).

Records for Schedules

How to provide records for Schedules having Table i.e. “Add Details” option and “Upload CSV” option together? Resolution: For the Schedules having “Add details and “Upload CSV” both options together, please note the following:-

a) For number of records up to 50: Either of table or CSV option can be used. In both cases, data will be reflected in table.

b) For number of records more than 50: Only CSV option can be used. The data will appear as CSV attachment only.

c) While using upload CSV option, followings steps to be followed:- “Download Excel template→ Add Records→ Convert Excel template into .csv file→ upload .csv file

d) Whenever a CSV file is uploaded, it will overlap the existing records/data, if any. Old records will be deleted and records uploaded through latest CSV will prevail.

Upload Balance Sheet, Profit and loss and tax audit report

Auditor is required to upload the Balance Sheet, Profit and Loss account and audit report under 3CA/3CB in PDF or zip file at the time of submission of form on e-filling portal under supporting documents. There is an optional attachment option as well named “Miscellaneous Attachments” where any other relevant document may be attached. Please note that size of each document shall not exceed 5 MB and all the attachments together should not exceed 50MB.Also all the attachments should be in PDF/ZIP format only and all the files in ZIP folder should contain files in PDF format only.

Revision of Form 10B

Filed Form 10 B can be revising. The option for revision of Form 10B is available.

Completion of Form submission

Filing of form is considered to be completed only when taxpayer accepts the form submitted by the CA and verifies the same with active DSC or EVC registered on e-filing portal.

View the filed form

Filed form details can be viewed under e-File tab—>Income Tax Forms—>View Filed Forms under CA and Taxpayer’s login.

10B Vs 10 BB

Income-tax Amendment (3rd Amendment) Rules,2023 has amended Rule 16CC and Rule 17B. Irrespective of the fact, which form was filed in the previous assessment years, applicability of the form 10B and 10BB from A.Y. 2023-24 onwards shall be decided based on amended Rule 16CC and Rule 17B.

STATEMENT OF PARTICULARS IN FORM 10B:

Form 10B requires detailed information about the financial operations and compliance of the organization. Some of the key contents include:

Basic Details;

1. PAN: Clause 1 Permanent Account Number (PAN) of the assessee whose accounts are being audited under section 12A/10(23C) of the Income Tax Act.

2. Name: Clause 2 mandates that the name of the audited entity under sections 12A or 10(23C) should be reported in accordance with its PAN. If the entity’s name changes, the reporting should reflect the name at the relevant time, and this name change should be noted as an observation in the audit report.

Name of the Assessee: The name of the entity being audited (the auditee) should be reported in accordance with the name specified in their Permanent Account Number (PAN).

Name Change during the Financial Year: If the entity undergoes a name change during the financial year being audited, the name at the end of that financial year should be reported.

Name Change after Financial Year but Before Audit Report: If the name change occurs after the close of the financial year but before the signing of the audit report, the name as of the year-end date should be mentioned.

Observation in Audit Report: Regardless of when the name change occurs, the audit report should include an appropriate observation to clarify the fact of the name change.

3. Assessment Year : Clause 3 requires the mention of the assessment year relevant to the previous year for which the accounts are being audited. In other words, when preparing audit documentation, it is necessary to specify the assessment year that corresponds to the financial year under audit. This ensures clarity and accuracy in the reporting and assessment of income and tax liability for the specific period being examined.

4. Previous Year: Clause 4 instructs that the period of the previous year should be stated. It further clarifies that, under the Act, the previous year consistently starts on April 1st and concludes on March 31st. Therefore, when providing information in audit documentation, it is essential to specify the relevant previous year according to this standardized schedule, which is April 1st to March 31st. This clarification ensures uniformity in reporting and aligns with the fiscal year used for tax assessment purposes in India.

5. Registered address: Clause 5 stipulates the following requirements related to the registered address of the auditee (the entity being audited) in audit documentation:

Registered Address: The audit report should include the registered address of the auditee. This address is expected to match the one communicated by the assessee to the Income Tax Department.

Verification of Address: The auditor should verify the relevant details of the assessee’s address using available income tax records or by checking the profile of the assessee on the Income Tax portal.

Observation for Discrepancies: If there is a discrepancy between the registered address mentioned in the audit report and the information found in income tax records or on the Income Tax portal, this difference should be noted as an observation in the audit report.

6. Other Addresses: Clause 6 outlines the requirement to include any other address, if applicable to the auditee, in the audit documentation. Specifically, it pertains to trusts, institutions, hospitals, etc., and addresses where books of accounts and documents are maintained, which may be different from the registered office. Here’s a summary of the key points:

Other Address Inclusion: The audit report should mention any other address that is relevant to the auditee. This is especially important for entities like trusts, institutions, and hospitals.

Bookkeeping Location: According to Rule 17AA(3), these entities are generally required to maintain their books of accounts at their registered office. However, there is provision for the management to decide on an alternative location for record-keeping through a resolution.

Intimation Requirement: If such a resolution is passed to maintain records at a location other than the registered office, the entity must inform the jurisdictional Assessing Officer in writing within seven days of passing the resolution. This written communication should include the full address of the alternate location and be signed by the person authorized to sign the income tax return under section 140 of the Income Tax Act.

Reporting in Audit Report: Clause 6 of the audit report should provide details of this other place where books of accounts and documents are maintained based on the resolution passed by the entity. If the required intimation was not given within the prescribed time frame or if no resolution has been passed, the auditor should include observations or qualifications in the relevant section of the audit report (Form No. 10BB/10B).

7. Legal : Clause 7 requires the auditor to specify the status or type of the assessee for whom the audit has been conducted under section 12A/10(23C) of the Income Tax Act. Specifically, the auditor should mention whether the auditee falls into one of the following categories: Trust, Society, Company, or any other relevant classification. This information helps in properly categorizing and identifying the type of entity being audited under the relevant tax provisions.

8. Whether the auditee is established under an instrument? Clause 8 of the audit report pertains to whether the auditee is established under a legal instrument such as a trust deed or a will. This requires the auditor to confirm whether the auditee is established under a legal instrument and report this information as either ‘Yes’ or ‘No’ in the audit report. Verification can be done through examination of relevant documents or management representation, and existing auditee reports can also be used for cross-verification when available. Here’s a summary of the key points:

Establishment under an Instrument: The auditor is required to mention whether the auditee has been established under a legal instrument, such as a trust deed, will, or similar document.

e-Filing Utility Requirement: The e-filing utility used for tax reporting typically asks the auditor to respond with ‘Yes’ or ‘No’ under this clause to indicate whether the auditee is established under such an instrument.

Verification: The auditor can verify this information by examining the establishment document, such as the Trust Deed or Will, which may be provided by the management of the auditee.

Management Representation Letter: If the auditee is not registered under any instrument, the auditor should obtain a management representation letter from the auditee to verify this fact.

Re-verification: The auditor can also cross-check this information by referring to any reporting done by the auditee in Form No. 10A/10AB, if such reports have been made available by the auditee.

9. Registration: Details of registration/provisional registration or approval/ provisional approval or notification of the auditee under the Income-tax Act (details of all the registration/provisional registration/approval/provisional approval/notification which are valid during the previous year should be provided, however where the auditee has got the registration/approval after provisional registration/approval the details of provisional registration/approval need not be provided.

The information provided elaborates on the specific considerations and responsibilities of the auditor in cases where the auditee has been granted provisional registration or approval. Here are the key points to understand:

Provisional Registration/Approval: This clause applies when the auditee has received provisional registration or approval for its activities.

Reporting Commencement of Activities: The auditor is required to report whether the auditee’s activities commenced during the previous year. If they did commence, the auditor should also report the date of such commencement.

Importance of Commencement Date: This information is crucial because entities with provisional registration are typically required to file an application for final registration within six months of commencing their activities or six months before the expiry of their provisional registration, whichever comes earlier.

Verification and Cross-Verification: The auditor should verify from the auditee the specific date considered as the date of commencement and the reason for choosing that date. Additionally, suitable management representation should be obtained.

Cross-Verification with Form No. 10AB: If the auditee has commenced activities and applied for final registration, the auditor can cross-verify the details with Form No. 10AB submitted by the auditee. Form No. 10AB contains information about the status of registration, date of final registration or cancellation, and the unique registration number (URN).

Professional Judgment: The auditor should use professional judgment to determine whether and when the auditee’s activities are considered to have commenced. This may involve discussions with the auditee and a careful assessment of the facts.

Reporting “No” if Activities Have Not Commenced: If the auditor concludes that the auditee’s activities did not commence during the previous year, they should report “No” in this clause.

Correct Position and Action: If the auditor believes that activities have commenced but were not reported correctly, they should bring this to the attention of the auditee, suggesting that appropriate action be taken to rectify the registration status.

This clause is especially significant for entities with provisional registration, as it involves reporting on the commencement of activities and the date of such commencement, which has implications for final registration requirements. The auditor’s role is to gather, verify, and cross-verify information while exercising professional judgment to accurately report the status of activity commencement and registration.

10. Management: Details about the Author/ Society Members/Trustees / Shareholding exceeding 5%/Directors etc.

Clause 10 mandates information which is crucial for transparency and compliance with regulations related to the auditee’s ownership and governance structure, especially when there are changes in these relationships during the audit year. The provided information outlines the details required for reporting individuals and beneficial owners associated with the auditee during the previous year of audit. Here’s a breakdown of the required details:

(a) Details of all the Author(s)/Founder(s)/Settlor(s)/Trustee(s)/Members of society/Members of the Governing Council/Director(s)/shareholders holding 5% or more of shareholding/Office Bearer(s) of the auditee at any time during the previous year:

For each individual associated with the auditee, you need to report:

Name of the person.

Relation to the auditee (Use the specified code, e.g., 1 for Author, 2 for Founder, etc.).

Percentage of shareholding (if applicable, for shareholders).

Unique Identification Number (such as PAN in India).

ID Code (refer to Note 5/6 of Form No. 10BB/10B respectively).

Address of the individual.

Whether there was any change in the relation during the previous year of audit (Yes/No).If yes, specify the change.In case if any of the persons [as mentioned in row 9(a)/10(a)] is not an individual, then provide the following details of the natural persons who are beneficial owners (5% or more) of such person during the previous year.If any of the individuals mentioned in part (a) are not individuals themselves (e.g., they represent an organization or entity), you need to provide details about the natural persons who are beneficial owners (holding 5% or more) of that non-individual entity. For each natural person:

Serial Number.

Name of the natural person.

Unique Identification Number (such as PAN).

ID Code (refer to Note 6 of Form No. 10B respectively).

Address of the natural person.

