Clause 7 – Amendment of section 12AA –Trusts –

Granting of Registration – sub-section (1) Section 12AA prescribes the procedure to be followed for granting registration of trust or institution, u/s 12A of the Act and withdrawal thereof.

The sub-section (1) deals with granting registration and authorises the Principal Commissioner or the Commissioner before whom the application is made, in Form 10A – Rule 17A, to:

1. call for such documents or information as he thinks necessary, to satisfy himself about the genuineness of the objects of the trust, and make such inquiries, as he may deem necessary, in this behalf.

2. after satisfying himself about the genuineness of objects, he is required to pass an order in writing, either granting the registration or refusing registration.

It is the general practice that the inquiries were made even on aspects other than the mandated ones. The courts have time and again held that at the stage of granting registration, the inquiry has to be restricted to genuineness of the objects of the trust only and that the trust or institution exits for charitable purpose only.

The application for registration is to be disposed off within a period of six months from the end of the month in which the application is made.

Sub-section (1) is sought to be substituted by a new sub-section(1) authorising the Principal Commissionr or Commissioner, to also satisfy himself the compliance of such requirements of any other law, as are required for the purpose of achieving the objects, besides calling for the documents or information about geninueness of the objects.

Compliance of conditions of any other law may generally take place after the period of six months of making the application. How would this requirement be complied with would be a subject of debate and litigation in future.

Cancellation of Registration – sub- section (4)

If the Principal Commissioner or the Commissioner, notices that a trust or institution, which has been granted registration, carries out its activities in a manner that section 13(1) gets attracted and exemption u/s 11 and 12 are denied, the registration granted u/s 12A can be cancelled.

Sub-section (4) is sought to be substituted by a new sub-section (4) authorising the Principal Commissionr or Commissioner, to cancel registration, besides on the grounds of being covered u/s 13(1), also on the ground of non compliance of any other law, and any other order, direction or decree which is not disputed.

This is bound to create disputes as finality of non compliance of any other law may take substantially long time.

Clause 39 – Amendment of section 139 – Filing of Return of Income

Section 139 mandates that every company or a firm or any person other than a company or firm, whose total income exceeds the maximum amount which is not liable to tax, shall furnish the return of income by due date in the prescribed form and verified in the prescribed manner.

Through Provisos 1 to 6, persons other than a company or firm even though their income may not exceed the maximum amount not liable to tax, are also required to file the return of income, if they satisfy certain conditions.

Sixth proviso requires filing of return of income by persons whose income does not exceed the maximum amount not liable to tax after allowing deduction under section 10(38), 10A, 10B, 10BA or chapter VIA to file the return of income by the due date.

The scope of sixth proviso is sought to be extended to the persons who claim deduction under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA or 54GB. The

persons in whose case, if the total income, before allowing deduction under the sections mentioned, exceeds the maximum amount not liable to tax, would also be required to file their return of income by the due date.

A new proviso is sought to be inserted, requiring certain persons other than a company or a firm, who is not required to file return of income on account of his total income does not exceed the maximum amount not chargeable to income-tax, also to file the return of income, by the due date, if the following conditions are satisfied:

1. who deposits an amount or aggregate of amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank;

2. has incurred expenditure on foreign travel exceeding two lakh rupees for himself or any other person;

3. has incurred expenditure on consumption of electricity exceeding one lakh rupees;

4. fulfils such other conditions as may be prescribed.

The amended section casts a responsibilty on assessees, who claim exemption from capital gains by reinvestment of capital gain or consideration received to file the return of income by due date. The category of persons, who satisfy the prescribed conditions, are also required to file the return of income by due date.

Clause 40 – Amendment of section 139A – PAN

Section 139A prescribes the category of persons who are required to apply for permanent account number and quote such number in the specified transactions.

Persons entering into specified transactions to apply for PAN

It has been observed by the government that in many cases persons enter into high value transactions like purchase of foreign currency or huge withdrawal from banks and such persons do not have PAN.

In order to keep an audit trail of such transactions and widening and deepening the tax base, the scope of sub-section (1) is being extended by providing a new clause (vi) which empowers the Board to prescribe the category of persons who enter into specified transaction, shall apply for PAN.

Wide power is being given to the Board to specify the nature of transactions, which would require PAN.

Inter-changeability of PAN & Aadhar

Sub-sections (5E), (6A) and (6B) are proposed to be inserted.

There may be instances where a person required to furnish or intimate or quote PAN has not been allotted PAN but holds Aadhar number.

It is proposed that Aadhar number can be quoted instead of PAN by a person who has not been allotted PAN. Such peson shall thereafter shall be allotted a PAN.

It is also proposed that a person who holds Aadhar number and the PAN is linked with Aadhar number, shall be at liberty to quote Aadhar number instead of PAN.

Duty has been cast upon the person receiving a document which requires PAN or Aadhar to be mentioned (in specified transactions), to ensurethat PAN or Aadhar is duly quoted. The PAN or Aadhar number shall be required to be authenticated in the prescribed manner.

The inter-changeability of PAN and Aadhar is a welcome step and would ease the carrying of transactions in many cases, especially for persons in rural area, who may not be holding PAN at the required point of time of executing the transaction.

Clause 41 – Amendment of section 139AA – Linking of PAN with Aadhar

Sub-section (2) of section 139AA mandates linking of PAN with Aadhar on or before specified date. Proviso to the sub-section states that failure to intimate the Aadhar number, would invalidate the PAN. The person might have used the PAN in respect of certain transactions during a period before the mandatory linking of Aadhar with PAN.

It is proposed that failure by the person to intimate Aadhar number shall result in making the PAN inoperative.

A show cause notice should be given to the person before it is made in-operative and proceedure for revival is desirable.

Clause 41 – Amendment of section 139AA – Linking of PAN with Aadhar

Section 195 of the Act mandates deduction of income tax at prescribed rates from payments made or credit given to non-residents. It keeps in check the possible loss of revenue as a result of tax liability in the hands of a foreign resident. This also obviates the difficulty in chasing such non-residents for recovery of their tax dues. The deduction is to be made on the gross amount.

The tax to be deducted u/s 195 may many a time exceed the tax liability in India. In order to provide for deducting only the appropriate amount of tax at source, sub-section (2) provides for making an application by the payer to the Assessing Officer to quantify the amount on which tax is decuctible or rate at which the same is deductible. Similarlry an application can be made by the payee, as per sub-section (3), for determinaion of appropriate amount of tax at source. Sub-section (7) authorises the Board to issue notification specifying the class of persons or cases who can apply to the Assessing Officer for determination of sum chargeable to tax and deduction of tax thereon. The applications are presently to be made in manual form.

Sub-section (2) & (7) are sought to be amended to provide for the application to be made to the Assessing Officer in prescribed form and manner, to determine the appropriate amount chargeable to tax and tax to be deducted. It is proposed that the applications shall be made in elctronic form
i.e online.

Making online application shall reduce the time for disposing the application as well as help the Department to collate the information in respect of assessees. Similar application to be made by the payee, as pse sub-section (3) should also be included, which seems to have been inadvertantly missed.