Tax Exemption for Trusts

Dear all,

Good morning to all of you. This is my first post to this forum. I have one query regarding the tax exemption offered to trust under 12A.

I am associated with one spiritual trust as a treasurer. We had been given Income tax exemption and were issued 12A certificate too. In order to follow our objectives of spreading "Bhakti marg", in June we had changed our constitution without changing our basic objectives. We have adopted more stringent rules and made the functioning of the trust more transparent. In the process we also had to change the name of the trust from (say) XYZ to XAZ.

We have approached Income Tax authorities informing them the change in name of the Trust and constitution. The concerned officers from IT are very co-operative and indeed guided us. However, as per them, since we have changed the constitution we are no more eligible for tax exemption under 12A and if at all we need the same, we have to apply fresh filling form 10A and submit few more documents etc. On the contrary, the advisors to our trust are of the opinion that there is no need to apply fresh and we should continue with old pan number and we should be eligible for 12A with the new name.

I don’t know whether this is right question to be raised at this forum. If possible, please guide me as to what should be our course of action for obtaining exemption under 12A?

Regards

Ashok D Kothavle

Mr.Ashok D. Kothavle

Do you mean that the officer bearers are changed by mentioning change of constitution or the objectives of the Trust are changed.

Please note that before confering registration u/s 12A the Income-tax Authorities generally will ask the trust to insert a clause in the trust deed that any amendments to the deed shall be made only after approval of the income-tax authorities. Here amendments mean only the objectives and and rules and regulation except the reliquinshment of office of office bearers at an Annual General Meeting or at any other occassion.

If you have amended the objectives with the prior approval of the income-tax authorities, the authorities now cannot question you for change of objectives, because at the time of granting approval for change they mihgt have informed you that if you change the objectives your trust will not enjoy continuation of registration u/s 12A.

Subsection (3) of Section 12AA says that where a trust has been granted registration under clause (b) of section (1) or has obtained registration at any time under section 12A as is it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996) and subsequently the Commissioner is satisfied that the activities of such trust are not genuine or are not being carried out in accordance with the objects of the trust or institution as the case may be he shall pass an order in writing cancelling the registration of such trust.

Hence simply if the Income-tax Authorities say orally that you have not make a fressh application for registratin u/s 12AA, it will not be correct on the part of the authorites.

Please verify the facts of your case in the light of the above explanation.

Best Wishes

Sathikonda