prpri Rationalise of Provisions of Section 10(23C): ICAI Rationalise of Provisions of Section 10(23C): ICAI


The 15th Proviso to Section 10(23C) states that application for obtaining approval under this section shall be made on or before 30th September of the relevant assessment year from which the exemption is sought. For example, if an institution seeks approval for Financial year 2017-18, it will have to apply up to 30th September 2018. Further, the 9th proviso to Section 10(23C) states that order granting approval or rejection shall be passed within 12 months from the end of month in which such application was received. In view of this proviso, in respect of applications received on 30th September 2018, the order has to be passed on or before 30th September, 2019. So the status of the application is not known till next 12 months i.e. for 2 financial years.

If such institution is not granted approval as on 30th September 2019 then it will have to pay income tax for Financial year 2017-18 and 2018-19. Resultantly, the charitable institution will have to face heavy tax burden. At the same time it is to be noted that ITD doesn’t accept such application before close of financial year i.e. application for F.Y. 2017-18 cannot be made on or before 31st March 2018, though there is no such restriction under the Act.


It is suggested that:

  • Such application should be allowed to be made at any time during the financial year for which exemption is sought even if the annual receipts have not exceeded or is not expected to exceed the limit of Rs 1 crore.
  • Time limit for granting approval may be reduced from 12 months to “within 4 months from the end of the month in which application has been filed”, so that any institution should be well aware of its status before due date of filing its income tax return.
Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax)
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July 2021