Non-individual entity in which beneficial ownership is held.

Percentage of beneficial ownership.

Whether there was any change during the previous year of audit (Yes/No).

If yes, specify the change. Further, the codes for relation to the auditee (e.g., Author, Founder, Trustee) are specified in the form (1-10). These codes help categorize the relationship of the individuals with the auditee for reporting purposes.

Part (a) requires the details of all specified persons covered under the clause. The relation to the auditee is mentioned in Column 2, and you should use the provided codes from the table specified in Note 5 of Form No. 10B to represent this relationship. If an individual has multiple relationships, each relationship should be reported separately, creating separate records for each.

Part (b) comes into play when there is a person other than an individual reported in Part (a). In such cases, Part (b) requires reporting the specified particulars of natural persons who are beneficial owners (holding 5% or more) of that non-individual entity. This structure and reporting process help provide a comprehensive understanding of the relationships between individuals and the auditee, ensuring compliance with relevant regulations and reporting standards.

Here’s a summary of how to complete this clause:

Column 1 Part (a): Report the details of all specified persons, including their names and relationships to the auditee (using the provided codes from Note 4 or Note 5). If a person has multiple relationships, create separate records for each relationship.

Column 2 Part (b): If any person in Part (a) is not an individual, report details about the natural persons who are beneficial owners (5% or more) of that non-individual entity. Provide their names and other specified particulars.The said table also provides for the codes which are to be mentioned in column 5. In column no. 2, if more than one relation is applicable for a person; separate records are to be added relation wise.

Column 3 – Percentage of Shareholding (for Shareholders): Report the percentage of shareholding held by individuals who own 5% or more of the auditee’s shares. Verify and report any changes in shareholding that occurred during the entire audit year.

Column 4 – Unique Identification Number: Report the Unique Identification Number (such as PAN or Aadhar) for each individual. Refer to the codes provided in Note 5/6 of Form No. 10BB/10B for the “Type of identification” when reporting.

Column 6 – Address: Mention the address of the individuals being reported. This address should be the permanent address or any communication address as indicated in their identification proof (reported in Column 4) or as communicated by the management.

Column 7 – Change in Relation: Indicate whether there has been any change in the relationship of the individuals reported in Column 1 during the previous audit year (Yes/No).

Column 8 – Details of Changes: If there were changes in the relationship during the audit year, specify the details of those changes in this column.

Verification Sources: The required details can be verified from various sources, including Latest Form No. 10A/Form No. 10AB submitted by the auditee, The auditee’s previous year’s income tax return, For changes in shareholding, refer to documents filed under the Companies Act, 2013, or relevant statutes, resolutions passed during the year, etc, PAN and Aadhar details of individuals, Minutes of meetings of the Board, Governing Council, and similar bodies, Filings with other statutory authorities.

Management Representation Letter: It is advisable for the auditor to obtain a Management Representation Letter to confirm and cross-verify the accuracy of the reported details.

By following the above mentioned instructions and verification methods, auditors can ensure that they provide accurate and comprehensive information as required by this clause in the audit report.

11. Objects of the Trust :

Clause 11 of Form No. 10B pertains to the requirements for auditors when conducting an audit of a trust or an institution. In this context, the auditor is required to report on the objects or purposes for which the trust or institution has been established. Here’s an explanation of this clause and its various components:

Auditor’s Responsibility: Clause 11 places the responsibility on the auditor to investigate and report on the objects and activities of the auditee, which is typically a trust or an institution. This is important because it ensures that the trust or institution is operating in accordance with its stated objectives and within the legal framework.

Enquiry and Verification: The auditor is expected to inquire into and verify the objects and activities of the auditee. This involves a thorough examination of the auditee’s operations to ensure they align with the stated purposes for which it was established.

Documentation Verification: To verify the objects and activities, the auditor should refer to specific documents. These documents may include:

i. Trust Deed or Bye-Laws: The auditor should examine the trust deed or bye-laws of the trust or institution. These legal documents outline the objectives, rules, and regulations governing the organization’s operations. The auditor compares the actual activities with what is specified in these documents.

ii. Form No. 10A: The auditor should review the application for registration under Form No. 10A that was submitted by the auditee to the relevant authorities. This document typically contains information about the objectives and activities of the trust or institution as provided to the government during the registration process.

iii. Earlier Year’s Return of Income: If available, the auditor should also examine the auditee’s previous year’s return of income. This helps ensure that the organization has been consistent in its objectives and activities over time.

The purpose of these verifications is to ensure transparency and compliance with legal requirements. If there are discrepancies between the stated objectives and actual activities, it may raise concerns about the trust or institution’s compliance with its legal obligations or its eligibility for certain tax benefits.

In summary, Clause 11 of Form No. 10B requires the auditor to thoroughly investigate and report on the objectives and activities of the auditee, such as a trust or institution. This involves verifying the alignment of these objectives and activities with the trust deed or bye-laws, Form No. 10A application, and earlier year’s income tax returns when available. It is a crucial step in the audit process to ensure compliance and transparency in the operations of the auditee.

12. Whether the auditee, being a trust or institution referred to in section 11 or 12, has adopted or undertaken modification of the objects which do not conform to the conditions of registration?

Clause 12 of Form No. 10B outlines the specific responsibilities of the auditor when it comes to checking whether a trust or institution has modified its stated objects or undertaken activities that do not conform to the conditions of registration. It also requires the auditor to verify if an application for fresh registration has been made within the stipulated period. Here’s a breakdown of the key points in this clause:

Checking for Object Modifications: The auditor must examine whether the trust or institution has made any modifications to its stated objectives or activities that do not comply with the conditions of its registration. This is crucial because trusts and institutions receive certain benefits and exemptions based on their registered objects, and deviating from these objects may result in non-compliance with legal requirements.

Reporting Modifications: If the auditor finds that such modifications have been made, they are required to provide further details, including the date when the modifications were made. This reporting is essential for regulatory authorities to assess compliance.

Latest Modification: If multiple modifications have been made, the auditor is instructed to provide details of the latest modification. This helps in understanding the current status of the trust or institution.

Checking for Fresh Registration Application: The auditor also needs to verify whether the trust or institution has applied for fresh registration within the specified 30-day period as per section 12A(1)(ac)(v). This requirement ensures that organizations are prompt in seeking registration when their objectives change substantially.

Reporting Fresh Registration Application: If the trust or institution has indeed applied for fresh registration, the auditor should furnish additional information, including the date of the application, its current status, and the date of registration or cancellation. This information is crucial for assessing the organization’s compliance with registration requirements.

Management Representation: To facilitate reporting under this clause, the auditor has the option to obtain a management representation. This means that the management of the trust or institution may provide a written statement confirming the accuracy of the details related to object modifications and fresh registration applications. This representation adds an extra layer of assurance.

Professional Judgment: The auditor is expected to exercise professional judgment throughout this process. This means that auditors are not just following a checklist but are also using their expertise to assess the compliance and accuracy of the information provided.

In summary, Clause 12 of Form No. 10B places specific responsibilities on auditors to investigate and report on whether a trust or institution has modified its objects or applied for fresh registration. It ensures that organizations adhere to legal requirements and helps maintain transparency and compliance within the sector. Auditors play a critical role in verifying and reporting these details to regulatory authorities.

13. Commencement of Activities: Whether the auditee, being a trust or institution referred to in section 11 or 12, has adopted or undertaken modification of the objects which do not conform to the conditions of registration? Y or N

Clause 13 mandates for the change of objects if any. If yes in 13 (i) , date of commencement of activities is to be mention. Whether application for registration under sub-clause (iii) of clause (ac) of sub-section (1) of section 12A or application for approval under clause (iii) of the first proviso to clause (23C) of section 10 has been filed? Y or N , If yes provide the following details regarding application for registration under section sub-clause (iii) of clause (ac) of subsection (1) of section 12A or application for approval under clause (iii) of the first proviso to clause (23C) of section .

i. S. No

ii. Date of Application

iii. Status of registration in pursuance to application

iv. Date of Registration /Cancellation based on such application

v. URN of such registration

14. Details of Place where books of account and other documents have been maintained : Whether the books of account and other documents have been kept and maintained in the form and manner and at such place as prescribed under rule 17AA by the auditee. Y or N

Clause 14 of Form No. 10B outlines the reporting requirements for auditors regarding the maintenance and location of books of account and related details. Here’s a summary of the key points covered in this clause:

Verification of Bookkeeping Compliance: The auditor is required to report on whether the auditee has maintained its books of account and other relevant documents in the prescribed form, manner, and at the specified place. Compliance with Rule 17AA is essential in this regard.

Disclosure of Location: If, during the audit, it is found that the books of account are kept at a location other than the registered office, the auditor must provide details of the address of that alternate location. This ensures transparency in the record-keeping process.

Resolution and Intimation: The auditor should review whether the auditee has passed a resolution and provided intimation to the assessing officer when maintaining books of account at a place other than the registered office, as required by law.

Company Assessee Verification: For company assesses, the auditor must also verify whether the company has filed any necessary forms under the Companies Act for maintaining books of account at a location other than the registered office. This is in accordance with Section 128 of the Companies Act, 2013.

Disclosure of Non-Compliance: If the books of account are kept at an alternate location under the proviso to sub-rule (3) of Rule 17AA, but the required resolution has not been passed or has not been intimated to the assessing officer within the prescribed time limit, the auditor should make appropriate disclosures in the audit report’s observations or qualifications section.

Details of Books of Account: Clause 14 also mandates that the auditor provides details of the books of account maintained by the auditee. This includes specifying which books have been prescribed, which books have actually been maintained, and which books were examined. There can be variations between these lists, and the auditor is expected to use professional judgment to assess whether such variations require disclosures or qualifications in the audit report.

Electronic Bookkeeping and Auditing: The auditor must state whether the books of account are maintained electronically and whether they have undergone an audit.

In summary, Clause 14 of Form No. 10B requires auditors to report on the compliance of the auditee with respect to the maintenance, location, and details of books of account. It also mandates disclosures regarding any non-compliance with the prescribed rules and any variations between the prescribed, maintained, and examined books of account. This reporting ensures transparency and compliance in the financial record-keeping of the auditee.

15. Advancement of General Public Utility; (15 & 16 ) Where, in any of the projects/institutions run by auditee, one of the charitable purposes is advancement of any other object of general public utility then-

Clause 15 of Form No. 10B outlines the reporting requirements for auditors when a charitable trust or institution, which is registered for advancing charitable purposes, is involved in activities related to the advancement of any other object of general public utility. The term religious purpose is not defined under the Income-Tax Act. However, Section 2(15) of the Act defines “charitable purpose” to include relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility.

