Article explains Proposed Amendments in Finance Bill, 2020 applicable on Charitable Organisations and includes Cases Applicable On Organisations Registered Under Section 12A As Well As Under Section 10(23C) Of Income Tax Act,1961 and Cases Applicable Only On Organisations Registered Under Section 12A.
Cases Applicable On Organisations Registered Under Section 12A As Well As Under Section 10(23C) of The Income Tax Act,1961 (‘Act’)
| Cases | Type of Organisation | Time limit under which application has to be filed to claim exemption u/s 12A or 10(23C) | Period for which approval shall be granted | Exemption u/s 12A or 10(23C) shall be granted from | Time period under which order shall be passed |
| Case I | Existing Organisations with no period of expiry | Within Three months from the 01.06.2020 (i.e. till 31.08.2020) | Approval for a period of five years shall be granted | Assessment year from which approval was earlier granted to it. | Within three months from the end of the month in which application was received |
| Case II | Organisations with period of expiry (Renewal of existing Organisation) | Atleast Six months prior to expiry of Period | Approval for a period of Five years shall be granted after satisfaction by CIT(E) on the basis of its objects and genuineness of activities. | Assessment year from which approval was earlier granted to it. | Within Six months from the end of the month in which application was received |
| Case III | Organisations which were approved provisionally. Now applying for formal registration | Atleast Six months prior to expiry of period of provisional approval or within six months of commencement of activities, whichever is earlier | Approval for a period of Five years shall be granted after satisfaction by CIT(E) on the basis of its objects and genuineness of activities. | Assessment year from which registration has been granted provisionally | Within Six months from the end of the month in which application was received |
| Case IV | Any other case (Fresh registration) | Atleast One month prior to commencement of previous year relevant to AY from which approval is sought | Provisional Approval shall be granted for a period of Three years from the Assessment year from which registration is sought | Assessment year immediately following the Financial year in which application is made. | Within one month from the end of the month in which application was received |
IMPORTANT KEY NOTES
- Any application which is pending for approval u/s 12A & 10(23C) of the Act before Principal Commissioner or Commissioner shall be deemed to be an application falling under Case IV.
- Concept of cross checking of donation made by donor and done has been introduced.(Applicable from 01.06.2020)
- Where registration has been granted to Organisation u/s 12A & 10(23C) of the Act except provisional registration granted to organisations and the Principal Commissioner or Commissioner is not satisfied with the genuineness of activities or activities are not conducted according to the objects of the organisation, he shall pass an order in writing cancelling the registration of such organisation after providing a reasonable opportunity of being heard.
- Further, where registration has been granted to Organisation u/s 12A of the Act and the Principal Commissioner or Commissioner is satisfied that:
- Income of such organisation has been applied to persons specified under Section 13(1) of The Act; or
- Organisation has not complied with any other requirement of law 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.
then, the Principal Commissioner or Commissioner may pass an order in writing cancelling the registration of such organisation after providing a reasonable opportunity of being heard.
Cases Applicable Only On Organisations Registered Under Section 12A Of The Act
| Cases | Type of Organisation | Time limit under which application has to be filed | Period for which approval shall be granted | Order Shall be passed |
| Case V |
Organisation being inoperative due to first proviso of section 11(7)* sought to be made operative |
Atleast Six months prior to commencement of assessment year from which registration is sought to be operative | Approval for a period of Five years shall be granted | Within Six months from the end of the month in which application was received |
| Case VI | Adoption or modification in the objects of Organisation | Within a period of Thirty days from date of said adoption or modification | Approval for a period of Five years shall be granted | Within Six months from the end of the month in which application was received |
Only one option can be availed– Entities registered u/s 12AA and 10(23C)/10(46) of the Act as the case may be, can opt to take exemption either under section 12A or section 10(23C)/ 10(46) of the Act.
Question. From which assessment years, exemption u/s 12A shall be granted under Case V & Case VI.
Answer. Though the Finance Bill, 2020 has not discussed regarding the assessment years from which exemption shall be granted under Case V & VI. However, according to author’s opinion, exemption u/s 12A shall be granted from the assessment year when the organisation is made operative by Commissioner or Principal Commissioner under Case V. Further under Case VI, exemption u/s 12A shall be granted from the assessment year when the modification or adoption of objects of organisation shall be approved by Commissioner or Principal Commissioner.
Question. Whether fresh registration application filed u/s 10(23C) & Sec 12AA shall be provided provisional registration for three years even if activities have been started by the Organisation?
Answer. Yes, fresh registration application filed u/s 10(23C) & Sec 12AA shall be provided provisional registration for three years even if activities have been started by the Organisation as mentioned in Case IV. Thereafter, Organisation shall apply for formal registration according to Case III.
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