12aa-80g power point presentation [compatibility mode]

8/8/2019 12aa-80g Power Point Presentation [Compatibility Mode]

http://slidepdf.com/reader/full/12aa-80g-power-point-presentation-compatibility-mode 1/30

ABIDS – HIMAYATNAGAR CPE STUDYCIRCLE OF HYDERABAD BRANCH OFSIRC OF ICAI

Tuesday, December 30, 200

Speaker: V RAVULAPALLI-FCA

REGISTRATION OFREGISTRATION OF

CHARITABLE &CHARITABLE &RELIGIOUSRELIGIOUS

INSTITUTIONS u/s.INSTITUTIONS u/s.

80G(5)(vi).80G(5)(vi).

Provisions of section 12 AA prescribe aProvisions of section 12 AA prescribe adetailed procedure for registration of a trustdetailed procedure for registration of a trustor an institution which is engaged in theor an institution which is engaged in thepursuit of religious or charitable purposes.pursuit of religious or charitable purposes.A trust or institution so registered is entitledA trust or institution so registered is entitledto exemption of its income as described u/s.to exemption of its income as described u/s.11 & 12 of the Act11 & 12 of the Act






In other words, exemption in respect of In other words, exemption in respect of the income as envisaged u/s. 11 & 12 isthe income as envisaged u/s. 11 & 12 is

available only if a trust or an institution,available only if a trust or an institution,engaged in the pursuit of charitable orengaged in the pursuit of charitable orreligious purposes, is grantedreligious purposes, is grantedregistration u/s. 12AA(1).registration u/s. 12AA(1).

One may ask if the Income Tax Act isOne may ask if the Income Tax Act is,,

why should it contain a detailed schemewhy should it contain a detailed schemeof provisions granting exemption fromof provisions granting exemption fromtaxationtaxation

It is, therefore, necessary to understand theIt is, therefore, necessary to understand the

basic philosophy and reasons behind thebasic philosophy and reasons behind thescheme of exemptions as contained in thescheme of exemptions as contained in the

Income Tax Act.Income Tax Act.

i.i. T e Foun ing at ers o our country perceiveT e Foun ing at ers o our country perceiveindependent India as, a Welfare state whoseindependent India as, a Welfare state whoseconcerns were not confined to law and order,concerns were not confined to law and order,defense or international relations.defense or international relations.

ii.ii. The Scheme of directive principles of state policy,The Scheme of directive principles of state policy,

as enshrined in our constitution, postulates thatas enshrined in our constitution, postulates thatthe state shall strive for sociothe state shall strive for socio--economic justiceeconomic justiceand upliftment of its people in general and of thoseand upliftment of its people in general and of thosebelonging to the weaker and under privilegedbelonging to the weaker and under privilegedsections of the society, in particular.sections of the society, in particular.






iii.iii. The farmers of our constitution wereThe farmers of our constitution werealso well aware that a newl bornalso well aware that a newl bornindependent country may not haveindependent country may not havethe requisite resources to achievethe requisite resources to achievethese objectives and that privatelythese objectives and that privatelyowned resources were also requiredowned resources were also required

..

iv.iv. The Income Tax Act was alsoThe Income Tax Act was alsoconceived, among other things as anconceived, among other things as aninstrument of socioinstrument of socio--economic justiceeconomic justice

, ,, ,certain provisions to promote thecertain provisions to promote thecause of sociocause of socio--economic justice andeconomic justice andupliftment by providing directionalupliftment by providing directionalthrust by way of tax incentives, like;thrust by way of tax incentives, like;






v.v. In a newly born independent country,In a newly born independent country,lacking in adequate resources, charitylacking in adequate resources, charity

and socio economic change wereand socio economic change werepossible only through privatepossible only through private

in the form of statute based taxin the form of statute based taxincentives.incentives.

vi.vi. The rovisions intended to romote theThe rovisions intended to romote thecause of social welfare, benevolencecause of social welfare, benevolence

and charity, are thus found at differentand charity, are thus found at differentplaces in the Income Tax Act.places in the Income Tax Act.

vii.vii. Certain provisions in section 10,11 & 12Certain provisions in section 10,11 & 12

and numerous deductions under chapterand numerous deductions under chapterVIVI--A, therefore, should be appreciatedA, therefore, should be appreciatedin the light of the fact that Income Taxin the light of the fact that Income Tax

but it is also intended to act as anbut it is also intended to act as aninstrument of socioinstrument of socio--economic change.economic change.