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless—

(i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and

(ii) the aggregate receipts from such activity or activities during the previous year, do not exceed 20% of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;

The auditor is required to report specific details related to such activities. Here’s a summary of the key points covered in this clause:

Nature of Trade, Commerce, or Business Activities: The auditor is required to report any activity carried out by the trust or institution that is in the nature of trade, commerce, or business. This includes providing the name of the project or institution involved in such activities and the total receipts generated from these activities.

Percentage of Receipts: The auditor should specify the percentage of these trade, commerce, or business receipts in relation to the total receipts of the trust or institution.

Relation to Advancement of Object of General Public Utility: The auditor should determine whether these trade, commerce, or business activities are carried out in the course of actually advancing any other object of general public utility. In other words, whether these activities are directly related to the charitable purpose.

Service for Consideration: If there are services provided in relation to any trade, commerce, or business, and these services are provided for consideration, the auditor must report this. Details should include the project or institution name and the total receipts generated from these services.

Percentage of Service Receipts: Similar to point 2, the auditor should specify the percentage of service receipts in relation to the total receipts of the trust or institution.

The purpose of reporting under this clause is to identify any violation of the conditions under which the trust or institution is registered. If these activities exceed a certain threshold limit as provided in the proviso to section 2(15) of the Income Tax Act, it may have tax implications. If the percentage of receipts from such activities exceeds this threshold, the auditor should seek clarification or a response from the management and report this in the observations or qualifications paragraph of the audit report.

16. If point II or iv of clause15 is Yes, the aggregate annual receipts from such activities in respect of that project/institution

Additionally, details of the aggregate annual receipts, as required in Clause 16 of Form No. 10B, should also be included in such reporting.

17. Business Undertaking (17 ) Whether the auditee has any business undertaking as referred to in sub-section (4) of section 11 Y or N

Clause 17(i) of Form No. 10B requires the auditor to determine whether the auditee, typically a trust or institution, has any business undertaking as defined in sub-section (4) of section 11 of the Income Tax Act. Here’s a summary of the key points covered in this clause:

Auditor’s Inquiry: The auditor must inquire and establish whether the auditee has a business undertaking, as defined in section 11(4) of the Income Tax Act.

Definition of Property Held Under Trust: According to section 11(4), “property held under trust” includes a business undertaking held by the trust. This means that if the trust owns and operates a business, it is considered part of the trust’s property.

Assessing Officer’s Power: The clause emphasizes that if a claim is made that the income of such a business undertaking should not be included in the total income of the persons receiving it, the Assessing Officer has the authority to determine the income of the business undertaking in accordance with the tax laws.

Reporting in Clause 17(ii): If the auditor confirms that the auditee has a business undertaking as part of its trust property, they are required to provide further details in Clause 17(ii) regarding this business undertaking.

Management Representation: The auditor may obtain management representation from the auditee, which should include details of any business undertaking owned and run by the trust as part of its property.

Verification of Facts: The auditor may verify the authenticity and correctness of the facts and figures mentioned in the management representation, ensuring that they align with the relevant provisions of the Income Tax Act applicable to the assessment of such a business undertaking.

Specific Attention to Sub-clauses (d) and (e): The auditor is urged to pay specific attention to reporting under sub-clauses (d) and (e) of Clause 17(ii). This is important because these sub-clauses relate to determining the amount to be included in the total income of the auditee and the amount not to be included in the total income. These amounts have implications for tax assessment and should be reconciled with other parts of the audit report.

Limitation of Auditor’s Scope: It’s noted that the amount to be determined by the Assessing Officer over and above the income computed for the business undertaking is beyond the scope of the auditor. The auditor’s role is to report on the existence of the business undertaking and provide necessary details, but not to determine the tax liability.

In summary, Clause 17(i) of Form No. 10B requires the auditor to determine whether the auditee has a business undertaking as defined in section 11(4) of the Income Tax Act. If such a business undertaking exists, the auditor must provide further details in Clause 17(ii) and ensure that the management representation aligns with tax regulations. However, the ultimate determination of tax liability for the business undertaking falls under the purview of the Assessing Officer.

18. Business Incidental to Objects Whether the auditee has any income being profits and gains from any business as referred in seventh proviso to Clause (23C) of section 10 or sub-section (4A) of section 11, as the case may be…..

Clause 18 (ii) of Form No. 10B requires the auditor to determine whether the auditee has any income, specifically profits and gains from any business, as referred to in the seventh proviso to Clause (23C) of section 10 or sub-section (4A) of section 11 of the Income Tax Act. The auditor is instructed to provide the following details if the answer is “Yes”:

Nature of Business: Describe the nature of the business carried out by the auditee.

Business Code: Assign a code to identify the specific business activity.

Maintenance of Separate Books of Account: Indicate whether separate books of account have been maintained for this business. The answer can be “Yes” or “No.”

Incidental to the Attainment of Objectives: Determine whether the business is incidental to the attainment of the objects of the auditee. In other words, assess if the business activities are closely related to the primary charitable or religious objectives of the organization.

Profits and Gains: Report the amount of profits and gains derived from the business during the previous year in rupees (Rs.).

These details help in assessing the nature and impact of any business activities conducted by the auditee, particularly in relation to its tax-exempt status and compliance with relevant tax regulations. Please note that the auditor’s response to these questions and the information provided should be accurate and in accordance with the provisions of the Income Tax Act.

Clause 18(i) of Form No. 10B requires the auditor to determine whether the auditee has any income, specifically profits and gains from any business, as referred to in the seventh proviso to section 10(23C) or section 11(4A) of the Income Tax Act. Here’s a summary of the key points covered in this clause:

Auditor’s Inquiry: The auditor must inquire and establish whether the auditee has any income from profits and gains derived from a business as mentioned in the relevant sections of the Income Tax Act.

Business Income Exemption: The clause emphasizes that there is no prohibition on a trust or institution engaging in business activities. Such income can qualify for exemption from taxation if certain conditions under sections 11 and 12 of the Income Tax Act are met.

Management Representation: The auditor may obtain management representation from the auditee containing details of any business activities conducted by the trust or institution.

Reporting in Clause 18(ii): If the auditor confirms that the auditee has income from business activities, they are required to provide further details in Clause 18(ii) regarding this business, including the nature of the business and a business code.

Conditions for Exemption: It’s emphasized that for business income to qualify for exemption, it must be incidental to the attainment of the trust or institution’s objectives, and separate books of account must be maintained for such business as per section 11(4A) of the Income Tax Act.

Supreme Court Rulings: The auditor should consider the Supreme Court rulings in cases such as Thanthi Trust and Ahmedabad Urban Development Authority, which emphasize that business income of a trust or institution can be exempt if it is incidental to the trust’s objectives.

Attachment of Reports: If the business conducted by the auditee is covered under the tax audit provisions, the auditor is mandated to attach the tax audit report in Form No. 3CA/3CB, along with the balance sheet and profit and loss account for that specific business. This is in addition to the financial statements prepared for the entire trust or institution, as required under Clause 17(ii) of Form No. 10B.

Correct Document Upload: The auditor is reminded to be cautious about uploading these annexures in the correct place when submitting the audit report.

In summary, Clause 18(i) of Form No. 10B requires the auditor to determine whether the auditee has any income from business activities, and if so, provide further details in Clause 18(ii). It’s essential to consider the conditions for income exemption and attach additional reports if the business activities fall under tax audit provisions. Compliance with tax regulations and proper documentation are crucial aspects of this reporting.

19. TDS on receipts (19) Details of the receipts of the auditee on which tax has been deducted at source referred to in section 194C or 194J or 194H or 194Q :

Clause 19 of the audit Form No. 10B requires the auditor to report specific details regarding receipts of the auditee on which tax has been deducted at source (TDS) under various sections of the Income Tax Act, specifically sections 194C, 194J, 194H, and 194Q. Here’s a summary of the key points covered in this clause:

Verification and Reconciliation: The auditor is instructed to verify the details of these TDS receipts, which can typically be obtained from the auditee’s Form No. 26AS (Tax Credit Statement) and AIS (Annual Information Statement). However, there’s a possibility that the deductor may have reported the TDS under the wrong section. To address this, the auditor should request the auditee to provide a reconciliation of the reported TDS amounts and the amounts reflected in the auditee’s books of accounts. The auditee should also provide details about the nature of such income.

Reporting TDS Details: The auditor is required to report specific details about these TDS receipts, including the gross amount, the amount of TDS, and the section under which tax has been deducted. If the wrong section has been quoted by the deductor, the auditor should appropriately disclose this fact.

Classification of Receipts: The TDS receipts are required to be reported under sub-clauses (7), (8), and (9). These receipts may include income/receipts from business activities that are both incidental to the attainment of the auditee’s objectives and other activities.

Separate Reporting for Incidental Business: Receipts that are from business activities incidental to the attainment of the auditee’s objectives should be reported separately under sub-clause (10). The auditor should also verify and report whether separate books of accounts are maintained for such business activities (sub-clause 11).

Management Representation: If tax has been deducted on receipts from business activities not incidental to the attainment of the auditee’s objectives, the auditor should obtain management representation. The information provided by the auditee should be reconciled with reporting done under Clause 17 (Business Undertaking) and Clause 18 (Business Incidental to Objects) of Form No. 10B.

Exclusion of Other TDS Sections: It’s important to note that other TDS sections, such as receipts covered under section 194A (TDS on interest income) or 194I (TDS on rent), are not required to be reported in Clause 19.

In summary, Clause 19 of Form No. 10B focuses on reporting TDS-related details for specific sections of the Income Tax Act. The auditor is responsible for verifying and reporting these details, reconciling discrepancies, and ensuring that TDS is correctly reported for receipts that are both incidental and not incidental to the auditee’s objectives. Other TDS sections are excluded from this reporting.

20. Whether the provisions of twenty second proviso to clause (23C) of section 10 or sub-section (10) of section 13 are applicable.

Clause 20 of Form No. 10B requires the auditor to determine whether the provisions of the twenty-second proviso to section 10(23C) or section 13(10) of the Income Tax Act are applicable to the auditee. The auditor must respond with either “Yes” or “No” based on the applicability of these provisions.

It’s important to note that this information is required to be reported once more under clause 39 of the form. If the response to Clause 20 is affirmative (“Yes”), Clause 39 mandates further details to be reported.

However, since Clause 39 deals with these details in depth, it is advisable to refer to Clause 39 for a comprehensive understanding and reporting of the additional information required regarding the applicability of the twenty-second proviso to section 10(23C) or section 13(10) of the Income Tax Act.

