Introduction: The Finance Bill, 2020 has proposed to make substantial changes regarding provisions for granting exemptions to the charitable / religious trusts, institutions etc. U/s. 11 of the Income Tax Act, 1961 (“Act”). The substantial amendments are also proposed in respect of exemption U/s. 10(23C) which are granted to the trusts, institutions, universities, educational institutions, hospitals, other medical institutions etc. The amendments are also proposed in respect of approval of funds, institutions etc. (donations to which are eligible for deduction to the donor) under section 80G.

Under the new regime, the amendments are proposed in section 10(23C), section 11, section 12A, section 12AA and section 80G. A new section 12AB is also proposed to be introduced. All these amendments are proposed to be made w.e.f. 01st June, 2020.

In this article an attempt has been made to have an overview of the proposed changes.

1. New Provisions / Procedure For Registration / Approval

The registration to the charitable / religious trust, institutions etc. is presently given u/s. 12AA of the Income Tax Act (“Act”). Now, w.e.f. 01st June, 2020 it is proposed to make this section ineffective and to give registration under new section 12AB.

For institutions etc. approved under clauses (iv), (v), (vi) and (via) of section 10(23C) and section 80G, new provisions / procedure for approval has been proposed, but the same is by way of proposed amendments respectively in the section 10(23C) and section 80G themselves.

2. New Registration / Approval for Limited Period of 5 Years only

Presently, the registration U/s. 12AA and approval U/s. 10(23C), 80G are given without any expiry period (though may be cancelled in specific circumstances). Now, under new provisions these are proposed to be given only for the limited period of 5 years (without any discretion in the hands of the authorities for any period less than 5 years etc.). On expiry of the aforesaid period the registration / approval may be re obtained.

3. Classification of Applicants for Registration / Approval in Four Categories

The proposed amendments classifies the cases of applicants for approval / registration in to four category i.e.,

(i) Already registered / approved under the existing law

(ii) Those whose registration / approval under new law is expired in 5 years

(iii) Those who have been given provisional registration under new law (for 3 years) and

(iv) Any other cases i.e., obviously fresh registration / approval applicants under new law. All applications under old law which will be pending as on the date of coming in to force of the amendment will be treated as fresh applications filed under the new law.

The relevant extract from Memorandum Explaining Clauses are as under:-

“(vii) the application pending for approval, registration, as the case may be, shall be treated as application in accordance with the new provisions, wherever they are being provided for.”

4. Existing Registered / Approved Entities also Required to Re Obtain Registration / Approval

These cases are dealt with in clause 7(1)(A)(a) & clause 10(1)(A) & clause 33(i)(b) and other related clauses of Finance Bill. The sub clause (i) of clause (ac) of sub section (1) of amended section 12A and clause (i) of first proviso to amended section 10(23C) & clause (i) of proviso to sub section (5) of section 80G are relevant. The institutions etc. which are already registered under existing section 12AA or earlier section 12A / approved under existing provisions of section 10(23C) or section 80G will also be required to obtain fresh registration / approval under new section 12AB / amended section 10(23C) / amended section 80G.

The application for re obtaining the approval / registration will have to be given within the period of three months from the date of coming in to force of the amendment. On receipt of the application, the PCIT / CIT will pass an order for registration / approval for the period of 5 years. The new approval / registration will be applicable from the assessment year from which the approval / registration was originally granted under the existing provisions. The order for registration / approval in such cases will be required to be passed within 3 months from the end of the month in which the application will be filed.

5. Relevant extract from Memorandum Explaining Clauses

The relevant extract explaining the intention behind the amendment and scope of amendment is as under :

“It is also felt that the approval or registration or notification for exemption should also be for a limited period, say for a period not exceeding five years at one time, which would act as check to ensure that the conditions of approval or registration or notification are adhered to for want of continuance of exemption. This would in fact also be a reason for having a non-adversarial regime and not conducting roving inquiry in the affairs of the exempt entities on day to day basis, in general, as in any case they would be revisiting the concerned authorities for new registration before expiry of the period of exemption. This new process needs to be provided for both existing and new exempt entities. (Emphasis supplied by us)”

“(iii) an entity approved, registered or notified under clause (23C) of section 10, section 12AA or section 35 of the Act, as the case may be, shall be required to apply for approval or registration or intimate regarding it being approved, as the case may be, and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five previous years at one time calculated from 1st April, 2020.”

