Section 12A of Income-Tax Act, 1961

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HomeBrud.gifIndian LawBrud.gifActsBrud.gifIncome-Tax Act, 1961Brud.gifSection 12A of Income-Tax Act, 1961

Section 12A of Income-Tax Act, 1961 deals with the topic of Conditions for applicability of sections 11 and 12 and Registration of Charitable/religious trust.

Contents

From the Act

[(1)] The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:—

(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the [***] Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, [whichever is later and such trust or institution is registered under section 12AA ] :

[Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,—

(i) from the date of the creation of the trust or the establishment of the institution if the [***] Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons;

(ii) from the 1st day of the financial year in which the application is made, if the [***] Commissioner is not so satisfied:]

[Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;]

[(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered under section 12AA;]

(b) 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 have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the pres-cribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.]

(c) [***]

[(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.]

Recent Cases / Related Cases / Case Laws

  • ITAT said: A company is also entitled to registration under provision of section 12A
    • There is no provision in the Income-tax Act or Rules made thereunder to deny registration under the provision of section 12A merely because assessee is a 'company'
    • It said that: The meaning of the word ‘institution’, nowhere suggest that a ‘company’ could not be an institution
    • Further, the test whether an assessee could be registered under section 12A is not the status of the ‘person’, but whether the person (assessee) is established for charitable or religious purpose - [2011] 10-153 (Hyd. - ITAT)
  • High Court: April 2011: Not finding any discrepancy or inconsistency in earlier years while granting exemption under section 12A and registration under section 80G to assessee would not automatically entitle assessee to have approval under section 10(23C) in subsequent years - [2011] 10 - 177 (Delhi)
  • May 2011: Delhi: Registration granted u/s. 12A on 4-12-1974 to an assessee-trust could not be cancelled/withdrawn by Authorities u/s. 12AA(3)
    • There was no power vested with the Commissioner to cancel or withdraw the registration granted to the assessee under section 12A(a) in the year 1974 - [2011] 11-42
  • Fifth Generation Education Society v. CIT [1990] 185 ITR 634 (All.): Question of application of income need not be considered - While considering the assessee’s application for grant of registration under section 12A, all that the Commissioner may examine is whether the application is made in accordance with the requirements of that section read with rule 17A, and whether Form 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At that stage, it is not proper to examine the application of income.
  • New Life in Christ Evangelistic Association v.CIT [2000] 246 ITR 532 (Mad.): Institution of a religious nature is not excluded - The language of section 12A does not show that in order to be able to get registration, there is necessity of first establishing as to how the concerned institution or, as the case may be, the society would be able to claim the exemptions under section 11 or 12 of the Act. At the stage of grant of certificate under section 12A of the Act, the only enquiry which could possibly be made would be whether the society has actually made an application in time and whether the accounts of the society are maintained in the manner as suggested by the said section. Beyond that, the scope of enquiry would not go. In insisting upon the society changing or amending its bye-laws and in refusing to consider the application on the ground that those bye-laws have not been changed so as to exclude the religious aspect from those bye-laws, the Commissioner would be overstepping his limits.
  • Ananda Marga Pracharaka Sangha v. CIT [1994] 76 Taxman 88 (Cal.): Delay in filing application, which is properly explained, cannot entail denial of exemption - When the entire period of delay in filing application has been satisfactorily explained for good cause, there cannot be any denial of the resultant benefit of the registration for such lost time.
  • Society of Divine Province v. Union of India [1999] 235 ITR 339 (MP): Reasons for delay during prescribed one-year period must alone be looked into - The expression ‘before the expiry of the period’ in proviso (i) of clause (a) of section 12A requires sufficiency of reasons which prevented the person from making the application within one year as required, and not the reasons for the period beyond the prescribed period of one year. What the authority has to see is whether or not there were sufficient reasons which prevented the person from making the application within the prescribed period and not the total period after which the application was made.
  • Society of Divine Province v. Union of India (supra): Commissioner must give specific reasons for not condoning delay - A mere recording by the Commissioner that the reasons furnished were not satisfactory will not suffice. ‘Not satisfactory’ is a conclusion and cannot be a reason by itself and it was necessary for the Commissioner to have given reasons why the explanation for not making the application in time was not satisfactory.
  • Society of Divine Province v. Union of India [1998] 146 CTR (MP) 417: Condonation of delay cannot be refused without hearing the assessee - Refusal to condone the delay in making the application for registration entails denial of benefits under sections 11 and 12. Hence, principles of natural justice require that an opportunity of hearing be given to the assessee before an order in this behalf is passed on the ground that the reasons furnished by the applicant were not satisfactory.
  • Laxminarayan Maharaj v. CIT [1984] 150 ITR 465 (MP): Evidential documents must afford a logical basis for inferring creation of trust - Where the trust is created under an instrument, rule 17A(a) requires the production of the constitutive document itself, i.e., the instrument which created the trust. Where the trust is not created under an instrument, it is impossible to produce any constitutive document, and hence the rule requires production of evidential documents, i.e., the documents evidencing the creation of the trust. The evidential documents cannot be limited to documents which directly prove the creation of the trust; they will embrace all documents which afford a logical basis of inferring creation of the trust, and all such documents can be described as ‘documents evidencing the creation of the trust’ within the meaning of rule 17A(a).
  • CIT v. Hardeodas Agarwalla Trust [1992] 198 ITR 511 (Cal.) [See also CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust [1992] 195 ITR 825 (Cal.)]: Audit report can be filed before completion of assessment - The direction that the audit report should accompany the return is not mandatory as the omission to do it may be rectified by filing the report at a later stage before the assessment is completed. Where the assessee was not given an opportunity to file the audit report which was available with the assessee before the assessment was completed, the appellate authority has to accept the audit report in the appellate proceedings, and to direct the Assessing Officer to redo the assessment. Hence, the assessee is entitled to file the audit report before the completion of assessment with or without a revised return for the purpose of curing the defect in the original return filed without the audit report.
  • CIT v. Shahzadanand Charity Trust [1997] 228 ITR 292 (Punj. & Har.): Provisions of section 12A(b) are directory in nature and audit report, if not furnished with return, can be furnished at appellate stage.
  • Madhya Pradesh Madhyam v. CIT [2002] 125 Taxman 382/256 ITR 277 (MP): Registration once granted cannot be reviewed in assessment proceedings - Scope of the proceedings of registration and its cancellation are different from the assessment proceedings. The income-tax authorities are bound by the registration. Once they have registered an institution as charitable one, they cannot go behind registration in assessment proceedings. They are prima facie bound by such a registration. However, the right to conduct the proceedings of cancellation in accordance with law cannot be denied to the department.

Other related Sections from the Act

  • Section 11: Income from property held for charitable or religious purposes
  • Section 12: Income of trusts or institutions from contributions
  • Section 12AA: Procedure for Registration

Other related Acts

Sections of the Indian Income Tax Act, 1961


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