AS REGARDS THE EXEMPTIONAS REGARDS THE EXEMPTIONFOR A TRUST OR INSTITUTIONFOR A TRUST OR INSTITUTIONENGAGED IN THE PURSUIT OFENGAGED IN THE PURSUIT OFRELIGIOUS PURPOSES, THERELIGIOUS PURPOSES, THEPHILOSOPHY AND REASONSPHILOSOPHY AND REASONS

FOUND IN OUR CONSTITUTION.FOUND IN OUR CONSTITUTION.

i.i. The farmers of our constitution declaredThe farmers of our constitution declared

India to be a secular state in whichIndia to be a secular state in whichpeople of all faiths and beliefs have apeople of all faiths and beliefs have afundamental right to profess andfundamental right to profess and

was supposed to have neither anywas supposed to have neither anyofficial religion, nor to support orofficial religion, nor to support orencourage any particular religion.encourage any particular religion.

ii.ii. All religions, therefore, were allowed aAll religions, therefore, were allowed alevel playing field without any favour orlevel playing field without any favour ordiscriminationdiscrimination






iii.iii. While no particular religion was to beWhile no particular religion was to beshown any favor, as a measure of shown any favor, as a measure of neutrality, religious trust or institution,neutrality, religious trust or institution,irrespective of their faith, had to beirrespective of their faith, had to beuniformly granted exemption under theuniformly granted exemption under theIncome Tax Act.Income Tax Act.

Exemption of Income stipulated u/s. 11 &

12, on the strength of registration, thusconforms to the Intended charitable andreligious endeavor by private participants.

Having touched upon the basic postulatesbehind the philosophy of exemption, weshall now deal with the provisionsre ardin re istration u/s. 12AA andapproval u/s 80G.






As already mentioned, the income of anyAs already mentioned, the income of anytrust or institution created wholly fortrust or institution created wholly forcharitable or religious purposes, qualifiescharitable or religious purposes, qualifiesfor exemption from tax on the basis of for exemption from tax on the basis of registration u/s. 12AA and subject toregistration u/s. 12AA and subject tofulfillment of certain conditions asfulfillment of certain conditions asstipulated in the provisions of chapter.stipulated in the provisions of chapter.III.III.

The charitable ur oses or the reli iousThe charitable ur oses or the reli iouspurposes, which constitute the basic testspurposes, which constitute the basic tests

for registration and consequentialfor registration and consequentialexemption have, however, not beenexemption have, however, not beenexhaustively or exclusively defined in theexhaustively or exclusively defined in theAct.Act.

•• Section 2(15) of the Act defines theSection 2(15) of the Act defines theexpression “ Charitable purposes” in anexpression “ Charitable purposes” in aninclusive manner to includeinclusive manner to include ––

i.i. Relief to poor,Relief to poor,

ii.ii. EducationEducation

iii.iii. Medical relief, andMedical relief, and

iv.iv. Advancement of any other object of Advancement of any other object of

genera pu c u y.genera pu c u y.






The latest test i.e, advancement of anyThe latest test i.e, advancement of anyother object of general public utility is of other object of general public utility is of wide important as much as the term iswide important as much as the term isopen to variety of interpretations:open to variety of interpretations:

Thou h it is clear that the ob ect has toThou h it is clear that the ob ect has tobe of general public utility and in thatbe of general public utility and in thatsense the trust or institution has to catersense the trust or institution has to caterto the public in general, the term utilityto the public in general, the term utilityshould not be understood in the sense of should not be understood in the sense of utilitarianism or usefulness as professedutilitarianism or usefulness as professedby Jermy Bentham or John Stuart Mill.by Jermy Bentham or John Stuart Mill.

The utility, therefore, has to be perceivedThe utility, therefore, has to be perceivedin conjunction with charity and not inin conjunction with charity and not interms of consumerism implying utility.terms of consumerism implying utility.

The trust or institution seekingThe trust or institution seeking

registration for exemption should not beregistration for exemption should not befor the benefit of a group or a class of for the benefit of a group or a class of individuals. However, charity to aindividuals. However, charity to a

society, by the sheer number of society, by the sheer number of beneficiaries involved, may be perceivedbeneficiaries involved, may be perceivedas charitableas charitable

Common quality of public or impersonalCommon quality of public or impersonal

in nature should dictate the activity.in nature should dictate the activity. The charity should be unselfish/withoutThe charity should be unselfish/without

quid pro quo and it should be based onquid pro quo and it should be based onaltruistic considerations.altruistic considerations.






‘Religious purposes’ have, however, not ‘Religious purposes’ have, however, notbeen defined at all in the Act. However,been defined at all in the Act. However,

based on the judicial decisions, a fewbased on the judicial decisions, a fewobjects, which constitute religiousobjects, which constitute religious--, ., .

Providing for establishment and worshipProviding for establishment and worshipof presiding deity. This also includesof presiding deity. This also includesmaintenance of Mos ue Dar ah andmaintenance of Mos ue Dar ah andSeminaries etc.Seminaries etc.

Construction of Temples, Mosque,Construction of Temples, Mosque,Churches or other places of worship andChurches or other places of worship andprayer hallsprayer halls

Provision for teaching religious texts orProvision for teaching religious texts or

scriptures and provision for recital thereof.scriptures and provision for recital thereof.

States like Tamil Nadu, Andhra Pradesh, KeralaStates like Tamil Nadu, Andhra Pradesh, Keralaand Maharashtra have laws coverin reli iousand Maharashtra have laws coverin reli iousendowments.endowments.

A religious endowment covered by such lawsA religious endowment covered by such lawscan, in most of the cases, be treated as acan, in most of the cases, be treated as aublic reli ious one. However the list of ublic reli ious one. However the list of

religious purposes as discussed, is notreligious purposes as discussed, is notexhaustive and one has to really examine theexhaustive and one has to really examine thereal nature of activities on the ground to comereal nature of activities on the ground to cometo definite conclusion.to definite conclusion.






