REGISTRATION PROCEDURE FOR TRUSTS/INSTITUTIONS SEEKING REGISTRATION U/S 12AB FOR THE FIRST TIME
Newly inserted provisions namely section 12AB and clause (ac) in sub-section 1 of section 12A in The Income-tax Act, 1961 (‘The Act’) have changed the procedure for trusts/ institutions to get themselves registered under the Act. For trusts/institutions which intend to get themselves registered for the first time have to follow the new procedure which is as under
Step no 1: Getting Provisional Registration
Step no 2: Converting Provisional registration into Final Registration
(there is no such phrase as Final registration used in the
Act, it is just used to avoid confusion and general understanding)
Unlike procedure prevailing before 01.04.2021 wherein trusts/institution
were required to file application and the registration, if given, was directly
a final registration for perpetuity unless cancelled. The Finance Act 2020 had brought
this amendment however it was deferred to 01.04.2021 by The Taxation And Other
Laws (Relaxation And Amendment Of Certain Provisions) Act, 2020.
Let’s understand different nuances of this new registration
procedure
Also watch detailed video on the new registration procedure:
A.
TIME LIMIT FOR APPLICATION:
1. For Seeking
Provisional registration
As mentioned above,
first step is to get a provisional registration, so the time limit for filing
application is at least one month prior to the commencement of the previous
year relevant to assessment year from which the said registration is sought [Section
12(1)(ac)(vi)].
E.g.: If any trust/
institution seeks to get registration from FY 2022-23 (AY 2023-24) then
application has to be made before 01.03.2022.
Now, the question which arises
is, what about those trusts/ institutions which intend to seek registration from
FY 2021-22 (i.e. AY 2022-23)? Since the corresponding rules and forms were not
available before 01.03.2021 such application could not be made.
Considering this
situation, an exception is being provided under rule 17A of the Income-tax
rules, 1962 (hereinafter referred as ‘the Rules’] [Income-tax (6th
amendment) Rules, 2021] amended vide notification dated 26.03.2021, particularly
for FY 2021-22 (i.e. AY 2022-23) only and it is prescribed as under,
(7)
In case of an application made under sub-clause (vi) of clause (ac) of
sub-section (1) of section 12A during previous year beginning on 1st day of
April, 2021, the provisional registration shall be effective from the
assessment year beginning on 1st day of April, 2022.
Accordingly, an application made during the FY 2021-22 for registration under
[Section 12(1)(ac)(vi) i.e. Registration for the first time] then the
provisional registration granted will be effective from same Financial year
(i.e. relevant assessment year). It be kindly noted this exception is provided
for covering the year of transition and not applicable for subsequent Assessment
years i.e. from AY 2023-24. For those subsequent period application has to be
made a month prior to the start of previous year relevant to that assessment
year in which registration is sought.
2. For Converting Provisional registration
into Final Registration
As mentioned above
the first step for getting registered is seeking provisional registration and
thereafter converting it to Final registration. Accordingly, the time frame is
as under [as per section 12A(1)(ac)(iii)]
- At least 6 months prior to the expiry of period of the
provisional registration (provisional registration is valid for three years) OR
- Within 6 months from the commencement of the activities
The crucial
aspect which needs to be understood is the play between Provisional
registration and Final registration. Generally trusts immediately after getting
formed start their activities but tend to defer seeking funds till they get
registered under Income-tax Act so as to plan their taxes (this is the
reason behind the idea of introducing Provisional Registration to be granted on
fast track basis). Now, since, the registration will be granted on fast
track basis, the trusts/institutions can start their activities immediately,
and they must apply for Final registration immediately (max time limit is within
6 months from commencement of activities).
Pending Application:
It further be kindly noted that, as per sub-section (2) of section 12AB of the Act,
any application pending as on 01.04.2021 on which order as per section
12AA(1)(b) is not passed would be considered as application made under section
12A(1)(ac)(vi) i.e. application for provisional registration.
B.
FORMS AND PROCEDURE FOR APPLICATION
1. Forms
As it could be understood
from above mentioned application procedure that two applications have to be
filed for seeking registration one for getting provisional registration and one
for converting Provisional registration into Final registration. Accordingly,
two separate forms have been prescribed by the Rules,
For seeking Provisional registration: Form No. 10A
For converting provisional to Final registration: Form No. 10AB
2. Procedure
Mode of Furnishing: Said forms to be furnished electronically.
Mode of Verification (Signing): Using digital signature (if the ITR is required to be furnished using
Digital signature) otherwise using electronic Verification Code.
Who has to verify: Form Nos. 10A or 10AB, as the case may be, shall be verified by the
person who is authorised to verify the return of income under section 140 of
the Act, as applicable to the applicant.
Examination of documents by CIT or PCIT:
· For seeking Provisional Registration: Apart from the documents and information as
required for filing application under form 10A no other information will be
sought for granting provisional registration. The relevant provision of section
12AB is as under,
12AB. (1) The Principal
Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,—
(a)…
(b)…
(c) where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering
the trust or institution for a period of three years from the assessment year
from which the registration is sought,
Thus, it is very apparent that upon filing application in form 10A (for
Provisional registration) the concerned income-tax authority (CIT or PCIT) has
to issue provisional registration certificate (in form 10AC with 16 digit unique
registration number) without any further verification or examination.
However, it be noted that according to rule 17A(6), of the Rules, if at
any point of time it is noticed that Form No. 10A is not furnished properly or correctly,
the CIT or PCIT after granting an opportunity of being heard may cancel the
registration under form 10AC.
· For Converting into Final Registration: After filing form 10AB
with requisite documents and information, the procedure is exactly same as it
was prevailing immediately before 01.04.2021. That is to say, the CIT or PCIT shall
call for such documents or information or make such inquiries as he thinks
necessary in order to satisfy himself about genuineness of the activities of
the trust or institution and the compliances of other laws [as per section
12AB(1)(b)(i)].