21. Clause 21 Whether auditee has filed Form No. 10BD for the previous year < If No then skip to row 23 >

Clause 21 of the audit Form No. 10B requires the auditor to determine whether the auditee has filed Form No. 10BD for the previous year. Form No. 10BD is a specific form used for filing a statement of income and expenditure by a scientific research association, university, college, or other educational institutions for the purposes of section 35(1)(ii)/(iia)/(iii) of the Income Tax Act.

The auditor should respond with either “Yes” or “No” based on whether the auditee has filed Form No. 10BD for the relevant previous year. If the answer is “No,” the form instructs the auditor to skip to row 23, indicating that further reporting related to Form No. 10BD is not applicable in that case.

22. Total Sum of donations reported in Form No. 10BD furnished by the auditee for the previous year

Clause 22 mandates Donations Reported in Form No. 10BD: This includes the donations that have been reported in Form No. 10BD. These donations are typically received for specific purposes related to scientific research, university, college, or educational institutions and are reported as per the provisions of section 35(1)(ii)/(iia)/(iii) of the Income Tax Act.

23. Donations which could not be reported in Form No 10BD due to non-availability of identification of donor as required under Form No. 10BD

Clause 23 mandates the Donations Not Reported in Form No. 10BD: This component consists of donations that have not been reported in Form No. 10BD. These donations may have been received for other purposes or activities of the institution.

24. Total voluntary contributions received by the auditee during the previous year [22+23(viii)]

Clause 24 is about the sum of these two components [22+23(viii)] represents the total voluntary contributions received by the institution during the relevant reporting period. This field may also be auto-populated, depending on the reporting mechanisms and the institution’s financial records.

25. Total foreign contribution out of the total voluntary contributions stated in 24

Clause 25 of Form No. 10B requires the auditor to report the total foreign contribution out of the total voluntary contributions stated in Clause 24. In other words, it involves calculating the portion of voluntary contributions that comes from foreign sources.To arrive at this figure, the auditor should determine the total amount of voluntary contributions reported in Clause 24, and then identify the portion of that total which is attributed to foreign contributions. This can be calculated as follows:

Total Foreign Contribution = (Total Voluntary Contributions from Foreign Sources) / (Total Voluntary Contributions as per Clause 24)

The result will be expressed as a percentage or fraction of the total voluntary contributions, indicating the proportion contributed by foreign sources. This information is essential for compliance and reporting purposes, especially when dealing with contributions received from foreign donors or organizations.

26. Voluntary Contribution forming part of corpus (which are included in 24)

Clause 26 of Form No. 10B requires the auditor to report on voluntary contributions that form part of the corpus of the institution. These contributions should be included in the total voluntary contributions reported in Clause 24. Here’s what this clause involves:

Voluntary Contributions: These are donations or contributions received by the institution voluntarily, typically from donors or supporters. The clause focuses on contributions that are part of the institution’s corpus.

Corpus: The term “corpus” refers to the capital or the permanent fund of the institution. Contributions that are part of the corpus are usually intended to be retained as a long-term investment or capital for the institution and are not meant for immediate use.

Inclusion in Clause 24: The auditor should confirm that these voluntary contributions forming part of the corpus have been included in the total voluntary contributions reported in Clause 24. This ensures that all contributions, including those designated for the institution’s corpus, are properly accounted for.

The purpose of reporting in this clause is important for transparency and compliance purposes, as it helps ensure that voluntary contributions are appropriately categorized and disclosed in the institution’s financial records and reporting documents.

27. Voluntary Contributions required to be applied by the auditee during the previous year [24-{23(vi)(d)+26A+ 26B}]

Clause 27 of Form No. 10B involves calculating and reporting on the voluntary contributions that were required to be applied by the auditee during the previous year. The calculation is based on the information provided in previous clauses and is represented as follows:

Voluntary Contributions Required to be Applied = (Total Voluntary Contributions as per Clause 24) – (Donations not reported in Form No. 10BD as per Clause 23(vi)(d)) – (Voluntary Contributions forming part of the corpus as per Clause 26A) – (Voluntary Contributions forming part of the corpus as per Clause 26B)

This calculation helps determine the portion of voluntary contributions that the auditee was obligated to apply for its charitable or specified purposes during the previous year. It’s essential for assessing compliance with the requirements of the Income Tax Act related to the utilization of such contributions for the organization’s objectives. The auditor should report this figure in Clause 27 of the form.

28. Income other than voluntary contributions derived from property held under trust referred to in section 11 or income of fund or institution or trust or any university or other educational institution or any hospital or other medical institution (other than the contribution reported in serial number 24)

Clause 28 of Form No. 10B requires the auditor to report on income derived from sources other than voluntary contributions, which are typically exempted under section 11 of the Income Tax Act. This income can include various types of earnings or receipts generated by the institution, fund, or trust. Here are the key points related to this clause:

Income Sources: This clause focuses on income sources other than voluntary contributions. It encompasses any income earned from property held under trust, as referred to in section 11, or income generated by funds, institutions, universities, educational institutions, hospitals, or medical institutions.

Exclusion of Voluntary Contributions: The income reported in this clause should exclude the voluntary contributions already reported in Clause 24 of the form.

Exemption under Section 11: Income derived from property held under trust or by the specified entities mentioned in this clause is often exempt from income tax under section 11, provided certain conditions are met.

Reporting Requirement: The auditor should report the total income generated from these sources during the relevant reporting period. This information helps assess the financial activities and income-generating capabilities of the institution beyond voluntary contributions.

Compliance and Transparency: Reporting this income is crucial for compliance with tax regulations and ensuring transparency in financial reporting for charitable and educational institutions.

In summary, Clause 28 requires the auditor to report income other than voluntary contributions that are generated from property held under trust or by specified entities mentioned in section 11 of the Income Tax Act. This income should be reported separately from voluntary contributions, and it plays a significant role in assessing the institution’s financial activities and tax-exempt status.

29. Income applied outside India which is eligible under clause (c) of sub-section (1) of section 11

Clause 29 of Form No. 10B requires the auditor to report income applied outside India, which is eligible for exemption under clause (c) of sub-section (1) of section 11 of the Income Tax Act. Here’s an explanation of what this clause entails:

Income Applied Outside India: This clause focuses on income that has been utilized or applied for charitable or religious purposes outside India. Charitable or religious institutions may receive donations or generate income that is intended for use in activities or projects outside the country.

Exemption under Section 11: Section 11 of the Income Tax Act provides exemptions for income derived from property held under trust for charitable or religious purposes. Clause (c) of sub-section (1) of this section specifically pertains to income applied outside India for charitable purposes.

Reporting Requirement: The auditor is required to report the total income that falls under this category. This includes income that qualifies for exemption under section 11, as long as it has been applied outside India for eligible charitable purposes.

Compliance and Documentation: Reporting this income is essential for demonstrating compliance with tax regulations and ensuring that income applied outside India for charitable purposes meets the criteria set forth in section 11.

In summary, Clause 29 of Form No. 10B focuses on reporting income that has been applied outside India and is eligible for exemption under clause (c) of sub-section (1) of section 11. This reporting helps ensure that the income is being used for charitable or religious purposes in accordance with the provisions of the Income Tax Act.

30. Income required to be applied in India by the auditee during the previous year [27+28-29]

Clause 30 of Form No. 10B involves the calculation and reporting of income that was required to be applied within India by the auditee during the previous year. This calculation is based on the information provided in previous clauses and is represented as follows:

Income Required to be Applied in India = (Voluntary Contributions Required to be Applied as per Clause 27) + (Income other than voluntary contributions as per Clause 28) – (Income applied outside India as per Clause 29)

This calculation helps determine the portion of income that the auditee was obligated to apply within India for its charitable or specified purposes during the previous year. It’s crucial for assessing compliance with the requirements of the Income Tax Act related to the utilization of income generated by the institution for its objectives. The auditor should report this figure in Clause 30 of the form.

31. Application of Income (excluding application not eligible and reported under serial number 37)

Clause 31 of Form No. 10B requires the auditor to report on the application of income, excluding any applications that are not eligible for exemption and have been reported under serial number 37 of the form. Here’s an explanation of what this clause entails:

Application of Income: This clause focuses on the utilization or application of income generated by the auditee during the relevant reporting period. Income generated by charitable or religious institutions is typically intended for specific purposes that align with their objectives.

Exclusion of Non-Eligible Applications: The clause instructs the auditor to exclude any applications of income that are not eligible for exemption under the provisions of the Income Tax Act. These non-eligible applications should have been reported separately under serial number 37 of the form.

Auto populated Figures : The amount to be allowed as application is an auto populated field in Clause 31(v).

Documentation: Reporting on the application of income is crucial for demonstrating compliance with tax regulations and ensuring that income is used for purposes that align with the organization’s objectives.

Compliance and Transparency: Reporting on the application of income in these categories is essential for demonstrating compliance with tax regulations and ensuring transparency in financial reporting. It helps assess whether the income has been utilized for purposes consistent with the objectives of the institution.

Category I to XXI: Each category represents a specific purpose or activity for which income generated by the institution is applied. These purposes may include educational programs, medical services, community development, religious activities, scholarships, and more.

Clause 31(i) requires the auditor to verify and report the total amount applied for charitable or religious purpose in India during the previous year.

Clause 31(ii) requires the auditor to report payments exceeding Rs 50 lakhs made under clause 31(i)(a) and (b). This entails providing details such as the recipient’s name, PAN, the amount applied, mode of application (electronic or other), whether tax was deducted, and the relevant tax deduction section. The auditor should maintain records of these details while verifying clause 31(i). Reporting in this clause is self-explanatory and should be done accordingly.

Clause 31(iii) requires reporting the portion of the amount mentioned above that was not paid during the previous year, as it is not considered an application.

Clause 31(iv) requires reporting liabilities incurred in prior years but paid in the current year, not previously claimed as applications.

Clause 31(v) is an auto-populated field where the allowable amount as an application is automatically filled in.

Clause 31(vi) requires a breakdown of the application into capital and revenue, as similarly required in ITR 7.

Clause 31(vii) mandates the auditor to report the amount invested or deposited back into the corpus, which had been applied during any earlier preceding year but was not claimed as an application during that specific year.

Clause 31(viii) necessitates the reporting of loan or borrowing repayments made during the previous year, which had been applied earlier but were not claimed as applications during that specific year.

Clause 31(ix) mandates the reporting of the amount that is non-allowable under the provisions of the thirteenth proviso to section 10(23C) in conjunction with section 40(a)(ia), or under Explanation 3 to section 11(1) in conjunction with section 40(a)(ia).

