The provisions of section 11 and 12 shall not apply in relation to the income of any trust or institutions unless the following conditions are fulfilled:
(1) [Sections 12A(1)]- Registration of Trust
As already discussed, for claiming exemption under sections 11 and 12, the trust must be registered under the Income-tax Act.
(a) Where a trust or institution has been granted registration under section 12AA, the benefit of sections 11 and 12 shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. [First proviso to Section 12A(2)]
(b) No action for reopening of an assessment under section 147 shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year. [Second Proviso to Section 12A(2)]
(c) The above benefits contained in the above first and second provisos, however, would not be available in case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA or a registration once granted was cancelled. [Third proviso to section 12A(2)]
(2) [Section 12A (1) (ab)]- Fresh Application for Registration required if there is change or modification of objects of entities Exempt U/s 11 and 12
The existing provisions of section 12A of the Act provide for conditions for applicability of sections 11 and 12 in relation to the benefit of exemption in respect of income of any trust or institution.
Further, the provisions of Section 12AA of the Act provide for registration of the trust or institution which entitles them to the benefit of sections 11 and 12. It also provides the circumstances under which registration can be cancelled, one such circumstance being satisfaction of the Principal Commissioner or Commissioner that its activities are not genuine or are not being carried out in accordance with its objects subsequent to grant of registration.
However, at present there is no explicit provision in the Act which mandates said trust or institution to approach for fresh registration in the event of adoption or undertaking modifications of the objects after the registration has been granted.
Therefore, for claiming exemption under sections 11 and 12, the Act has inserted sub-clause (ab) as another condition for claiming exemption under section 12A(1).
Sub-clause (ab) provides that where a trust or an institution has been granted registration under section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996] and, subsequently. it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, it shall be required to obtain fresh registration by making an application within a period of thirty days from the date of such adoption or modifications of the objects in the prescribed form and manner.
In view of the above, the consequential amendments have been made under section 12AA relating to procedure for registration.
Documents to be attached along with application in Form 10 [Rule 17A]:
Application for registration in Form IOA shall be made in duplicate and shall be accompanied by the following documents, namely:—
|(a) (i) where the trust is created, or the institution is established, under an instrument||the instrument in original, together with one copy thereof|
|(ii) where the trust is created, or the institution is established, otherwise than under an
|the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof|
However, if the instrument or document in original cannot conveniently be produced, it
shall be open to the Chief Commissioner or Commissioner to accept a certified copy in lieu
of the original;
(b) Where the trust or institution has been in existence during any year or years, prior to the financial year in which the application for registration is made, two copies of the accounts of the trust or institution relating to such prior year or years (not being more than 3 years immediately preceding the year in which the said application is made) for which such accounts have been made up.
(3) [Section 12A(1)(b)]- Accounts of the Trust must be Audited by the Chartered Accountant
Where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year. the accounts of the trust or institution for that year should have been audited by a Chartered Accountant and the person in receipt of the income should furnish along with the return of income for the relevant assessment year the report of such audit in Form No. 10B duly signed and verified by such accountant and selling forth such particulars as may be prescribed.
(4) [Section 12A(1)(ba)]- Return of income to be furnished before the due date specified in section 139(1)
The person in receipt of the income should furnish the return of income for the previous year in accordance with the provisions of section 139(4A), within the time allowed under that section i.e. section 139(1). If the return is not furnished within the time allowed under section 139(l), the exemption under section 11 and section 12 shall not be allowed to the assessee.