No Trust on “Trust”: Draconian provision for trust to renew their registration
One of the most chronicle amendments in the Finance Bill 2020 is with regards to charitable trust. It is proposed that all charitable & religious trust will now be required to re-register themselves with the Income Tax Department w.e.f. 01.06.2020. This new amendment is seriously going to impact the routine operations & working of a charitable/religious trust.
It may be noted that there is already an existing provision in the Income Tax Act in u/s 12AA(3) which empowers CIT to cancel the registration of the charitable trust. Section 12AA(3) of the Act was inserted by the Finance (No.2) Act, 2004 w.e.f. 01.10.2004, which specifically empowers the Commissioner to cancel the registration of the Trust or institution. Prior to this addition, there was no specific power available with the Commissioner to cancel the registration earlier granted.
It may be recalled here that the even a simple registration application is a very time consuming process under the present regime itself. The registration as of now requires submission and production of number of documents which is even followed by changes and amendment in the trust deed also in few cases. Further, it may be noted that new Registration or Approval shall be for a Limited Period of 5 Years Only. Under the existing law, the registration U/s. 12AA and approval U/s. 10(23C), 80G are given without any expiry period.
On expiry of the aforesaid period the registration or approval may be re obtained. All the trust & institutions etc. which are already registered under existing section 12AA or earlier section 12A or approved under existing provisions of section 10(23C) or section 80G will also be required to obtain fresh registration / approval under new section 12AB, amended section 10(23C), amended section 80G. The application for re obtaining the approval or registration will have to be given within the period of three months from the date of coming in to force i.e., w.e.f 1/6/2020.
On receipt of the application, the PCIT / CIT will pass an order for registration or approval for the period of 5 years. The new approval or registration will be applicable from the assessment year from which the approval or registration was originally granted under the existing provisions. The order for registration or approval in such cases will be required to be passed within 3 months from the end of the month in which the application will be filed.
Relevant Extract From Memorandum Explaining Clauses
The relevant extract explaining the intention behind the amendment and scope of amendment is as under :
“It is also felt that the approval or registration or notification for exemption should also be for a limited period, say for a period not exceeding five years at one time, which would act as check to ensure that the conditions of approval or registration or notification are adhered to for want of continuance of exemption. This would in fact also be a reason for having a non-adversarial regime and not conducting roving inquiry in the affairs of the exempt entities on day to day basis, in general, as in any case they would be revisiting the concerned authorities for new registration before expiry of the period of exemption. This new process needs to be provided for both existing and new exempt entities.
Renewal Of Registration /Approval After Expiry Of 5 Years
The application for re obtaining the registration / approval will have to be given at least 6 months prior to the expiry of the registration / approval. The PCIT / CIT will have to make the necessary enquiries and to pass order for granting or rejecting the registration / approval. The order for registration / approval is required to be passed within 6 months from the end of the month in which the application is filed. The renewed registration / approval will be applicable from assessment year immediately following the financial year in which such application is made.
New Provisions For Provisional Registration / Approval
Under the existing provisions, there were no provisions relating to the provisional registration / approval. Either the application is rejected or accepted and full / final registration is granted. Now the amendments proposes to give the approval U/s. 10(23C), 80G / registration U/s. 12AB on provisional basis. The provisional approval may be granted for the period of 3 years (without any discretion in the hands of the authorities for any period less than 3 years etc.). The first time fresh applicants will not be directly given full / final registration but will be granted only provisional approval / registration. Later on, full / final registration / approval may be granted following the prescribed procedure.
The application for fresh registration / approval is to be made at least one month prior to the commencement of the previous year relevant to the assessment year from which said approval / registration is sought. For example, if the exemption is sought for the income from financial year 2021-22 the application will have to be made at least one month before 1st April, 2021 i.e., in March 2021 or prior.
In case of fresh first time applicants, the PCIT / CIT is required to give provisional approval / registration for three years and to send the copy of order to the applicant. No requirement for any detailed enquiry etc. is mentioned like in other cases of approval / registration. The requirement for detailed enquiry has been mentioned only regarding application for full / final registration / approval to provisionally registered / approved entity. The provisional registration is to be given from the assessment year from which the registration was sought. The order for registration / approval in such cases will be required to be passed within a months from the end of the month in which the application will be filed.