Clause 31(x) requires reporting of the amount that is non-allowable under the provisions of the thirteenth proviso to section 10(23C) or Explanation 3 to section 11(1) in conjunction with section 40A(3)/(3A). When the reporting is based on the certificate provided by the assessee, the auditor should include the following comment as an observation/qualification paragraph in the audit report (Form No. 10B):

“It is not possible for me/us to verify whether the receipts/payments have been accepted/made otherwise than by an account payee cheque or an account payee bank draft, as necessary evidence is not in the possession of the assessee.”

This comment acknowledges that the auditor is relying on the information and certificates provided by the assessee, and there may be limitations in verifying certain aspects of the receipts/payments due to the unavailability of supporting evidence. It is a way of indicating that the auditor’s assessment is based on the information provided by the assessee and may not encompass all possible verification checks.

Clause 31(xi) mandates reporting the donation made to any fund, institution, trust, university, educational institution, hospital, or medical institution mentioned in section 10(23C) (iv), (v), (vi), or (via) of the Income Tax Act, or any trust or institution referred to in section 11 or 12 of the Act, specifically directed towards the corpus.

Clause 31(xii) requires reporting donations made to any fund, institution, trust, university, educational institution, hospital, or medical institution mentioned in section 10(23C) (iv), (v), (vi), or (via) of the Income Tax Act, or any trust or institution referred to in sections 11 or 12 of the Act, provided they do not have the same objects as the auditee.

Clause 31(xiii) requires reporting concerning donations made to any individual or entity other than a fund, institution, trust, university, educational institution, hospital, or medical institution mentioned in section 10(23C) (iv), (v), (vi), or (via) of the Income Tax Act, or any trust or institution referred to in sections 11 or 12 of the Act.

Clause 31(xiv) requires reporting the amount in respect of applications made outside India for which approval under the proviso to section 11(1)(c) has not been obtained and has not been reported under Clause 29.

Clause 31(xv) mandates the auditor to report the amount of application made outside India for which approval under the proviso to section 11(1)(c) has been obtained. The auditor should reconcile this amount with the amount reported in “Schedule Intt App” as reported under Clause 29.

Clause 31(xvi) necessitates reporting the amount that has been applied for a purpose that goes beyond the objects or objectives of the auditee. This reporting is essential for assessing compliance with the institution’s defined objectives and the provisions of the Income Tax Act.

Clause 31(xvii) mandates the reporting of any other disallowances. The auditor should maintain the nature of such disallowances in their working papers. This reporting helps document and disclose any additional disallowances that may impact the institution’s tax-exempt status or compliance with tax regulations.

Clause 31(xviii) requires reporting the total allowable application, which is calculated by subtracting the disallowable application amounts from the total application. This is an auto-populated field where the software or system automatically calculates this figure based on the data provided in the previous sections of the form.

Clause 31(xix) mandates the reporting of the amounts that are deemed to have been applied during the previous year under clause (2) of Explanation 1 to Section 11(1) of the Income Tax Act. This reporting is important for assessing compliance with the tax regulations regarding the deemed application of certain amounts by the auditee.

Clause 31(xx) necessitates the reporting of income that has been accumulated in accordance with the provisions of Explanation 3 to the third proviso to section 10(23C) or section 11(2) of the Income Tax Act. This reporting is crucial for documenting and disclosing any accumulated income as required by tax regulations.

Schedule AC refers to a section within the audit report where the auditor provides specific details regarding the accumulation of income by the auditee. This schedule is used to document and report information related to income that has been accumulated and not applied for the charitable or specified purposes as required by tax regulations.

In this schedule, you can expect to find:

Details of Accumulated Income: This section typically includes information about the amount of income that has been accumulated during the previous year(s) and any unapplied income from earlier years.

Purpose of Accumulation: The auditor may describe the reasons or purposes for which the income was accumulated. This could include future expansion, projects, or other specific objectives.

Compliance with Regulations: The schedule may also include statements or explanations regarding how the accumulation of income aligns with the relevant provisions of the Income Tax Act and whether it complies with the legal requirements.

Calculations and Reconciliation: If applicable, the auditor may provide calculations and reconciliations related to the accumulated income to demonstrate that it has been appropriately accounted for and reported.

Verification and Supporting Documents: The auditor should ensure that the accumulation details are based on verifiable and supported documentation and records.

The purpose of Schedule AC is to provide transparency and clarity regarding the accumulation of income, which is an important aspect of ensuring that charitable institutions comply with tax regulations. It helps tax authorities and stakeholders understand how the institution is managing and utilizing its income for its intended purposes.

Clause 31(xxi) mandates reporting income that has been accumulated or set apart for application to charitable or religious purposes or for the stated objectives of the trust or institution. However, this reporting should be done only to the extent that it does not exceed 15% of the total income. This provision is in accordance with tax regulations and aims to ensure that a significant portion of the income is applied for charitable or religious purposes while allowing for some flexibility in accumulation for future needs.

The auditor should carefully review the financial records and documentation provided by the auditee to determine how income has been applied in each of these categories. Reporting in these categories provides a comprehensive overview of how the institution’s funds are being utilized for its charitable, religious, or other specified purposes.

32. Taxable Income

Clause 32 of the audit report pertains to the reporting of taxable income. The taxable income is calculated as follows:

i. Start with the total income required to be applied in India.

ii. Reduce this total by the total allowable application amount.

iii. Deduct the amounts that have been set apart, accumulated, or deemed to be applied as per various sections of the Income Tax Act, including section 11(1), the third proviso to section 10(23C), Explanation 3 to the third proviso to section 10(23C), section 11(2), and Clause 2 of Explanation 1 to Section 11.

This clause represents an auto-populated field where the software or system automatically calculates the taxable income based on the information provided in the previous sections of the form. It is crucial for determining the institution’s taxable income, which may be subject to taxation under specific provisions of the Income Tax Act.

33. Section 115BBI Income taxable under section 115BBI

Section 115BBI of the Income Tax Act specifies that certain income of institutions is subject to a tax rate of 30%, regardless of the provisions of other sections of the Act. This income is referred to as “specified income,” and it includes the following:

i. Income that has been accumulated or set apart in excess of fifteen percent of the total income, where such accumulation is not allowed under any specific provision of the Income Tax Act.

ii. Deemed income as referred to in Explanation 4 to the third proviso to clause (23C) of section 10, or as per sub-section (1B) or sub-section (3) of section 11.

iii. Any income that is not exempt under clause (23C) of section 10 due to a violation of the provisions of clause (b) of the third proviso of clause (23C) of section 10 or is not excluded from the total income under the provisions of clause (d) of sub-section (1) of section 13.

iv. Any income that is deemed to be income under the twenty-first proviso to clause (23C) of section 10 or is not excluded from the total income under clause (c) of sub-section (1) of section 13.

v. Any income that is not excluded from the total income under clause (c) of sub-section (1) of section 11.

For income other than the specified income listed above, the tax liability is calculated based on the regular income tax rates that would apply if the specified income were not included in the total income of the assessee. This provision ensures that institutions do not receive preferential tax treatment for income that falls within the scope of specified income as defined in Section 115BBI.

Clause 33(a) of Form No. 10B requires the auditor to indicate whether the auditee has any deemed income as referred to in section 11(1B), which is subject to tax at a rate of 30% under section 115BBI. The auditor should provide a “Yes” or “No” response to this question.If the response is “Yes,” it implies that the auditee has income falling under this category. In such cases, Schedule DI (Deemed Income) needs to be completed. This schedule is used to provide details of the deemed income and the corresponding tax calculations for income subject to the provisions of section 11(1B) and section 115BBI.

Schedule DI, titled “Details of deemed application under Explanation 1 to sub-section (1) of section 11 and deemed income under sub-section (1B) of section 11,” is a section within the audit report where the auditor provides specific details regarding the deemed application of income and the deemed income itself, as per the provisions of the Income Tax Act.

This schedule typically includes the following details:

Nature of Deemed Income: The auditor specifies the nature or type of income that is deemed under sub-section (1B) of section 11.

Amount of Deemed Income: The auditor reports the amount of income that is deemed as per the provisions of section 11(1B).

Details of Deemed Application: This section provides information about the deemed application of income under Explanation 1 to sub-section (1) of section 11. It may include details of the purpose for which the income is deemed to be applied and any specific provisions under which this application is deemed.

Tax Calculation: The auditor may provide calculations related to the tax liability arising from the deemed income. This may include the application of the 30% tax rate as specified in section 115BBI, if applicable.

Compliance with Regulations: The schedule may include statements or explanations regarding how the deemed income and application align with the relevant provisions of the Income Tax Act and whether it complies with the legal requirements.

The purpose of Schedule DI is to provide a detailed breakdown of the deemed income and its application, ensuring transparency and compliance with tax regulations. It helps tax authorities and stakeholders understand how the institution is managing and reporting income that falls under the specified provisions of section 11(1B).

Clause 33(b) of Form No. 10B requires the auditor to indicate whether the auditee has any deemed income as referred to in Explanation 4 to the third proviso of Section 10(23C) or Section 11(3). This deemed income is subject to tax at a rate of 30% under Section 115BBI. The auditor should provide a “Yes” or “No” response to this question. If the response is “Yes,” it implies that the auditee has income falling under this category, and the auditor should also report the amount of such deemed income.

In cases where the response is affirmative (i.e., “Yes”), Schedule AC should be completed. Schedule AC is used to provide details of deemed income and the corresponding tax calculations for income subject to the provisions of Section 10(23C) or Section 11(3) and Section 115BBI.

Schedule AC is also required to be filled for entities reporting under Clause 31(xx), and the relevant information can be referred to from there.

Clause 33(c) of Form No. 10B appears to be related to the reporting requirements for auditing organizations or entities that fall under the purview of income tax laws in India. Specifically, it addresses whether the auditee has any income that is not to be excluded from the total income under specific sections of the Income Tax Act, and whether that income is chargeable to tax at a rate of 30% under section 115BBI. Here’s a breakdown of the requirements:

Whether the auditee has any income which is income not to be excluded from the total income under:

i. First proviso to clause (23C) of section 10: This refers to certain income sources that are exempt from income tax under Section 10, with specific conditions and limitations as defined in the first proviso to clause (23C). If the auditee has any income falling under this category, it needs to be reported.

ii. Clause (c) of sub-section (1) of section 13: This refers to certain income sources of charitable and religious institutions that are exempt from income tax under Section 13, provided they meet the conditions specified in clause (c). If the auditee has any income falling under this category, it needs to be reported.

Reporting Requirement: If the response to the above question (i) is affirmative (Yes), then the auditee is required to report:

The amount of such income: If the auditee has any income falling under the mentioned sections, you need to specify the amount of income that is not to be excluded from the total income under these sections.

