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Budget and provisions related to Trust and society

Yogesh Agarwal 
on 19 March 2012

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Dear all the annual budget had finally placed by the Fin Minister. Some drastic, some dramatical, some difficult to appetite amendments are proposed in the budget.

I will not discuss the entire finance bill but only the amendment proposed in relation to the charitable trust / society or educational institutions referred to in section 10(23C)

The following are the proposed amendments in the ensuing budget of 2012-13 related to Charitable Trust / Institutions.

Amendment in Section 10(23C) : After the sixteenth proviso, the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2009, namely:—

“Provided also that the income of a trust or institution referred to in sub-clause (iv) or sub-clause (v) shall be included in its total income of the previous year if the provisions of the first proviso to clause (15) of section 2 become applicable to such trust or institution in the said previous year, whether or not any approval granted or notification issued in respect of such trust or institution has been withdrawn or rescinded;”

Amendment in Section-13: In section 13 of the Income-tax Act, after sub-section (7) and before Explanation 1, the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2009, namely:—

“(8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year.”

In sub-section (3) of section 143, after the second proviso, the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2009, namely:—

“Provided also that notwithstanding anything contained in the first and the second proviso, no effect shall be given by the Assessing Officer to the provisions of clause (23C) of section 10 in the case of a trust or institution for a previous year, if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in such previous year, whether or not the approval granted to such trust or institution or notification issued in respect of such trust or institution has been withdrawn or rescinded.”

The first proviso to the clause (15) of section 2 is reproduced below for your ready reference: “Charitable purpose” includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:]

[Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [ten lakh rupees] or less in the previous year;]

Now it would be difficult for the trust/society or institution which are carrying on and registered as the charitable trust for advancement for general public utility to take the benefit of exemption. However, relaxation has been given to the trusts and societies. The benefit shall be continued if the aggregate value of the receipts from the activities referred to is Rs.25 Lacs or less in the previous year. Hope this article will help the readers to interpret the proposed amendment in the finance bill 2012.

Regards

CA Yogesh Kr.Agarwal

Kharagpur




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