Having appreciated the fact that a trust orHaving appreciated the fact that a trust orinstitution created wholly for religious orinstitution created wholly for religious or

charitable purposes, is eligible forcharitable purposes, is eligible forregistration u/s. 12AA and havingregistration u/s. 12AA and having

and religious purposes, we shall proceedand religious purposes, we shall proceedto analyze the procedure for registration.to analyze the procedure for registration.

APPLICATION FOR REGISTRATION.APPLICATION FOR REGISTRATION.Section 12A(1)(a) requires anSection 12A(1)(a) requires an

application in the prescribed form to be madeapplication in the prescribed form to be madeseeking registration.seeking registration.

•• This application in accordance with RuleThis application in accordance with Rule 17 A17 Aand in Form No. 10Aand in Form No. 10A has to be madehas to be made ininup cateup cate w t n t e nanc a year rom t ew t n t e nanc a year rom t e

date of creation of the trust or institution.date of creation of the trust or institution.•• The Delay in application can be condoned byThe Delay in application can be condoned by

the Commissioner/Director of Income Tax forthe Commissioner/Director of Income Tax forthe reasons to be recorded in writing and inthe reasons to be recorded in writing and incase the delay is not condoned but thecase the delay is not condoned but the

otherwise satisfied regarding the eligibility, theotherwise satisfied regarding the eligibility, theregistration can be granted with the first day of registration can be granted with the first day of the financial year in which the application isthe financial year in which the application ismade.made.






•• The registration is granted from the firstThe registration is granted from the firstday of the financial year because theday of the financial year because thetaxability or nontaxability or non--taxability will be for ataxability will be for aprevious year as a whole which beginsprevious year as a whole which beginsfrom the first day of the financial year.from the first day of the financial year.

•• The application inThe application in form No. 10A (to beform No. 10A (to be

filed in duplicate)filed in duplicate) has to accompanyhas to accompany--(i) Original copy of the deed or(i) Original copy of the deed or

instrument of creation or a certifiedinstrument of creation or a certified

,,

(ii) Where the trust/institution has been(ii) Where the trust/institution has been

in existence prior to the financialin existence prior to the financial

year in which application is made,year in which application is made,

two co ies of the accounts for thetwo co ies of the accounts for the

prior year or years, as the case mayprior year or years, as the case may

be, not exceeding for more thanbe, not exceeding for more than

three years.three years.






•• The procedure for registration isThe procedure for registration iscontained in section 12AA(1):contained in section 12AA(1):

-- The Commissioner may call for theThe Commissioner may call for the

necessary documents/ information tonecessary documents/ information tosatisfy himself about the genuineness of satisfy himself about the genuineness of

trust/institution,trust/institution,-- He can also make such enquiries as heHe can also make such enquiries as he

may deem fit. The assessing Officermay deem fit. The assessing Officershould not make any enquiries unlessshould not make any enquiries unlessthey are mandated by the CIT/DIT.they are mandated by the CIT/DIT.

-- An order in writing granting or refusing theAn order in writing granting or refusing the

registration shall be passed within six monthsregistration shall be passed within six monthsfrom the end of the month in which thefrom the end of the month in which theapplication is made.application is made.

Role of the Assessing Officer:Role of the Assessing Officer:

When the application seekingWhen the application seekingregistration is received, it may beregistration is received, it may bereferred to the Assessing Officer forreferred to the Assessing Officer for

..Assessing Officer should, thereforeAssessing Officer should, therefore ––

(i) Go through the deed or instrument of (i) Go through the deed or instrument of

,,objects are such as would render theobjects are such as would render theapplicant eligible for registration,applicant eligible for registration,






(ii) Whether the charitable objects are certain or(ii) Whether the charitable objects are certain or

vague,vague,

(iii) Whether the objects are mixed i.e, partly(iii) Whether the objects are mixed i.e, partlyreligious and partly charitable. This aspectreligious and partly charitable. This aspect

of approval u/s. 80G(5)(vi).of approval u/s. 80G(5)(vi).

(iv) Whether the deed or instrument of creation(iv) Whether the deed or instrument of creation

contains investment clause, dissolution orcontains investment clause, dissolution or

winding up clause, amendment clause, nonwinding up clause, amendment clause, non--

benefit of specified persons u/s. 13(1)(c)benefit of specified persons u/s. 13(1)(c)

clause, irrevocability clause or not and theclause, irrevocability clause or not and the

members of general public as beneficiariesmembers of general public as beneficiaries

are spelt out or not.are spelt out or not.

•• The analysis of the accounts,The analysis of the accounts,

accompanying the application should beaccompanying the application should bemade to find out as to whether or not,made to find out as to whether or not,income in the past has been applied forincome in the past has been applied for

..

•• Whether returns were filed, and in caseWhether returns were filed, and in casereturns were not filed, though required toreturns were not filed, though required tobe filed, feasibility of action under sectionbe filed, feasibility of action under section272A(2)(e) read with section 139(4A)272A(2)(e) read with section 139(4A)

may be examined.may be examined.