(iv) an entity already approved under section 80G shall also be required to apply for approval and on doing so, the approval, registration or notification in respect of the entity shall be valid for a period not exceeding five years at one time.”

6. Renewal of Registration /Approval After Expiry of 5 Years

The application for re obtaining the registration / approval will have to be given at least 6 months prior to the expiry of the registration / approval. The PCIT / CIT will have to make the necessary enquiries and to pass order for granting or rejecting the registration / approval. The order for registration / approval is required to be passed within 6 months from the end of the month in which the application is filed. The renewed registration / approval will be applicable from assessment year immediately following the financial year in which such application is made.

The author personally feels that the applicability of renewed approval / registration has been associated with the financial year in which the application has been made. This may create some practical problems. For example, if registration is given from assessment year 2021-22 to 2025-26 (i.e., financial year 2024-25), the registration will expire on 31st March, 2025. Now, the application for renewal will have to be made in financial year 2024-25 itself. The fresh registration will have to be granted from the assessment year 2025-26 for which the institution will be already registered / approved.

7. New Provisions for Provisional Registration / Approval

Under the existing provisions, there were no provisions relating to the provisional registration / approval. Either the application is rejected or accepted and full / final registration is granted. Now the amendments proposes to give the approval U/s. 10(23C), 80G / registration U/s. 12AB on provisional basis. The provisional approval may be granted for the period of 3 years (without any discretion in the hands of the authorities for any period less than 3 years etc.). The first time fresh applicants will not be directly given full / final registration but will be granted only provisional approval / registration. Later on, full / final registration / approval may be granted following the prescribed procedure.

8. Procedure for Fresh First Time Applicants

The proposed provisions regarding first time applicants are contained in clause 7(1)(A)(a) and clause 10(1)(A) & clause 33(i)(b) and other related clauses of Finance Bill. These are covered in “any other cases” mentioned in the amended provisions. The sub clause (vi) of clause (ac) of sub section (1) of amended section 12A and clause (iv) of first proviso to amended section 10(23C) and clause (iv) of proviso to sub section 5 of section 80G are relevant.

The application for fresh registration / approval is to be made at least one month prior to the commencement of the previous year relevant to the assessment year from which said approval / registration is sought. For example, if the exemption is sought for the income from financial year 2021-22 the application will have to be made at least one month before 1st April, 2021 i.e., in March 2021 or prior.

In case of fresh first time applicants, the PCIT / CIT is required to give provisional approval / registration for three years and to send the copy of order to the applicant. No requirement for any detailed enquiry etc. is mentioned like in other cases of approval / registration. The requirement for detailed enquiry has been mentioned only regarding application for full / final registration / approval to provisionally registered / approved entity. The provisional registration is to be given from the assessment year from which the registration was sought. The order for registration / approval in such cases will be required to be passed within a months from the end of the month in which the application will be filed.

9. Procedure for Conversion of Provisional Registration To Full / Final Registration

These cases are dealt with in clause 7(1)(A)(a) and clause 10(1)(A) & clause 33(i)(b) and other related clauses of the Finance Bill. The provisionally registered institutions etc. will have to apply for full / final approval at least 6 months prior to the expiry of the provisional registration or within 6 months of commencement of activities which is earlier. In case the final approval / registration is granted the same will be from the assessment year from which the provisional approval / registration was granted. The order for registration / approval in such cases will be required to be passed within 6 months from the end of the month in which the application will be filed.