The purpose of this reporting is to ensure that income that is exempt from taxation under specific sections is correctly identified and reported in the audit process. Additionally, any income falling under these sections that is chargeable to tax at a rate of 30% under section 115BBI should also be reported, along with the corresponding amount.

Clause 33(d) of Form No. 10B pertains to the reporting requirements for auditors regarding the accumulation of income by the auditee, which exceeds fifteen percent of the income, where such accumulation is not allowed under any specific provision of the Income Tax Act. Here’s a breakdown of the requirements:

The auditor is required to state in “Yes/No” whether the auditee has any income accumulated or set apart in excess of fifteen percent of the income where such accumulation is not allowed under any specific provision of the Income Tax Act.

Reporting Requirement: If the response to the above question is affirmative (Yes), then the auditor is required to report:

i. The amount of such income: If the auditee has any income that has been accumulated or set apart in excess of fifteen percent of their income, and this accumulation is not permitted under any specific provision of the Income Tax Act, then the auditor must specify the amount of such income.

The purpose of this reporting requirement is to ensure that any income that has been improperly accumulated or set aside in violation of the provisions of the Income Tax Act is identified and reported accurately. This is important for tax compliance and transparency.

It’s important to note that the clause does not provide an exhaustive list of such income that needs to be reported. Instead, it relies on the auditor’s professional judgment to identify and report such income accurately. Auditors should have a thorough understanding of the relevant provisions of the Income Tax Act to make this determination correctly.

Clause 33(e) of Form No. 10B pertains to reporting requirements for auditors regarding applications made by the auditee outside of India. Here’s an explanation of the requirements:

The auditor is required to state in “Yes/No” whether the auditee has made any application out of India.

Reporting Requirement: If the response to the above question is affirmative (Yes), then the auditor is required to fill out “Schedule Int App.” This schedule is used to provide details about the applications made by the auditee outside of India.

“Schedule Int App” likely contains fields where the auditor needs to provide specific information about these applications, such as their nature, purpose, amounts involved, and any other relevant details.

The purpose of this reporting requirement is to ensure that any applications made outside of India by the auditee are appropriately disclosed and accounted for in the audit process. This information is important for tax compliance and transparency.

Since the schedule “Int App” is mentioned to have been discussed earlier in the form, auditors should refer to the specific instructions or guidelines provided in the form to accurately fill out this schedule and provide the required details about the applications made by the auditee outside of India.

34. Anonymous donation which is chargeable to tax @ 30 % under section 115BBC

Clause 34 refers to anonymous donations that are chargeable to tax at a rate of 30% under Section 115BBC of the Income Tax Act. Anonymous donations are contributions received by charitable or religious institutions where the identity of the donor is not disclosed.

Under Section 115BBC, if a charitable or religious institution receives anonymous donations, they are subject to a flat tax rate of 30% on such donations. This provision is aimed at discouraging the use of charitable institutions for the purposes of money laundering or tax evasion through anonymous donations. Charitable institutions must be cautious when receiving such donations and are required to report and pay tax on them at the specified rate.

The reporting requirement specified in Clause 34 is related to matters that have already been discussed in Clauses 21 to 30 of Form No. 10B.In such cases, you should refer to the relevant Clauses 21 to 30 of Form No. 10B for detailed instructions and guidance on how to report the specific information or matters covered by Clause 34. When filling out Clause 34, make sure to follow the instructions provided in the referenced clauses to accurately report the relevant information or matters that are already discussed in those sections.

35. Other Income

Clause 35 is related to the reporting of various types of income for auditing purposes. Below is an explanation of the reporting requirements for each of the sub-sections (a, b, c, and d):

i. Income chargeable under section 12(2):

• The auditor needs to state whether the auditee has any income chargeable under section 12(2).
• If the answer is “Yes,” then the auditor must specify the amount of such income in Rs.

ii. Income as per Explanation 3B to sub-section (1) of section 11:

• This appears to be related to violations of specific provisions of the Income Tax Act regarding income under section 11.
• The auditor needs to report income as per Explanation 3B to sub-section (1) of section 11 in case there is a violation of clause (a), (b), (c), or (d) of Explanation 3A to sub-section (1) of section 11, read with clause (b) of sub-section (2) of section <Fill Schedule Corpus>.
• You should provide the amount of this income in Rs.

iii. Income as per Explanation 1B to the third proviso to clause (23C) of section 10:

• This section seems to be related to violations of specific provisions of the Income Tax Act regarding income under section 10.
• The auditor needs to report income as per Explanation 1B to the third proviso to clause (23C) of section 10 in case of a violation of clauses (a), (b), (c), or (d) of Explanation 1A to the third proviso to clause (23C) of section 10, read with clause (b) of sub-section (2) of section 80G.
• You should provide the amount of this income in Rs.

iv. Income chargeable under sub-section (4) of section 11:

• The auditor needs to report income chargeable under sub-section (4) of section 11.
• You should provide the amount of this income in Rs.

The auditor should carefully assess the auditee financial records and compliance with relevant tax laws to accurately report these incomes and amounts in the specified sections.

36. Capital Assets

Clause 36 is related to reporting details of capital asset transfers under sub-section (1A) of section 11 of the Income Tax Act, particularly in the context of trusts holding property for charitable or religious purposes. Here’s an explanation of the reporting requirements for each of the sub-sections:

i. Capital Asset Transfer for Property Held Wholly for Charitable or Religious Purpose:

• • The auditor needs to state whether a capital asset, which is property held under trust wholly for charitable or religious purposes, has been transferred.
  • If the answer is “Yes,” then the auditor must specify the net consideration for which the asset is transferred in Rs.

ii. Deemed Application Claim under Clause (a) of sub-section (1A) of section 11:

• • The auditor needs to state whether the trust has claimed deemed application as per clause (a) of sub-section (1A) of section 11.
  • If the answer is “Yes,” then the auditor must specify the amount of such deemed application in Rs.

iii. Capital Asset Transfer for Property Held in Part for Charitable or Religious Purpose:

• • The auditor needs to state whether a capital asset, which is property held under trust in part only for charitable or religious purposes, has been transferred.
  • If the answer is “Yes,” then the auditor must specify the net consideration for which the asset is transferred in Rs.

iv. Deemed Application Claim under Clause (b) of sub-section (1A) of section 11:

• • The auditor needs to state whether the trust has claimed deemed application as per clause (b) of sub-section (1A) of section 11.
  • If the answer is “Yes,” then the auditor must specify the amount of such deemed application in Rs.

These reporting requirements are essential to ensure that capital asset transfers and deemed application claims by trusts for charitable or religious purposes are accurately reported and comply with the provisions of the Income Tax Act.

37. Application of income out of different sources

Clause 37 is related to the application of income from various sources during the previous year for purposes of tax reporting. It involves reporting the amounts applied or utilized in both electronic and non-electronic modes from different income sources. Below is an explanation of the reporting requirements for each of the sources:

Income Accumulated under Third Proviso to Clause (23C) of Section 10 or under Sub-section (2) of Section 11 During Any Earlier Previous Year:

1. • You need to report the amounts applied or utilized from income accumulated under the specified provisions during any earlier previous year.
   • Report the amounts in both electronic and non-electronic modes separately, and provide the total amount.

Income Deemed to be Applied in Any Preceding Year under Clause (2) of Explanation 1 to Sub-section (1) of Section 11 During Any Earlier Previous Year:

1. • Report the amounts applied or utilized from income deemed to be applied under the specified provision during any earlier previous year.
   • Report the amounts in both electronic and non-electronic modes separately, and provide the total amount.

Income of Earlier Previous Years Up to 15% Accumulated or Set Apart:

1. • Report the amounts applied or utilized from income accumulated or set apart from earlier previous years, up to 15% of that income.
   • Report the amounts in both electronic and non-electronic modes separately, and provide the total amount.

Corpus:

1. • Report the amounts applied or utilized from the corpus.
   • Report the amounts in both electronic and non-electronic modes separately, and provide the total amount.

Borrowed Fund:

1. • Report the amounts applied or utilized from borrowed funds.
   • Report the amounts in both electronic and non-electronic modes separately, and provide the total amount.

Any Other (Please Specify):

1. • If there are other sources of income that have been applied during the previous year, specify the details and amounts.
   • Report the amounts in both electronic and non-electronic modes separately, and provide the total amount.

For each of the above categories, it’s important to accurately report the amounts applied or utilized in both electronic and non-electronic modes. The total amount for each category should be provided as well.

38. Details of application resulting in payment or credit in excess of Rs. 50 lakh during previous year to a single person out of 37

Clause 38 of Form 10B appears to pertain to the reporting of details regarding applications resulting in payments or credits exceeding Rs. 50 lakh during the previous year to a single person. It seems that this clause is related to financial transactions that exceed a specified threshold. Here’s an explanation of the reporting requirement:

Details of Application Resulting in Payment or Credit:

1. • In this section, you should provide specific information about applications or transactions that resulted in payments or credits exceeding Rs. 50 lakh during the previous year to a single person.
   • You should specify the nature of the application or transaction, the recipient’s details (the single person receiving the payment or credit), and the total amount involved.

Further, For each application or transaction that meets the criteria (payment or credit exceeding Rs. 50 lakh to a single person), you should provide the following details:

Serial Number: This is a serial number to uniquely identify each application or transaction.

Name of Person: The name of the individual or entity to whom the payment or credit was made.

PAN : The PAN of the person or entity receiving the payment or credit.

Amount of Application (Rs.): The total amount of the application or transaction in rupees.

Mode of Application: Specify whether the application was made through electronic modes, other than electronic modes, or both.

TDS (Tax Deducted at Source):

• Indicate whether any TDS has been deducted for this transaction (Yes/No).
• If TDS has been deducted, specify the section of the Income Tax Act under which TDS has been deducted.
• Provide the amount of TDS deducted in rupees.

39. 13(10) and 22nd proviso to section 10(23C)

Clause 39 of Form No. 10B appears to be related to the applicability of specific provisions of the Income Tax Act and the computation of income chargeable under those provisions. Here’s an explanation of the reporting requirements:

Part (i): Applicability of Provisions

i. Whether provisions of twenty-second proviso to clause (23C) of section 10 or sub-section (10) of section 13 are applicable? (Yes/No)

• • Indicate whether the provisions of the mentioned sections are applicable to the auditee.

ii. If yes in (i), specify the reason why the provisions of twenty-second proviso to clause (23C) of section 10 or sub-section (10) of section 13 are applicable:

• • You need to specify the reasons why these provisions are applicable. There are several conditions mentioned in subparts (a) to (d) that may trigger the applicability of these provisions.