The registration entitling the applicantThe registration entitling the applicanttrust or institution for examination is nottrust or institution for examination is nota perpetual benefit and it is subject toa perpetual benefit and it is subject tofulfillment of certain conditions. Anyfulfillment of certain conditions. Anyinfringement or contravention of theseinfringement or contravention of theseconditions may entail forfeiture of conditions may entail forfeiture of exem tion.exem tion.

Forfeiture of exemption.Forfeiture of exemption.

There are certain provisions/conditionsThere are certain provisions/conditionsstipulated in the Act, the infringement orstipulated in the Act, the infringement orcontravention of which, may lead tocontravention of which, may lead toforfeiture of exem tion These areforfeiture of exem tion These are ––

Contravention of the provisions of Contravention of the provisions of section 11(2):section 11(2):

Every trust or institution registeredEvery trust or institution registered

. ,. ,income for charitable or religiousincome for charitable or religiouspurposes. Capital outlays will also qualifypurposes. Capital outlays will also qualifyas application for reckoning thisas application for reckoning thispercentage.percentage.






In case, this specified percentage is notIn case, this specified percentage is notapplied, the trust or institution has to fileapplied, the trust or institution has to filea notice in Form No. 10 for accumulationa notice in Form No. 10 for accumulationof income or setting apart income forof income or setting apart income forspecified purposes. This notice has to bespecified purposes. This notice has to befiled before the due date, as prescribedfiled before the due date, as prescribedu/s. 139 1 and the over all limit foru/s. 139 1 and the over all limit forutilization of such accumulated incomeutilization of such accumulated income

cannot exceed 5 yearscannot exceed 5 years

In the event of any failure to apply theIn the event of any failure to apply the

specified percentage and at the samespecified percentage and at the sametime failure to file the notice of time failure to file the notice of accumulation, the Assessing Officer canaccumulation, the Assessing Officer can

..provisions, though apparently veryprovisions, though apparently verypotent, do not have the required teeth.potent, do not have the required teeth.Vide Board’s circular No.Vide Board’s circular No. 273 dated273 dated03.06.198003.06.1980, the CIT/DIT have been, the CIT/DIT have been

empowere o con one e e ay n ngempowere o con one e e ay n ngthe notice of accumulation in Formthe notice of accumulation in FormNo.10.No.10.






Besides, in the case of Besides, in the case of Nagpur HotelsNagpur HotelsAssociationAssociation –– 247 ITR247 ITR –– 201,201, the Apexthe ApexCourt has held, that such a notice can beCourt has held, that such a notice can befiled before the Assessing Officer finalizesfiled before the Assessing Officer finalizesthe assessment. Thus, in reality, thethe assessment. Thus, in reality, thesubmission of notice can travel beyondsubmission of notice can travel beyondthe due date rescribed u/s. 139 1 .the due date rescribed u/s. 139 1 .

The income so accumulated, has toThe income so accumulated, has to

be invested in accordance w ith thebe invested in accordance w ith themodes and forms of investment, asmodes and forms of investment, asspecified u/ s. 11(5).specified u/ s. 11(5).

Contravention of the provisions of Contravention of the provisions of Section 11(3).Section 11(3).

If income accumulated is applied for theIf income accumulated is applied for the

religious or it ceases to remain investedreligious or it ceases to remain investedin any form or mode, specified u/s.in any form or mode, specified u/s.11(5), the benefit of exemption can be11(5), the benefit of exemption can beforfeited.forfeited.






Contravention of the provisions of Contravention of the provisions of section 11(5).section 11(5).

Provisions of Sec. 11(5) prescribe theProvisions of Sec. 11(5) prescribe theforms and modes of investments and informs and modes of investments and incase there is a deviation, the benefit of case there is a deviation, the benefit of exemption can be forfeited.exemption can be forfeited.

The rationale behind prescribing the modes andThe rationale behind prescribing the modes and

forms of investments is that the funds of aforms of investments is that the funds of acharitable institution, which are essentiallycharitable institution, which are essentiallymeant for charity, should not be utilized formeant for charity, should not be utilized forpromotion of private interests, nor should theypromotion of private interests, nor should theye expose to g r s areas. e ssess nge expose to g r s areas. e ssess ng

Officers shall be advised to call for originalOfficers shall be advised to call for originalinstruments of investments to satisfy that theinstruments of investments to satisfy that theinvestments are strictly in accordance with theinvestments are strictly in accordance with themodes and forms prescribed under themodes and forms prescribed under the

. ,. ,instruments as to whether or not they areinstruments as to whether or not they areendorsed or hypothecated to banks or otherendorsed or hypothecated to banks or otherfinancial institutions for the interests other thanfinancial institutions for the interests other thanthose of the assessee institution.those of the assessee institution.






Contravention of the provisions of Sec.Contravention of the provisions of Sec.13(1)(c).13(1)(c).