The “commencement / non commencement of activities” has remained a disputed basis for rejection of application for registration / approval under the existing law. Therefore, it appears that under the new law, the genuine institution may not be rejected approval / registration (though provisional) for want of commencement of activities.

The relevant extract from the Memorandum Explaining Clauses are as under :

“(vi) an entity making fresh application for approval under clause (23C) of section 10, for registration under section 12AA, for approval under section 80G shall be provisionally approved or registered for three years on the basis of application without detailed enquiry even in the cases where activities of the entity are yet to begin and then it has to apply again for approval or registration which, if granted, shall be valid from the date of such provisional registration. The application of registration subsequent to provisional registration should be at least six months prior to expiry of provisional registration or within six months of start of activities, whichever is earlier.”

10. Fresh Registration / Approval to be Applied Much Earlier

Under the existing provisions, the application for registration U/s. 12AA can be made at any time during the financial year from which the exemption is required. For example, if the exemption is required from the income of financial year 2018-19, the application could have been made at any time between 01st April, 2018 to 31st March, 2019, even on the last day of the financial year i.e., on 31st March, 2019. In case the registration is granted the same will be applicable to the income of the whole financial year 2018-19.

Similarly, for getting approval for exemption U/s. 10(23C) in respect of income from any financial year, the application is to be made at any time before the 30th September next from the end of the financial year i.e., for exemption of income from the financial year 2018-19, the application had to be made at any time up to 30th September, 2019.

Now, under the proposed provisions, the fresh applicants (first time applicants) will have to make application for registration / approval much earlier i.e., at least one month prior to the commencement of the financial year from which exemption is required. The approval / registration will be granted from such financial year.

(Note : it appears that there is some drafting error in the proposed amendment. The language used for prescribing time limit for making application is “(iv) in any other case, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought, “. The language used for grant of registration is “(iii) in any other case, from the assessment year immediately following the financial year in which such application is made:” (emphasis supplied by us) For example it the registration / approval is sought for the financial year 2021-22 (assessment year 2022-23) then application will have to be made in the financial year 2020-21. Now, registration will be granted from the assessment year following the financial year in which the application is made i.e., in this case from the assessment year 2021-22 or financial year 2020-21 whereas the application has been made from the financial year 2021-22 (assessment year 2022-23).

11. Simultaneous Registration for Exemption under Section 11 etc and Approval For Section 10(23C) Exemption Now Not Permissible

The proposed amendment to section 11 provides that if the institution is registered for exemption U/s. 11 etc. as well as approved U/s. 10(23C) / notified U/s. 10(46) then the above registration shall became inoperative from the date of coming in to force of the amendment. If in future, an institution which is registered U/s. 12AA / 12AB also gets approval U/s. 10(23C) or become notified U/s. 10(46) after amendment, then also in such case the registration U/s. 12AA / 12AB shall became inoperative from the date of such approval / notification.

The proposed amendments gives an option to the institution to get its registration u/s. 12AA / 12AB operative by making application for that. However, in such circumstances he will not be entitled to get benefit of section 10(23C) approval / 10(46) notification. The procedure for making registration operative again is given in the amended provisions.

The crux of the above amendment is that at a time an institution can take benefit of either section 12AA / 12AB or of section 10(23C) and 10(46).

12. Due Date of Filing of Income Tax Return Extended To 31st October

The due date for filing of the Income Tax Return for such institutions have also been extended to 31st October from 30th September.

13. Other Relevant Amendments

(1) Similar amendments are proposed in respect of institutions approved U/s. 35.

(2) Deduction under section 80G/ 80GGA to a donor shall be allowed only if a statement is furnished by the donee who shall be required to furnish a statement in respect of donations received and in the event of failure to do so, fee and penalty shall be levied.

(3) Similar to section 80G of the Act, deduction of cash donation under section 80GGA shall be restricted to Rs 2,000/- only.