Part (ii): Computation of Income Chargeable Under Applicable Provisions

For each of the specified conditions (a to d) that may trigger the applicability of the provisions mentioned in Part (i), you need to provide details and amounts:

(a) Provision of proviso to clause (15) of section 2 is applicable? (Yes/No)

(b) Condition specified in clause (a) of tenth proviso to clause (23C) of section 10 or sub-clause (i) of clause (b) of sub-section (1) of section 12A has been violated? (Yes/No)

(c) Condition specified in clause (b) of tenth proviso to clause (23C) of section 10 or sub-clause (ii) of clause (b) of sub-section (1) of section 12A has been violated? (Yes/No)

(d) Condition specified in twentieth proviso to clause (23C) of section 10 or sub-clause (ii) of clause (ba) of sub-section (1) of section 12A has been violated? (Yes/No)

Part (iii): Computation of Income Chargeable Under the Applicable Provisions

For the conditions that are applicable (as specified in Part (ii)), you need to provide a detailed computation of income chargeable under the respective provisions. The computation involves various components, and you should provide amounts for each component:

(a) Income for the previous year

(b) Total Expenditure incurred in India, for the objects of the auditee

(c) Expenditure to be disallowed:

• This section includes various sub-components (i to viii) that contribute to the calculation of disallowed expenditure.

(d) Total expenditure to be disallowed (sum of amounts in (c))

(e) Income chargeable to tax under twenty-second proviso to clause (23C) of section 10 or sub-section (10) of section 13 [(a – b) + c(d)]

40. Expenditure Incurred for Religious Purpose

Clause 40 is related to the reporting requirements when the auditee is approved under the second proviso to sub-section (5) of section 80G of the Income Tax Act. This section focuses on reporting details related to expenditure of a religious nature. Here’s an explanation of the reporting requirements:

(a) Whether any amount of expenditure incurred during the previous year which is of a religious nature and the amount of such expenditure:

• You need to specify whether any expenditure incurred by the auditee during the previous year is of a religious nature.
• If the answer is “Yes,” then you must specify the amount of such expenditure in rupees.

(b) Total income of auditee during the previous year:

• Provide the total income of the auditee for the previous year in rupees.

(c) Percentage of expenditure which is of religious nature to the total income [(Amount in (a))/(Amount in (b))]:

• Calculate and report the percentage of the expenditure that is of a religious nature relative to the total income of the auditee during the previous year.

This reporting is for auditing purposes to ensure that the expenditure of a religious nature is properly accounted for, especially in cases where the auditee is approved under the specified provision of section 80G.

41. Person referred to in 13(3)

Clause 41 is related to the reporting of details of specified persons as referred to in sub-section (3) of section 13 of the Income Tax Act. These specified persons are related to the auditee’s activities and may have made contributions. Here’s an explanation of the reporting requirements:

For each specified person, you are required to provide the following details:

Code of Person referred to in sub-section (3) of section 13:

1. • There appears to be a code associated with the type of person referred to in sub-section (3) of section 13. You should select the appropriate code for the specified person from the options provided. Please refer to the notes or guidelines for the code descriptions.

Name of such person:

1. • Provide the name of the specified person.

PAN (Permanent Account Number) of such person:

1. • If the specified person has a PAN, provide it.

Aadhar number of such person, if allotted:

1. • If the specified person has an Aadhar number, provide it if allotted.

Address of such person:

1. • Provide the address details of the specified person.

If code 2 selected in column (1), specify the amount of contribution made to the auditee:

1. • If the code selected in column (1) corresponds to a specified person who made contributions to the auditee, specify the amount of the contribution in rupees.

42. Details of specified person transactions as referred to in sub-section (3) of section 13.

Clause 42 of Form No. 10B appears to be related to the reporting of transactions referred to in section 13(2) of the Income Tax Act. These transactions involve various activities and interactions between the auditee and specified persons. Here’s an explanation of the reporting requirements for each subsection:

(a) Whether any part of the income or property of the auditee is, or continues to be, lent to any specified person for any period during the previous year without either adequate security or adequate interest or both:

• Indicate whether such lending of income or property without adequate security or interest has occurred during the previous year.
• If yes, you need to fill “Schedule SP-a,” which likely includes details about the transactions.

(b) Whether any land, building, or other property of the auditee is, or continues to be, made available for the use of any specified person for any period during the previous year without charging adequate rent or other compensation:

• Indicate whether any property was provided for the use of specified persons without adequate compensation.
• If yes, you need to fill “Schedule SP-b,” which likely includes details about the transactions.

(c) Whether any amount is paid by way of salary, allowance, or otherwise during the previous year to any specified person out of the resources of the trust or institution for services rendered by that person to such auditee, and the amount so paid is in excess of what may be reasonably paid for such services:

• Indicate whether excessive payments were made to specified persons for services rendered.
• If yes, you need to fill “Schedule SP-c,” which likely includes details about the transactions.

(d) Whether the services of the auditee are made available to any specified person during the previous year without adequate remuneration or other compensation:

• Indicate whether the services of the auditee were provided to specified persons without adequate compensation.
• If yes, you need to fill “Schedule SP-d,” which likely includes details about the transactions.

(e) Whether any share, security, or other property is purchased by or on behalf of the auditee from any specified person during the previous year for consideration which is more than adequate:

• Indicate whether any overpriced purchases of assets from specified persons occurred during the previous year.
• If yes, you need to fill “Schedule SP-e1/e2,” which likely includes details about the transactions.

(f) Whether any share, security, or other property is sold by or on behalf of the auditee to any specified person during the previous year for consideration which is less than adequate:

• Indicate whether any underpriced sales of assets to specified persons occurred during the previous year.
• If yes, you need to fill “Schedule SP-f1/f2,” which likely includes details about the transactions.

(g) Whether any income or property of the auditee is diverted during the previous year in favor of any specified person:

• Indicate whether there was any diversion of income or property in favor of specified persons.
• If yes, you need to fill “Schedule SP-g,” which likely includes details about the transactions.

(h) Whether any funds of the auditee are, or continue to remain, invested for any period during the previous year in any concern in which any specified person has a substantial interest:

• Indicate whether the auditee’s funds were invested in concerns where specified persons have a substantial interest.
• If yes, you need to fill “Schedule SP-h,” which likely includes details about the investments.

43. Specified Violations

Clause 43 is related to the reporting of specified violations as referred to in Explanation 2 to the fifteenth proviso to clause (23C) of section 10 or Explanation to sub-section (4) of section 12AB of the Income Tax Act. These violations involve non-compliance or activities that may impact the tax-exempt status or eligibility of the auditee. Here’s an explanation of the reporting requirements for each subsection:

(a) Income of the auditee has been applied, other than for the objects of the trust or institution:

• Indicate whether there has been a violation where income of the auditee has been applied for purposes other than those specified in the trust or institution’s objectives. If yes, specify the amount of such violation in rupees.

(b) Whether the auditee has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by auditee in respect of the business which is incidental to the attainment of its objectives:

• Indicate whether the auditee generates income from a business that is not directly related to its objectives or if separate books of account for such business are not maintained. If yes, specify the amount of such violation in rupees.

(c) Whether the auditee, referred to in clause (a) of sub-section (1) of section 13, has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public:

• Indicate whether any part of the income from a property held for private religious purposes has been applied for purposes other than the benefit of the public. If yes, specify the amount of such violation in rupees.

(d) Whether the auditee, referred to in clause (b) of sub-section (1) of section 13, has applied any part of its income for the benefit of any particular religious community or caste:

• Indicate whether any part of the income has been applied for the benefit of a particular religious community or caste. If yes, specify the amount of such violation in rupees.

(e) Whether any activity being carried out by the auditee is not genuine or is not being carried out in accordance with all or any of the conditions subject to which it was registered:

• Indicate whether there are concerns about the genuineness of any activities or non-compliance with registered conditions. If yes, specify the amount of such violation in rupees.

(f) Whether the auditee has not complied with the requirement of any other law, for the time being in force, and the order, direction, or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality:

• Indicate whether there has been non-compliance with any other law, and if there is an order, direction, or decree confirming non-compliance. If yes, you may need to fill “schedule other law violation” to provide additional details.

44. Whether there is any claim of depreciation or otherwise has been made in terms of Explanation 1 to clause (23C) of section 10 or sub-section (6) of section 11 in respect of any asset, acquisition of which has been claimed as an application of income and the amount of such depreciation? Yes/No If yes specify the amount

Clause 44 is related to the claim of depreciation or any other allowance in terms of Explanation 1 to clause (23C) of section 10 or sub-section (6) of section 11 in the context of assets whose acquisition has been claimed as an application of income by a trust or institution. Here’s an explanation:

Explanation 1 to Clause (23C) of Section 10:

1. • Explanation 1 to clause (23C) of section 10 of the Income Tax Act pertains to the definition of “income applied to charitable or religious purposes” for the purpose of granting tax exemption to charitable or religious trusts or institutions.
   • Under this provision, when a trust or institution claims that an asset’s acquisition has been made as an application of income for charitable or religious purposes, it’s eligible for tax benefits.

Sub-section (6) of Section 11:

1. • Sub-section (6) of section 11 of the Income Tax Act deals with the conditions for claiming depreciation or any other allowance by a trust or institution. It specifies the conditions under which a trust or institution can claim depreciation or allowances on its assets.

This clause is asking whether the trust or institution has claimed depreciation or any other allowance in connection with an asset that it acquired using funds it declared as an application of income for charitable or religious purposes.

Here’s what the components mean:

i. Claim of Depreciation or Allowance: This refers to whether the trust or institution has applied for tax benefits related to depreciation or other allowances on a specific asset.

ii. Explanation 1 to Clause (23C) of Section 10 or Sub-section (6) of Section 11: These are the relevant provisions of the Income Tax Act under which the claim for depreciation or allowances is made.

iii. Asset Acquisition Claimed as Application of Income: It indicates that the trust or institution claimed that the funds used to acquire the asset were utilized as an application of income for charitable or religious purposes.

iv. Amount of Such Depreciation: If there is a claim for depreciation or allowances, the amount of depreciation or allowance claimed should be specified.

45. In view of provisions of nineteenth proviso to clause (23C) of section 10 or sub-section (7) of section 11, please specify whether the trust or institution has claimed deduction under section 10 [other than clause (1), clause (23C) and clause (46) thereof] during the previous year and the amount of such claim? Yes/No Amount in Rs.

The auditor is required to state whether the trust or institution has claimed a deduction under section 10 (other than clause (1), clause (23C), and clause (46)) during the previous year. This is important due to specific provisions in the law.

