After sharing the last two articles 'Concept of NGO and Income Tax Provisions' and 'Benefits of Registration u/s 12A of the Income Tax Act' 1961' I have received many queries regarding procedure for registration u/s 12A. In this article, we are solely discussing Procedure for Registration u/s 12A of the Income Tax Act'1961.
Trust, Society and Section 8 Company can seek registration u/s 12A to claim exemption under Income Tax Act'1961, if certain conditions are satisfied. Section 12A deals with registration of trust and section 12AA deals with procedure for registration of trust.
If the NGO does not get itself registered u/s 12A, it will not be eligible to claim 'Benefits of Registration u/s 12A of the Income Tax Act' 1961'. Once the registration is granted, it will hold good till the cancellation of registration.
Step by Step Procedure for Registration u/s 12A
Application for 12A registration is made in Form 10A. It is prescribed in Rule 17A of the income tax rules'1962. Below is the step by step procedure for applying Section 12A registration:
a) To whom application for registration is to be made? - The application for registration has to be filed with the jurisdictional commissioner of Income Tax (exemptions).
b) Documents to be furnished for registration-
I. An application in form 10A has to be filled. (ANNEXURE:1)
II. Documents evidencing creation of trust or the establishment.
III. Two copies of the accounts of trust, for not more than three years.
IV. In case of trust, copy of trust deed; in case of society, copy of registration certificate and copy of memorandum of association of society; in case of section 8 company, copy of certificate of incorporation and copy of MOA, AOA of company.
V. Copy of PAN Number of Trust.
Every legal document has to be signed and stamped by the authorized signatory. The application has to be filed in accordance with Rule 17A of the Income Tax Rules'1962. Application should be complete in all respects along with the documents required under said rule.
c) Procedure for registration-
Section 12AA of the Income Tax Act' 1961 prescribes procedure for registration of Trusts or institution. Upon the receipt of application for registration u/s 12A of the Income Tax Act, the commissioner has to satisfy about the genuineness of the activities of trust.
I. The commissioner on receipt an application for registration of a trust shall call for the documents and information as he thinks necessary to satisfy about the genuineness of the activities of trust.
II. He shall pass an order in writing after satisfying himself about the objects of trust.
III. If he is not satisfied, he shall pass an order in writing refusing to register the trust. Applicant shall be given opportunity of being heard before passing order of refusal.
IV. Order granting or refusing registration shall be passed before the expiry of six months from the end of month in which application was received under section 12A.
In case of refusal to grant the registration, an opportunity of hearing is must. In case the assessing officer refuses to grant the registration, then he must pass speaking order recording the reasons for refusal.
Note: Section 12A has not made any distinction with regard to charitable or religious trust. Therefore, the scheme of exemption is applicable to charitable as well as religious trusts.
d) Deemed Registration:
As per Section 12AA(2) Every order granting or refusing registration shall be passed before the expiry of six months from the end of the month in which the application was received.
The Supreme Court on February 16'2016 held in the case of:
CIT vs. Society for The Promotion of Education, Adventure Sport & Conservation of Environment
'S. 12AA: Non-disposal of an application for registration before the expiry of six months as provided u/s 12AA (2) results in deemed grant of registration”
CBDT Instruction:
The CBDT has issued Instruction No. 16 of 2015 dated 06.11.2015 in which it has taken a stern view of the fact that the time limit of six months specified in s. 12AA(2) of the Income-tax Act 1961 for passing an order granting or refusing registration under s. 12AA are not being adhered to by the Commissioners of Income Tax (Exemptions). The CBDT has directed the Chief Commissioners to monitor that the Commissioners are adhering to the time limit and to take suitable administrative action in the case of laxity.
e) Cancellation of Registration granted under Section 12A
Registration granted u/s 12A can be cancelled in below circumstances:
I. The activities of such trust or institution
are not genuine.
II. The activities are not being carried out in accordance with the objects of
the trust or institution.
III. Trust's income does not endure for the benefit of general public.
IV. It is for the benefit of any particular religious community or caste.
V. Any income or property of trust is applied for the benefit of specified
persons like author of trust, trustees etc.
VI. Its funds are invested in prohibited modes.
'It is however provided that registration will not be cancelled if the trust institution proves that there was reasonable cause for carrying out activities in said manner.”
Important Note:
Amendment by Finance Act'2017
Following clause (ab) shall be inserted after clause (aa) of sub-section (1) of section 12A by the Finance Act, 2017, w.e.f. 1-4-2018:
'the person in receipt of the income has made an application for registration of the trust or institution, in a case 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 (33 of 1996)], and, subsequently, it has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, in the prescribed form and manner, within a period of thirty days from the date of said adoption or modification, to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA”
It means where a trust or an institution has been granted registration 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.
ANNEXURE:1 {SOURCE: INCOME-TAX RULES, 1962}
FORM NO. 10A
[See rule 17A]
Application for registration of charitable or religious trust or institution under clause (aa) of sub-section (1) of section 12A of the Income-tax Act, 1961
To
The Commissioner of Income-tax,
Sir,
I, ------------------------- on behalf of ------------------------------[name of the trust or institution] hereby apply for the registration of the said trust/institution under section 12A of the Income-tax Act, 1961. The following particulars are furnished herewith:
- Name of the * trust/institution in full [in block letters]
- Permanent Account Number
- Address
- Details of the author(s)/founder(s): --
- Date of creation of the trust or establishment of the institution
- Details of the trustee(s)/manager(s): --
I also enclose the following documents:
1. (a) * Original/Certified copy of the instrument under which the trust/institution was created/established, together with a copy thereof.
(b) * Original/Certified copy of document evidencing the creation of the trust or the establishment of the institution, together with a copy thereof. [The originals, if enclosed, will be returned].
2. Two copies of the accounts of the * trust/institution for the latest * one/two/three years.
I undertake to communicate forthwith any alteration in the terms of the trust, or in the rules governing the institution, made at any time hereafter.
Date
Signature
Designation
Address
*Strike out whichever is not applicable.
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