14. Relevant Clauses of Finance Bill

These are mentioned hereunder for ready reference :

i. Amendment of section 10

7. In section 10 of the Income-tax Act,–

(I) in clause (23C),–

(A) with effect from the 1st day of June, 2020,–

(a) for the first and second provisos, the following provisos shall be substituted, namely:–

“Provided that the exemption to the fund or trust or institution or university or other educational institution or hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via)under the respective sub-clauses shall not be available to it unless such fund or trust or institution or university or other educational institution or hospital or other medical institution makes an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,–

(i) where such fund or trust or institution or university or other educational institution or hospital or other medical institution is approved under the second proviso [as it stood immediately before its amendment by the Finance Act, 2020], within three months from the date on which this clause has come into force;

(ii) where such fund or trust or institution or university or other educational institution or hospital or other medical institution is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period;

(iii) where such fund or trust or institution or university or other educational institution or hospital or other medical institution has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier;

(iv) in any other case, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought, and the said fund or trust or institution or university or other educational institution or hospital or other medical institution is approved under the second proviso:

Provided further that the Principal Commissioner or Commissioner, on receipt of an application made under the first proviso, shall,—

(i) where the application is made under clause (i) of the said proviso, pass an order in writing granting approval to it for a period of five years;

(ii) where the application is made under clause (ii) or clause (iii) of the said proviso,–

(a) call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about—

(A) the genuineness of activities of such fund or trust or institution or university or other educational institution or hospital or other medical institution; and

(B) the compliance of such requirements of any other law for the time being in force by it as are material for the purpose of achieving its objects; and

(b) after satisfying himself about the objects and the genuineness of its activities under item (A), and compliance of the requirements under item (B), of sub-clause (a),–

(A) pass an order in writing granting approval to it for a period of five years;

(B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its approval after affording it a reasonable opportunity of being heard;

(iii) where the application is made under clause (iv) of the said proviso, pass an order in writing granting approval to it provisionally for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the fund or trust or institution or university or other educational institution or hospital or other medical institution:”;

(b) for the eighth and ninth provisos, the following provisos shall be substituted, namely:–

“Provided also that any approval granted under the second proviso shall apply in relation to the income of the fund or trust or institution or university or other educational institution or hospital or other medical institution,–

(i) where the application is made under clause (i) of the first proviso, from the assessment year from which approval was earlier granted to it;

(ii) where the application is made under clause (iii) of the first proviso, from the first of the assessment years for which it was provisionally approved;

(iii) in any other case, from the assessment year immediately following the financial year in which such application is made:

Provided also that the order under clause (i), sub-clause (b) of clause (ii)and clause (iii) of the second proviso shall be passed, in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received:”;

(B) in the tenth proviso, for the words and figures “section 288 and furnish along with the return of income for the relevant assessment year”, the words, figures and letters “section 288 before the specified date referred to in section 44AB and furnish by that date” shall be substituted;

(C) with effect from the 1st day of June, 2020,–

(a) the sixteenth proviso shall be omitted;

(b) for the eighteenth proviso, the following proviso shall be substituted, namely:–

“Provided also that all applications made under the first proviso [as it stood before its amendment by the Finance Act, 2020] pending before the Principal Commissioner or Commissioner, on which no order has been passed before the date on which the first proviso has come into force, shall be deemed to be an application made under clause (iv) of the first proviso on that date:”;

ii. Amendment of section 11

9. In section 11 of the Income-tax Act, in sub-section (7), with effect from the 1st day of June, 2020,–

(a) for the words, brackets, letters and figures “under clause (b) of sub-section (1) of section 12AA”, the words, figures and letters “under section 12AA or section 12AB” shall be substituted;

(b) for the words, brackets, figures and letter “clause (1) and clause (23C)”, the words, brackets, figures and letter “clause (1), clause (23C) and clause (46)” shall be substituted;

(c) the following provisos shall be inserted, namely:–

“Provided that such registration shall become inoperative from the date on which the trust or institution is approved under clause (23C) of section 10 or is notified under clause (46) of the said section, as the case may be, or the date on which this proviso has come into force, whichever is later:

Provided further that the trust or institution, whose registration has become inoperative under the first proviso, may apply to get its registration operative under section 12AB subject to the condition that on doing so, the approval under clause (23C) of section 10 or notification under clause (46) of the said section, as the case may be, to such trust or institution shall cease to have any effect from the date on which the said registration becomes operative and thereafter, it shall not be entitled to exemption under the respective clauses.”.

iii. Amendment of section 12A

10. In section 12A of the Income-tax Act,–

(I) in sub-section (1),–

(A) after clause (ab), the following clause shall be inserted with effect from the 1st day of June, 2020, namely:–

“(ac) notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution,–

(i) where the trust or institution is registered under section 12A [as it stood immediately before its amendment by the Finance (No. 2) Act, 1996] or under section 12AA, [as it stood immediately before its amendment by the Finance Act, 2020] within three months from the date on which this clause has come into force;

(ii) where the trust or institution is registered under section 12AB and the period of the said registration is due to expire, at least six months prior to expiry of the said period;

(iii) where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier;

(iv) where registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11, at least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative;

(v) where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of the said adoption or modification;

(vi) in any other case, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought, and such trust or institution is registered under section 12AB;”;

(B) in clause (b), for the words “and the person in receipt of the income furnishes along with the return of income for the relevant assessment year”, the words, figures and letters “before the specified date referred to in section 44AB and the person in receipt of the income furnishes by that date” shall be substituted;

(II) in sub-section (2), with effect from the 1st day of June, 2020,–

(A) in the first proviso, for the words “Provided that”, the following shall be substituted, namely:–

“Provided that the provisions of sections 11 and 12 shall apply to a trust or institution, where the application is made under–

(a) sub-clause (i) of clause (ac) of sub-section (1), from the assessment year from which such trust or institution was earlier granted registration;

(b) sub-clause (iii) of clause (ac) of sub-section (1), from the first of the assessment years for which it was provisionally registered:

Provided further that”;

(B) in the second proviso, for the words “Provided further”, the words “Provided also” shall be substituted;

(C) in the first and third provisos, after the word, figures and letters “section 12AA”, the words, figures and letters “or section 12AB” shall be inserted.

iv. Amendment of section 12AA

11. In section 12AA of the Income-tax Act, after sub-section (4), the following sub-section shall be inserted with effect from the 1st day of June, 2020, namely:–

“(5) Nothing contained in this section shall apply on or after the 1st day of June, 2020.”.

v. Insertion of new section 12AB

12. After section 12AA of the Income-tax Act, the following section shall be inserted with effect from the 1st day of June, 2020, namely:–

“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) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years;

(b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of the said clause,–

(i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about—

(A) the genuineness of activities of the trust or institution; and

(B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; and

(ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A), and compliance of the requirements under item (B), of sub-clause (i),–

(A) pass an order in writing registering the trust or institution for a period of five years;

(B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard;

(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, and send a copy of such order to the trust or institution.

(2) All applications, pending before the Principal Commissioner or Commissioner on which no order has been passed under clause (b) of sub-section (1) of section 12AA before the date on which this section has come into force, shall be deemed to be an application made under sub-clause (vi) of clause (ac) of sub-section (1) of section 12A on that date.

(3) The order under clause (a), sub-clause (ii) of clause (b) and clause (c), of sub-section (1) shall be passed, in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received.

(4) Where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution 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 or institution after affording a reasonable opportunity of being heard.