The provisions clearly prohibit any benefitThe provisions clearly prohibit any benefitaccruing or arising to the persons specified inaccruing or arising to the persons specified insection 13(3). In case any benefit direct orsection 13(3). In case any benefit direct orindirect flows to these specified persons, theindirect flows to these specified persons, theexemption can be forfeited.exemption can be forfeited.

Forfeiture of exemption in the aboveForfeiture of exemption in the abovecircumstances i.e., under the provisions of circumstances i.e., under the provisions of section 11 & 13 is only a temporarysection 11 & 13 is only a temporary

disability for a particular assessment yeardisability for a particular assessment yearor years. This forfeiture does notor years. This forfeiture does notobliterate the registration granted u/ s.obliterate the registration granted u/ s.12AA.12AA.

Cancellation of Registration.Cancellation of Registration.

A new provision i.e. SubA new provision i.e. Sub--section (3) of section (3) of section 12AA has been inserted w.e.f. 1section 12AA has been inserted w.e.f. 1stst

October 2004, whereby power to cancelOctober 2004, whereby power to cancelthe re istration once ranted has beenthe re istration once ranted has beenconferred on the CIT/DIT. Theconferred on the CIT/DIT. Theregistration can be cancelled, if the CIT isregistration can be cancelled, if the CIT issatisfied thatsatisfied that ––

(i) The activities of the trust/institution(i) The activities of the trust/institution

,,(ii) Are not being carried out in(ii) Are not being carried out in

accordance with the objects of theaccordance with the objects of the

trust or institutiontrust or institution






An order cancelling the registration has to be inAn order cancelling the registration has to be in

affording a fair and reasonable opportunity toaffording a fair and reasonable opportunity tothe trust/institution concerned.the trust/institution concerned.

Approval under section 80G.Approval under section 80G.

Approval u/s. 80G(5)(vi) is primarilyApproval u/s. 80G(5)(vi) is primarilygiven to any trust or institution whosegiven to any trust or institution whoseincome is not liable for inclusion in itsincome is not liable for inclusion in itso a ncome. n o er wor s, assessa eo a ncome. n o er wor s, assessa e

entities enjoying exemption u/s. 11 & 12entities enjoying exemption u/s. 11 & 12and under certain other specifiedand under certain other specifiedprovisions of section 10 are eligible forprovisions of section 10 are eligible forthis approval.this approval.

Such approval shall, however, notSuch approval shall, however, notexceed at one point of time for moreexceed at one point of time for morethan five assessment years [(Proviso tothan five assessment years [(Proviso tosection 80G(5)(vi)].section 80G(5)(vi)].





Speaker: V RAVULAPALLI-FCA 2

This approval is not available to suchThis approval is not available to suchentities as are wholly or substantiallyentities as are wholly or substantially

engaged in the pursuit of religiousengaged in the pursuit of religiouspurposes. [Exemption 3 below sectionpurposes. [Exemption 3 below section

..

Marginal relaxation u/s. 5B is, however,Marginal relaxation u/s. 5B is, however,available if the amount applied foravailable if the amount applied forreligious purposes does not exceed 5%religious purposes does not exceed 5%of the total income.of the total income.

While approval is accorded to anWhile approval is accorded to an

assessable entity, the benefit of assessable entity, the benefit of deduction is available to the donorsdeduction is available to the donorsand not to the recipient entityand not to the recipient entity

..

The deduction is available only for theThe deduction is available only for thedonation made in money. In otherdonation made in money. In otherwords, the monetary equivalent of thewords, the monetary equivalent of thedonation made in kind is not eli ible fordonation made in kind is not eli ible for

deduction. [Explanation 5 below Sectiondeduction. [Explanation 5 below Section80G(5c)].80G(5c)].






The basic intention behind this taxThe basic intention behind this taxincentive in the form of deduction is toincentive in the form of deduction is to

institutionalize the charity and toinstitutionalize the charity and tochannelise the private money/wealth andchannelise the private money/wealth and

charity.charity.

The charitable trust / institution has toThe charitable trust / institution has toapply for obtaining this approval fromapply for obtaining this approval fromthe CIT/DIT who has been authorized tothe CIT/DIT who has been authorized toaccord or reject the approval oraccord or reject the approval or

continuance of approval sought by thecontinuance of approval sought by theapplicant trust / institution.applicant trust / institution.

Such order of approval or continuance of Such order of approval or continuance of

approval or denial of approval shall beapproval or denial of approval shall bepassed by the CIT/DIT exercising thepassed by the CIT/DIT exercising theauthority in terms of the provisions of authority in terms of the provisions of

..






Procedure.Procedure.

AA detailed proceduredetailed procedure in this regard hasin this regard has

been laid down inbeen laid down in Rule 11AARule 11AA ––-- The applicant entity has to make anThe applicant entity has to make anapplication inapplication in triplicatetriplicate in Form No. 10G.in Form No. 10G.

-- The application so filed, has to beThe application so filed, has to beaccompanied byaccompanied by ––

(i) Copy of registration granted u/s(i) Copy of registration granted u/so ca on u s. .o ca on u s. .

(ii) Note on activities, carried out from(ii) Note on activities, carried out frominception or during the last threeinception or during the last threeyears, which ever is less.years, which ever is less.