Section 11(7): This section outlines that if a trust or institution has been granted registration under section 12AA or section 12AB, or obtained registration under section 12A as it existed before its amendment by the Finance (No. 2) Act, 1996, and if that registration is in force for any previous year, then income derived from the property held under trust will not be excluded from the total income, except for certain specified clauses of section 10. However, if the trust or institution gets approval under clause (23C) of section 10 or is notified under clause (46), the registration becomes inoperative.

Exemption Under Section 10: As per the provided information, trusts or institutions cannot claim exemption under section 10 except for section 10(1) due to the provisions outlined in section 11(7). This means that their income derived from trust property is generally subject to taxation unless it falls under section 10(1).

Auditor’s Role: The auditor is required to obtain various documents, including the computation of the auditee, last year’s returns, and other relevant documents to verify whether the auditee is registered under section 12A, 12AA, or 12AB, and if that registration is currently in force. This is important for determining the tax treatment of the trust or institution’s income.

46. Whether the auditee has taken or accepted any loan or deposit or any specified sum, exceeding the limit specified in section 269SS during the previous year? Yes/No (If yes, fill Schedule 269SS)

Section 269SS of the Income Tax Act in India outlines the rules and restrictions regarding the mode of taking or accepting certain loans, deposits, or specified sums by individuals or entities. Here’s a breakdown of the key points:

Approved Banking Channels: Section 269SS mandates that no person shall take or accept a loan, deposit, or specified sum from another person in any form other than through approved banking channels. Approved banking channels include:

i. Account payee cheque

ii. Account payee bank draft

iii. Electronic clearing system through a bank account

iv. Other electronic modes as may be prescribed

Conditions for Applicability: (a) The section applies if the amount of the loan, deposit, or specified sum, or the aggregate amount of such loans, deposits, and specified sums, is twenty thousand rupees or more. (b) It also applies if, on the date of taking or accepting the loan, deposit, or specified sum, there is any outstanding loan, deposit, or specified sum that was taken or accepted earlier by the same person from the depositor and is remaining unpaid, whether the repayment due date has arrived or not. (c) The section also applies if the total amount specified in clause (a) along with the amount specified in clause (b) equals or exceeds twenty thousand rupees.

Exception for PACS and PCARD: As of Assessment Year (AY) 2023-24, an exception is made for Primary Agricultural Credit Societies (PACS) and Primary Co-operative Agricultural and Rural Development Banks (PCARD). For these entities, the threshold for compliance with Section 269SS is increased to two lakh rupees, meaning that the section won’t apply to transactions below this threshold.

The Central Board of Direct Taxes (CBDT) issued a notification (No. 8/2020) on January 29, 2020, which came into effect on September 1, 2019. This notification prescribed additional electronic modes for the purposes of Section 269SS of the Income Tax Act, which regulates the acceptance of certain loans, deposits, or specified sums. The prescribed electronic modes are as follows:

• Credit Card
• Debit Card
• Net Banking
• IMPS (Immediate Payment Service)
• UPI (Unified Payment Interface)
• RTGS (Real Time Gross Settlement)
• NEFT (National Electronic Funds Transfer)
• BHIM (Bharat Interface for Money) Aadhar Pay

These electronic modes are in addition to the existing methods, such as account payee cheques drawn on a bank, account payee bank drafts, or electronic clearing systems through a bank account, for complying with Section 269SS.

Section 269SS does not apply to certain entities or transactions, as per the first proviso to the section. It does not apply to loans or deposits taken or accepted from:

i. Government

ii. Banking companies, post office savings banks, or cooperative banks

iii. Corporations established by Central, State, or Provincial Acts

iv. Government companies as defined in the Companies Act, 2013

v. Other institutions, associations, or bodies that the Central Government may notify for specific reasons.

Schedule 26SS, related to Clause 46 of Form No. 10B, requires details of each loan, deposit, or specified sum that exceeds the limit specified in Section 269SS during the previous year.

“Loan or deposit” for the purposes of Section 269SS means a loan or deposit of money.

The auditor, when reporting under this clause, should consider various situations, including the segregation of loan and deposit transactions from other accounts, consideration of opening credit balances in loan accounts, reporting of interest-free loans, and treatment of security deposits against contracts.

Additionally, the auditor should report particulars of any “specified sum” taken or accepted in relation to the transfer of an immovable property, as defined in Explanation (iv) to Section 269SS.

The Schedule under this clause requires various details, including the Permanent Account Number (PAN) or Aadhar number of the lender or depositor, if available.

Auditors should obtain these details from the assessee and verify them from the available records and evidence. If the total of all loans/deposits/specified sums from a person is Rs. 20,000 or more, even if individual items are less than Rs. 20,000, the auditor should report on all such entries reaching or exceeding Rs. 20,000.

For transactions involving account payee cheques or bank drafts, where verifying evidence is lacking, auditors should make a suggested comment in their report.

47. Whether the auditee has received an amount exceeding the limit specified in section 269ST, from a person in a day; or in respect of a single transaction; or in respect of transactions relating to one event or occasion from a person during the previous year?

Clause 47 of Form No. 10B pertains to the auditor’s reporting obligations regarding transactions subject to Section 269ST of the Income Tax Act. Here are the key points:

Reporting Requirement: Clause 47 of Form No. 10B requires the auditor to state “Yes/No” as to whether the auditee has received an amount exceeding the limit specified in Section 269ST from a person on a single day, in a single transaction, or in transactions related to one event or occasion during the previous year.

Section 269ST: Section 269ST of the Income Tax Act outlines that no person shall receive a sum of Rs. 2 lakh or more in the following ways:

a) In aggregate from a person in a single day. b) In respect of a single transaction. c) In respect of transactions related to one event or occasion from a person.

Such receipts must be made by either an account payee cheque, an account payee demand draft, or by using electronic clearing systems through a bank account or other prescribed electronic modes. Violation of Section 269ST can lead to penalties under Section 271DA.

Prescribed Electronic Modes: The CBDT, through a notification (No. 8/2020) dated January 29, 2020, prescribed other electronic modes for compliance with Section 269ST, effective from September 1, 2019.

No Distinction Between Capital and Revenue Account: Section 269ST does not differentiate between receipts on capital and revenue accounts. Once a receipt exceeds the specified limit, it must be reported, regardless of whether it pertains to capital or revenue transactions.

Auditor’s Judgment: The auditor must exercise judgment in determining whether receipts, even if pertaining to more than one transaction, are related to a single event or occasion. This requires an assessment of the context and purpose of the transactions.

Verification of Receipt Mode: If receipts are made in a manner other than an account payee cheque, an account payee demand draft, or electronic clearing through a bank account, the auditor must verify the mode of receipt to ensure compliance with Section 269ST.

48. Whether the auditee has repaid any amount being loan or deposit or any specified advance exceeding the limit specified in section 269T, during the previous year? Yes/No Amount in Rs. (If yes, fill Schedule 269T)

Clause 48 of Form No. 10B requires the auditor to state “Yes/No” as to whether the auditee has repaid any amount being a loan, deposit, or specified advance that exceeds the limit specified in Section 269T during the previous year. If the answer is affirmative, details of such repayments must be provided in Schedule 269T.

Section 269T: Section 269T of the Income Tax Act specifies that no branch of a banking company, cooperative bank, company, cooperative society, firm, or person shall repay any loan, deposit, or specified advance made to them, except by one of the following methods:

a) Account payee cheque or account payee bank draft drawn in the name of the person who made the loan, deposit, or paid the specified advance. b) Use of electronic clearing system through a bank account. c) Such other electronic mode as may be prescribed.

This provision applies when the aggregate amount of the loan, deposit, or specified advance, together with any interest payable thereon, exceeds Rs. 20,000. However, there is an exception for Primary Agricultural Credit Societies (PACS) and Primary Co-operative Agricultural and Rural Development Banks (PCARD), with the limit raised to Rs. 2,00,000 effective from Assessment Year (AY) 2023-24.

Reporting Details: Clause 48 seeks information regarding all repayments made by the auditee during the previous year for loans, deposits, or specified advances that exceed the limit specified in Section 269T. The auditor needs to report these repayments if they are made in a manner other than the prescribed methods (account payee cheque, account payee bank draft, or electronic modes as prescribed).

CBDT Notification: The Central Board of Direct Taxes (CBDT) issued a notification (No. 8/2020) on January 29, 2020, which prescribed additional electronic modes for compliance with Section 269T, effective from September 1, 2019. These electronic modes were explained earlier.

49. Whether the auditee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB? Yes/No (If yes, fill Schedule TDS/TCS/ Statement of TDS/TCS/ Interest on TDS/TCS as applicable)

Clause 49 pertains to the reporting of whether the auditee is required to deduct or collect tax as per the provisions of Chapter XVII-B or Chapter XVII-BB of the Income Tax Act. The clause also outlines the auditor’s responsibilities, including the need for compliance verification and the exercise of judgment in reporting. The key points from the clause are:

Responsibility of the Assessee: The primary responsibility for preparing the information in a manner that the auditor can verify compliance with tax deduction and collection provisions lies with the assessee (the entity being audited).

Auditor’s Verification: The auditor is required to verify that no items have been omitted from the information provided by the assessee. Reasonable test checks should be conducted to determine whether the information is accurate. The extent of checking conducted by the auditor should be documented in their working papers and audit notes.

Designing the Audit Program: The auditor should design their audit program to reveal the extent of their checking. Adequate documentation should be maintained to support the information being certified in the audit report.

Exercise of Judgment: The auditor has the discretion to exercise judgment based on applicable laws and judicial pronouncements when assessing the applicability of tax deduction and collection provisions (Chapter XVII-B or XVII-BB) to the auditee.

Reporting Applicability: If the auditor determines that the provisions of Chapter XVII-B and/or XVII-BB are applicable to the auditee, they should answer the question as “Yes” and provide further details. If the applicability is not straightforward, the answer may be qualified depending on the facts and circumstances of each case.

Use of Judicial Pronouncements: The auditor can rely on judicial pronouncements to support their assessment of the applicability of tax deduction and collection provisions.

Observations/Qualifications: In cases where the answer is predominantly based on judicial pronouncements, the auditor may consider mentioning this in the “Observations/Qualifications” paragraph in the audit report.

Furnishing Further Details: Once the auditor affirms the applicability of Chapter XVII-B and/or XVII-BB, they are required to provide additional details under this clause.

Obtaining TDS/TCS Statements: The auditor should obtain a copy of the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) statements filed by the auditee. These statements form the basis for reporting under this clause.

Compliance Testing: Due to the voluminous nature of transactions, the auditor can apply test checks and compliance tests on the transactions reported in the TDS/TCS statements to verify the required information.