(5) Without prejudice to the provisions of sub-section (4), where registration of a trust or an institution has been granted under clause (a) or clause (b) of sub-section (1) and subsequently, it is noticed that–

(a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or

(b) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, after affording a reasonable opportunity of being heard, cancel the registration of such trust or institution.”

vi. Amendment of Section 80G

“(viii) the institution or fund prepares such statement for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorized by such authority such statement in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed:

Provided that the institution or fund may also deliver to the said prescribed authority a correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be prescribed; and

(ix) the institution or fund furnishes to the donor, a certificate specifying the amount of donation in such manner, containing such particulars and within such time from the date of receipt of donation, as may be prescribed:

Provided that the institution or fund referred to in clause (vi) shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,–

(i) where the institution or fund is approved under clause (vi) [as it stood immediately before its amendment by the Finance Act, 2020], within three months from the date on which this proviso has come into force;

(ii) where the institution or fund is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period;

(iii) where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier;

(iv) in any other case, at least one month prior to commencement of the previous year relevant to the assessment year from which the said approval is sought:

Provided further that the Principal Commissioner or Commissioner, on receipt of an application made under the first proviso, shall,—

(i) where the application is made under clause (i) of the said proviso, pass an order in writing granting it approval for a period of five years;

(ii) where the application is made under clause (ii) or clause (iii) of the said proviso,–

(a) call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about—

(A) the genuineness of activities of such institution or fund; and

(B) the fulfilment of all the conditions laid down in clauses (i) to (v); and

(b) after satisfying himself about the genuineness of activities under item (A), and the fulfilment of all the conditions under item (B), of sub-clause (a),–

(A) pass an order in writing granting it approval for a period of five years;

(B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its approval after affording it a reasonable opportunity of being heard;

(iii) where the application is made under clause (iv) of the said proviso, pass an order in writing granting it approval provisionally for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the institution or fund:

Provided also that the order under clause (i), sub-clause (b) of clause (ii) and clause (iii) of the first proviso shall be passed in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received:

Provided also that the approval granted under the second proviso shall apply to an institution or fund, where the application is made under–

(a) clause (i) of the first proviso, from the assessment year from which approval was earlier granted to such institution or fund;

(b) clause (iii) of the first proviso, from the first of the assessment years for which such institution or fund was provisionally approved;

(c) in any other case, from the assessment year immediately following the financial year in which such application is made.”;

(ii) in sub-section (5D), after Explanation 2, the following Explanation shall be inserted, namely:–

“Explanation 2A.— For the removal of doubts, it is hereby declared that claim of the assessee for a deduction in respect of any donation made to an institution or fund to which the provisions of sub-section (5) applies, in the return of income for any assessment year filed by him, shall be allowed on the basis of information relating to said donation furnished by the institution or fund to the prescribed income-tax authority or the person authorised by such authority, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.”;

(iii) after sub-section (5D), the following sub-section shall be inserted, namely:–

“(5E) All applications, pending before the Commissioner on which no order has been passed under clause (vi) of sub-section (5) before the date on which this sub-section has come into force, shall be deemed to be applications made under clause (iv) of the first proviso to sub-section (5) on that date.”.

PROPOSED CHANGE BY THE FINANCE BILL UNDER THE FOLLOWING SECTION :-

1. Section 43B:- Allowing deduction for amount disallowed under section 43B, to insurance companies on payment basis.

Section 43B of the Act provides for allowance of certain deductions, irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by the assessee, only in the previous year in which such sum is actually paid.

Section 44 of the Act provides that computation of profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or a co-operative society shall be computed in accordance with the rules contained in the First Schedule to the Act.

As per Rule 5 of the First Schedule, the deduction of expenditure was subject to the provisions of Sec 43B but there is no provision of allowance of the expenses in subsequent year on actual payment.

In the finance bill 2020 has proposed to insert a proviso after clause (c) of the said rule 5 to provide that any sum payable by the assessee which is added back under section 43B in accordance with clause (a) of the said rule shall be allowed as deduction in computing the income under the rule in the previous year in which such sum is actually paid.

2. U/s 143 Tax Administration and Compliance:-

i. Modification of e-assessment scheme sub section (3A)

Section 143 of the Act provides the manner for processing and assessment of return of income (ITR) where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142 of the Act. Section 143(3A) provides that the Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under section 143(3) so as to impart greater efficiency, transparency and accountability by certain means specified therein. Accordingly, E-assessment Scheme, 2019 was notified under section 143(3A) of the Act.