(iii) Copies of the accounts from inception(iii) Copies of the accounts from inception

or for the last three years, which everor for the last three years, which everis less.is less.

The CIT/DIT may, however, call forThe CIT/DIT may, however, call forfurther information documents andfurther information documents andevidence etc.evidence etc.

Where the CIT is satisfied that allWhere the CIT is satisfied that allconditions laid down for approval areconditions laid down for approval arefulfilled, he shall accord the approval infulfilled, he shall accord the approval interms of Rule 11AA 4 .terms of Rule 11AA 4 .

Where he is not satisfied, he shall passWhere he is not satisfied, he shall passan order refusing the grant of approvalan order refusing the grant of approvalor continuation of approval in terms of or continuation of approval in terms of Rule 11AA(5).Rule 11AA(5).






The application filed in Form No.10GThe application filed in Form No.10Gseeking approval u/s. 80G(5) has to beseeking approval u/s. 80G(5) has to be

disposed of disposed of within six monthsw ithin six months from thefrom thedate of filing the application.date of filing the application.

However, time ta en y t e app icant inHowever, time ta en y t e app icant innot complying with the direction by thenot complying with the direction by theCIT/DIT, shall be excluded inCIT/DIT, shall be excluded incomputation of this limitation.computation of this limitation.

There is a disharmony in the matter of limitationThere is a disharmony in the matter of limitationapplicable for disposal of applications in Form No.10Aapplicable for disposal of applications in Form No.10A

& 10G. While application in Form No. 10A for& 10G. While application in Form No. 10A forregistration u/s. 12AA has to be decided before theregistration u/s. 12AA has to be decided before theexpiry of six months from the end of the month inexpiry of six months from the end of the month inwhich the application is received, the application filedwhich the application is received, the application filed

. .. .to be decided before the expiry of six months from theto be decided before the expiry of six months from thedate on which the application is made. In quite a largedate on which the application is made. In quite a largenumber of cases, applications in Form No. 10A andnumber of cases, applications in Form No. 10A and10G are filed simultaneously, whereas the limitation10G are filed simultaneously, whereas the limitationfor disposal thereof are different. Normally, approvalfor disposal thereof are different. Normally, approvalu/s.80G(5)(vi) has to follow the grant of registrationu/s.80G(5)(vi) has to follow the grant of registration

. ,. ,application in Form No.10G expires earlier. It is,application in Form No.10G expires earlier. It is,therefore, felt necessary that the limitation applicabletherefore, felt necessary that the limitation applicablein respect of both these applications is harmonized.in respect of both these applications is harmonized.






Role of the Assessing Officer.Role of the Assessing Officer.

Whenever an application in Form No.10GWhenever an application in Form No.10G

is received, a copy thereof may beis received, a copy thereof may beforwarded to the Assessing Officerforwarded to the Assessing Officerseekin his scrutin re ort andseekin his scrutin re ort andcomments.comments.

The Assessing Officer, should, therefore,The Assessing Officer, should, therefore, --

Examine, whether all the enclosuresExamine, whether all the enclosuresprescribed are attached with theprescribed are attached with the

order.order.

Examine, whether accounts filed with theExamine, whether accounts filed with thereturns received are in agreement withreturns received are in agreement withthose filed with the application.those filed with the application.

Verify, whether there has been anyVerify, whether there has been any

contravention of section 11(2)/11(5) orcontravention of section 11(2)/11(5) orsection 13(1)(c) leading to forfeiture of section 13(1)(c) leading to forfeiture of exemption for any assessment year. Thisexemption for any assessment year. Thisaspect can be examined with referenceaspect can be examined with referenceto the assessment records,to the assessment records,

Examine, whether there have been anyExamine, whether there have been anyirregularities/manipulations or violationsirregularities/manipulations or violationsof the provisions or the applicantof the provisions or the applicanttrust/institution was found to be engagedtrust/institution was found to be engaged

in activities, not in accordance with thein activities, not in accordance with theobjects of the trust/institution, it will beobjects of the trust/institution, it will beworthwhile to send a proposal forworthwhile to send a proposal forcancellation of registration itself.cancellation of registration itself.






Assessment of Charitable Trusts /Assessment of Charitable Trusts /Institutions.Institutions.

As the crux of the matter is the eligibilityAs the crux of the matter is the eligibilityfor exemption, the focal point forfor exemption, the focal point forscru ny nves ga on s ou e n ouscru ny nves ga on s ou e n outhe contravention of provisions whichthe contravention of provisions whichprovide for forfeiture of exemption.provide for forfeiture of exemption.

Investigations/enquiries in the course of Investigations/enquiries in the course of assessment roceedin s should beassessment roceedin s should beoriented to find out how and whetheroriented to find out how and whether

these entities are really discharging thethese entities are really discharging theobligations, which otherwise entitle themobligations, which otherwise entitle themto exemption.to exemption.

Scrutinizing a case of such institutionsScrutinizing a case of such institutions

from the point of view of forfeiture of from the point of view of forfeiture of exemption should, therefore, be the lineexemption should, therefore, be the lineof investigation while dealing with theirof investigation while dealing with their

..