Once the CIT or PCIT satisfies himself on above aspects then they shall grant registration under Form
10AD or reject the application & cancel the registration (provisional)
after granting an opportunity of being heard [as per section 12AB(1)(b)(ii) of
the Act]
Further according to the provisions of Sub-section 4 and 5 of section
12AB, CIT or PCIT may cancel the registration (after providing reasonable
opportunity of being heard) if he finds that activities are not genuine or are
not carried out in accordance with the objects of trust/institution or not in manner
as provided in section 11 and 12 of the Act.
C.
DOCUMENTS AND INFORMATION REQUIRED FOR APPLICATION
Rule No. 17A has prescribed the documents required to be attached along with the application.
The list of documents are as under,
(a) where the applicant is created or established, under an instrument,
self-certified copy of such instrument creating or establishing the applicant;
(b) where the applicant is created or established, otherwise than under
an instrument, self-certified copy of the document evidencing the creation or
establishment of the applicant;
(c) self-certified copy of registration with Registrar of Companies or
Registrar of Firms and Societies or Registrar of Public Trusts, as the case may
be;
(d) self-certified copy of registration under Foreign Contribution
(Regulation) Act, 2010 (42 of 2010), if the applicant is registered under such
Act;
(e) self-certified copy of existing order granting registration under
section 12A or section 12AA or section 12AB, as the case may be;
(f) self-certified copy of order of rejection of application for grant
of registration under section 12A or section 12AA or section 12AB, as the case
may be;
(g) where the applicant has been in existence during any year or years
prior to the financial year in which the application for registration is made,
self-certified copies of the annual accounts of the applicant relating to such
prior year or years (not being more than three years immediately preceding the
year in which the said application is made) for which such accounts have been made
up;
(h) where a business undertaking is held by the applicant as per the
provisions of sub-section (4) of section 11 and the applicant has been in
existence during any year or years prior to the financial year in which the application for
registration is made, self-certified copies of the annual accounts of such
business undertaking relating to such prior year or years (not being more than
three years immediately preceding the year in which the said application is
made) for which such accounts have been
made up and self-certified copy of the report of audit as per the provisions of
section 44AB for such period;
(i) where the income of the applicant includes profits and gains of
business as per the provisions of sub-section (4A) of section 11 and the
applicant has been in existence during any year or years prior to the financial
year in which the application for registration is made, self-certified copies
of the annual accounts of such business relating to such prior year or years
(not being more than three years immediately preceding the year in which the
said application is made) for which such accounts have been made up and
self-certified copy of the report of audit as per the provisions of section
44AB for such period;
(j) self-certified copy of
the documents evidencing adoption or modification of the objects;
(k) note on the activities of the applicant.
(As per the rule, above is the list of documents required for furnishing
both the forms)
D.
TIME LIMIT FOR RECEIPT OF NEW REGISTRATION CERTIFICATE
The new procedure of granting
provisional registration is with an intention and the intention is to simplify and
facilitate the registration process for new and existing charitable trusts/institutions,
the extract of Hon’ble Finance Minister’s budget speech is as under,
‘In
order to simplify the compliance for the new and existing charity institutions,
I propose to make the process of registration completely electronic under which
a unique registration number (URN) shall
be issued to all new and existing charity institutions. Further, to facilitate
the registration of the new charity institution which is yet to start their
charitable activities, I propose to allow them provisional registration for
three years.’
Considering the
intention, the time frame under which the registration is to be granted has to
be speedy. Accordingly, the time limit to grant registration are as under
·
Granting Provisional registration: Within 1 month from the end of the month in which
application was received by concerned authority (CIT or PCIT)
·
Granting Final registration certificate: Within 6 months from
the end of month in which application was received by concerned authority (CIT
or PCIT)
E.
VALIDITY OF NEW REGISTRATION CERTIFICATE
The Provisional registration will be valid for 3 years from the assessment year from which the registration is sought
Final registration will
be valid for the period of 5 years. (According
to the first proviso to sub-section (2) of section 12A the Act, where the
application is made under 12A(a)(ac)(iii) the provisions of section 11 and 12
shall apply from the first assessment year for which it was provisionally
registered)
F.
AUTHORITIES AUTHORIZED FOR RECEIVING
AND GRANTING REGISTRATION:
According to Notification No. 30 /2021/F. No. 370142/4/2021-TPL, CPC and CIT(Exemption)- Bengaluru are authorized to receive form 10A and Grant provisional registration (section 12A(1)(ac)(vi)]. Even the authority to grant registration in case of renewal [section 12A(1)(ac)(i)] is with these Authorities. Whereas, for all other purpose, since there is no such separate notification issued till date, the authority lies with jurisdictional CIT(Exemption).
G. CERTAIN QUESTIONS WHICH CBDT NEEDS TO CLARIFY.
1. What
about those cases where ITAT has set aside the registration matter back to the
file of CIT(E) and the matter is yet pending with CIT(E) as on 31.03.2021?
Would these cases be considered as pending application and be given provisional
registration?
2. What
about those cases where ITAT has directed the CIT(E) to grant registration and
the matter is yet pending with CIT(E) as on 31.03.2021. Whether the concerned
trust will be getting provisional registration or the Final registration?
3. When
would it be considered that trust has ‘commenced its activities’? Upon receipt
of funds or upon payment of funds or upon start of on field activities?
4. In
case a trust having final registration, (which was converted from provisional
registration), from which year the expiry period of 5 years be counted. Would
it be from first AY in which provisional registration was granted or from the
date of granting final registration?
B Com, CA, LLB
+91 9421847944
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