Now, the scope of section 143(3A) has been expanded to include the reference of section 144 of the Act relating to best judgment assessment in the said sub-section.

ii. Modification of e-assessment scheme sub section (3B) of section 143

The central government for purpose of giving effect to the scheme made under sub section (3A) by a notification in the official gazette, direct that any of the provision of this act relating to assessment of total income or loss shall not apply or shall apply with such exception modification and adaptations as may be specified in this notification provided that no direction shall be issue after the 31st day of march 2020.

In the Finance Bill 2020 has proposed and extended the period from 31st March 2020 to 31st March 2022.

iii. New System of e-appeal

It is proposed to insert new sub-section (6A) in section 250 of the Act to provide for the following: —

Empowering Central Government to notify new an e-appeal scheme for disposal of appeal by CIT(A) so as to impart greater efficiency, transparency and accountability.

Eliminating the interface between the CIT (A) and the appellant in the course of appellate proceedings to the extent technologically feasible.

Optimizing utilization of the resources through economies of scale and functional specialization.

Introducing an appellate system with dynamic jurisdiction in which appeal shall be disposed of by one or more CIT(A).

proposed to empower the Central Government, for the purpose of giving effect to the scheme made under the proposed sub- section, by notification in the Official Gazette, to direct that any of the provisions of this Act relating to jurisdiction and procedure of disposal of appeal shall not apply or shall apply with such exceptions, modifications and adaptations as maybe specified in the notification. Such directions are to be issued on or before 31st March 2022.

3. Amendment in section 139 of the Income tax Act, in sub clause (1) in explanation 2 in clause (a)

The due date for filling return other than the assessee who is required to furnish a report referred to in section 92E, company and other than company whose account are to be required to be audited under this act, or any other laws for the time being enforce, working partner of the firm whose accounts are required to be audited under this act or under any other law for the time being enforce has been substituted from 30th day to September to 31st day of October. The return of the company, other than company audited u/s 44AB of the Income tax Act, the due date for file to return from 30th day of September has been substituted to 31st day of October.

4. Amendment in section 140 of the Income tax Act

The provision of section 140 return u/s 139 or section 115WD shall be verified by :—

a) IN case of an individual

i) By the individual himself

ii) Where he is absent from India, by the individual himself or by sum person duly authorized by him in this behalf

iii) Where is mentally in capacitated from attending to his affairs by his guardian or any other person competent to act on a behalf and

iv) Where for the any other person it is not possible for the individual to verify the return by any person duly authorized by him in this behalf

In the finance bill following amendment has been proposed:-

i) In case of a company by the managing director is not able to verify the return, the any other person as may be prescribed for this purpose shall be inserted and

ii) In case of clause (cd) in case of limited liability partnership the word by any partner thereof had been inserted from any other person as may be prescribed for this purpose, if the dignities partner are not able to verify the return the any other person as authorized by the partner shall verified the return.

5. New section 285BB has been Inserted in the Finance Bill 2020

In the finance bill 2019 the section 285BA was inserted obligation to furnish statement of financial transaction or reportable accounts and in the finance bill new section 285BA has been inserted with effect from 1st June 2020 namely

“The prescribe income tax authority or the person authorized by the such authority shall uploaded in the registered account of the assessee an annual information statement in such form and manner with such time and alongwith such information which is in the possession of an income tax authority, as may be prescribed”

As per provision of section 285BA the financial transaction has been uploaded on income tax site but the new section 285BB has been inserted and the Income tax Authority shall be uploaded the information again the information of the assessee on the registered ID of the assessee which is in the possession of income tax authority.

6. Amendment in section 288 in The Finance Bill 2020

The section 288(2) authorized the representative who is entitled to attend the case before the authority. IN this section after clause (vii) a new clause (viii) has been inserted namely “any other person as may be prescribe”