Scrutiny into the aspects like,Scrutiny into the aspects like,observance of provision of section 11(2),observance of provision of section 11(2),section 11(5), section 13(1)(c) etc.section 11(5), section 13(1)(c) etc.Should form the core areas of Should form the core areas of

examination in the assessmentexamination in the assessmentproceedings.proceedings.






Voluntary contributions should also beVoluntary contributions should also bethoroughly analyzed to find out whetherthoroughly analyzed to find out whetherthey are really voluntary or forced orthey are really voluntary or forced orcontrived contributions.contrived contributions.

Classification of donations into “generalClassification of donations into “generaldonations” and “corpus donations” donations” and “corpus donations”

to ensure that the specified percentage isto ensure that the specified percentage isnot camouflaged by misclassification of not camouflaged by misclassification of accounts.accounts.

SOME OF THE IMPORTANT ASPECTS:SOME OF THE IMPORTANT ASPECTS:

WHERE BUSINESS ITSELF IS VESTEDWHERE BUSINESS ITSELF IS VESTEDIN CHARITY, IT COULD NOT BE SAIDIN CHARITY, IT COULD NOT BE SAIDTHAT THE OBJECT OF THE TRUST ISTHAT THE OBJECT OF THE TRUST ISTO CARRY ON BUSINESS AS WASTO CARRY ON BUSINESS AS WASPOINTED OUT IN :AUDITORPOINTED OUT IN :AUDITORDASARATHARAMA REDDY CHARITIESDASARATHARAMA REDDY CHARITIESV. CIT AND THE SAME VIEW WASV. CIT AND THE SAME VIEW WASTAKEN IN CIT V.SHANTHITAKEN IN CIT V.SHANTHICHANDRAN (2000) 241 ITR 371CHANDRAN (2000) 241 ITR 371(MAD.).(MAD.).






ANONYMOUS DONATIONS:ANONYMOUS DONATIONS:

ANONYMOUS DONATIONS:ANONYMOUS DONATIONS:

TO IN SUBTO IN SUB--CLAUSE (iia) OF CLAUSE (24)CLAUSE (iia) OF CLAUSE (24)OF SECTION 2, WHERE A PERSONOF SECTION 2, WHERE A PERSONRECEIVING SUCH CONTRIBUTION DOESRECEIVING SUCH CONTRIBUTION DOESNOT MAINTAIN A RECORD OF THENOT MAINTAIN A RECORD OF THEIDENTITY INDICATING THE NAME ANDIDENTITY INDICATING THE NAME AND

CONTRIBUTION AND SUCH OTHERCONTRIBUTION AND SUCH OTHER

PARTICULARS INCLUDING THE PANPARTICULARS INCLUDING THE PANDETAILS OF THE DONOR.DETAILS OF THE DONOR.

ANONYMOUS DONATIONSANONYMOUS DONATIONS

EFFECT OF TAX ON SUCHEFFECT OF TAX ON SUCH--

30% RATE OF TAX ON ANY ANONYMOUS30% RATE OF TAX ON ANY ANONYMOUSDONATION RECEIVED, THE FOLLOWINGDONATION RECEIVED, THE FOLLOWINGCASE TAXATION IS NOT APPLICABLECASE TAXATION IS NOT APPLICABLE--

--ANY TRUST OR INSTITUTIONANY TRUST OR INSTITUTIONCREATED OR ESTABLISHEDCREATED OR ESTABLISHED WHOLLYWHOLLY FORFOR

..IS NO EXEMPTION IS AVAILABLE FORIS NO EXEMPTION IS AVAILABLE FORWHOLLY RELIGIOUS TRUST ORWHOLLY RELIGIOUS TRUST ORASSOCIATION.ASSOCIATION.






PROFIT MAKING OBJECTPROFIT MAKING OBJECT

SUPREME COURT HELD IN ADDL.CITSUPREME COURT HELD IN ADDL.CITvs.vs.MANUFACTURERS, WHERE MAINMANUFACTURERS, WHERE MAINOBJECT IS CHARITABLE ANDOBJECT IS CHARITABLE ANDINCIDENTAL OR ANCILLARY OBJECTINCIDENTAL OR ANCILLARY OBJECTIS PROFIT MAKING OBJECT, STILL ITIS PROFIT MAKING OBJECT, STILL ITWILL NOT LOOSE THE CHARACTERWILL NOT LOOSE THE CHARACTER

AS CHARITABLE.13 CTR (SC)378.AS CHARITABLE.13 CTR (SC)378.

BENEFIT TO THE SIZABLEBENEFIT TO THE SIZABLECOMMUNITYCOMMUNITY THE SUPREME COURT IN CIT vs.AHMEDABAD RANA CASTETHE SUPREME COURT IN CIT vs.AHMEDABAD RANA CASTE

ASSOCIATIONASSOCIATION-- 140 ITR 1 (SC), HELD THAT THE140 ITR 1 (SC), HELD THAT THE

BROTHERHOOD AMONG THE MEMBERS OF THEBROTHERHOOD AMONG THE MEMBERS OF THECOMMUNITY, DEVELOP THE LIFE OF MEMBERS OF THECOMMUNITY, DEVELOP THE LIFE OF MEMBERS OF THECOMMUNITY IS ENTITLED FOR REGISTRATION U/S.2 (15).COMMUNITY IS ENTITLED FOR REGISTRATION U/S.2 (15).

THE SAME WAS ESTABLISHED IN CITTHE SAME WAS ESTABLISHED IN CITvs.A.P.PAWNBROKERS ASSOCIATION BY AP HIGHCOURT.vs.A.P.PAWNBROKERS ASSOCIATION BY AP HIGHCOURT.

BUT IN THE CASE OF M.P.SHANTI VERMA JAIN, PRESIDENTBUT IN THE CASE OF M.P.SHANTI VERMA JAIN, PRESIDENT

MSP FAMILY JAIN TRUST vs.STATE OF KERALAMSP FAMILY JAIN TRUST vs.STATE OF KERALA --61 CTR,61 CTR,HELD THAT WHERE THE DOMINANT PURPOSE OF THEHELD THAT WHERE THE DOMINANT PURPOSE OF THETRUST WAS PROPOGATION OF THE JAIN RELIGION ANDTRUST WAS PROPOGATION OF THE JAIN RELIGION ANDTO SERVE ITS FOLLOWERS IS NOT CHARITABLE TRUST.TO SERVE ITS FOLLOWERS IS NOT CHARITABLE TRUST.






DEPRECIATION ALLOWABLEDEPRECIATION ALLOWABLE

AS PER THE DECISION TAKEN BYAS PER THE DECISION TAKEN BY

CIT vs.RAIPUR PALLOTTINECIT vs.RAIPUR PALLOTTINESOCIETYSOCIETY--ITR 579 (MP), THAT THEITR 579 (MP), THAT THEDEPRECIATION ONDEPRECIATION ONASSETS/PROPERTY PROVIDED INASSETS/PROPERTY PROVIDED INTHE ACCOUNTS, ALLOWABLE WHILETHE ACCOUNTS, ALLOWABLE WHILE

WORKING OUT THE INCOME OF THEWORKING OUT THE INCOME OF THESOCIETY.SOCIETY.

REPAYMENT OF LOANREPAYMENT OF LOAN

A TRUST CAN TAKE A LOAN AND THEA TRUST CAN TAKE A LOAN AND THE

INCOME OF THE SUBSEQUENT YEAR ANDINCOME OF THE SUBSEQUENT YEAR ANDTHE PAYMENT OF THE SAID LOAN OUT OFTHE PAYMENT OF THE SAID LOAN OUT OFTHE INCOME OF THE SUBSEQUENT YEARTHE INCOME OF THE SUBSEQUENT YEARWOULD AMOUNT TO APPLICATION OFWOULD AMOUNT TO APPLICATION OFINCOME FOR CHARITABLE ANDINCOME FOR CHARITABLE ANDRELIGIOUS PURPOSES UNDER SECTIONRELIGIOUS PURPOSES UNDER SECTION11 (1) (a) OF THE ACT.11 (1) (a) OF THE ACT.

--CIR.ISSUED BY CBDT ON 24CIR.ISSUED BY CBDT ON 24--0101--1973.1973.





SECTIONSECTION--1313--DENIESDENIES

EXEMPTIONEXEMPTION ANY PART OF INCOME IS HELD FOR PRIVATEANY PART OF INCOME IS HELD FOR PRIVATERELIGIOUS PURPOSE,RELIGIOUS PURPOSE,

TRUST OR INSTITUTION IS CREATED FORTRUST OR INSTITUTION IS CREATED FORPARTICULAR RELIGIOUS COMMUNITY OR CASTEPARTICULAR RELIGIOUS COMMUNITY OR CASTEOTHER THAN SC,ST,BC AND WOMEN AND CHILDOTHER THAN SC,ST,BC AND WOMEN AND CHILDWELFARE,WELFARE,

INCOME OF THE TRUST ENSURES DIRECTLY ORINCOME OF THE TRUST ENSURES DIRECTLY ORINDIRECTLY FOR THE BENEFIT OF ANYINDIRECTLY FOR THE BENEFIT OF ANYPERSONSPECIFIED IN SECTION 13 (3),PERSONSPECIFIED IN SECTION 13 (3),

THAN IN THE MODES SPECIFIED IN SECTION 11THAN IN THE MODES SPECIFIED IN SECTION 11

(5).(5). DENIAL OF EXEMPTION IS FOR THE PARTICULARDENIAL OF EXEMPTION IS FOR THE PARTICULAR

ASST.YEAR RELEVANT TO THE PRE.YEAR ONLY.ASST.YEAR RELEVANT TO THE PRE.YEAR ONLY.

CONCLUSIONCONCLUSION

THANKS TO THE ORGANISERS.THANKS TO THE ORGANISERS.

THANKS TO MY GURUS.THANKS TO MY GURUS.

THANKS TO THE PARTICIPANTS.THANKS TO THE PARTICIPANTS.

MY MAILMY [email protected][email protected].

12aa-80g power point presentation [compatibility mode]

Documents