SPECIAL PROVISIONS RELATING TO TAX ON ACCRETED INCOME OF CERTAIN TRUSTS AND INSTITUTIONS

115TD  Tax on accreted income

4[(1) Notwithstanding anything contained in this Act, where in any previous year, a specified person has—

(a) converted into any form which is not eligible for grant of registration under section 12AA or section

12AB, or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 ;

(b) merged with any entity other than an entity which is a trust or institution having objects similar to it and registered under section 12AA or section 12AB or approved under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10; or

(c) failed to transfer upon dissolution all its assets to any other specified person within a period of twelve months from the end of the month in which the dissolution takes place, then, in addition to the income-tax chargeable in respect of the total income of such specified person, the accreted income of the specified person as on the specified date shall be charged to tax and such specified person shall be liable to pay additional income-tax (herein referred to as tax on accreted income) at the maximum marginal rate on the accreted income.

(2) The accreted income for the purposes of subsection (1) means the amount by which the aggregate fair market value of the total assets of the specified person, as on the specified date, exceeds the total liability of such specified person, computed in accordance with the method of valuation, as may be prescribed: Provided that so much of the accreted income as is attributable to the following asset and liability, if any, related to such asset, shall be ignored for the purposes of sub-section (1), namely:—

(i) any asset which is established to have been directly acquired by the specified person out of its income of the nature referred to in clause (1) of section 10;

(ii) any asset acquired by the specified person during the period beginning from the date of its creation or establishment and ending on the date from which the registration under section 12AA or section 12AB or approval under clause (23C) of section 10 became effective, if the specified person has not been allowed any benefit of sections 11 and 12 or subclause (iv) or sub-clause (v) or sub-clause (vi) or subclause (via) of clause (23C) of section 10 during the said period:

Provided further that where due to the provisions of the first proviso or the second proviso to sub-section (2) of section 12A or the eighth proviso to clause (23C) of section 10, the benefit of sections 11 and 12, or subclause (iv) or sub-clause (v) or sub-clause (vi) or subclause (via) of clause (23C) of section 10 have been allowed to the specified person in respect of any previous year or years beginning prior to the date from which the registration under section 12AA or section 12AB or approval under clause (23C) of section 10 is effective, then, for the purposes of clause (ii) of the first proviso, the registration or approval shall be deemed to have become effective from the first day of the earliest previous year:

Provided also that while computing the accreted income in respect of a case referred to in clause (c) of sub-section (1), assets and liabilities, if any, related to such asset, which have been transferred to any other specified person within the period specified in the said clause, shall be ignored.

(3) For the purposes of sub-section (1), a specified person shall be deemed to have been converted into any form not eligible for registration under section 12AA or section 12AB or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 in a previous year, if,—

(i) the registration or approval granted to it under section 12AA, or section 12AB, or sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, has been cancelled; or

(ii) it has adopted or undertaken modification of its objects which do not conform to the conditions of registration and it—

(a) has not applied for fresh registration under section 12AA, or section 12AB, or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 in the said previous year; or

(b) has filed application for fresh registration under section 12AA or, section 12AB, or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10 but the said application has been rejected.]

(4) Notwithstanding that no income-tax is payable by a trust or the institution on its total income computed in accordance with the provisions of this Act, the tax on the accreted income under sub-section (1) shall be payable by such 5[specified person].

(5) The principal officer or the trustee of the 5[specified person], as the case may be, and the 5[specified person] shall also be liable to pay the tax on accreted income to the credit of the Central Government within fourteen days from,—

i)  the date on which,—

(a)  the period for filing appeal under section 253 against the order cancelling the registration expires and no appeal has been filed by the 5[specified person]; or

(b)  the order in any appeal, confirming the cancellation of the registration, is received by the trust or institution,

in a case referred to in clause (i) of sub-section (3);

(ii)  the end of the previous year in a case referred to in sub-clause (a) of clause (ii) of sub-section (3);

(iii) the date on which,—

(a)  the period for filing appeal under section 253 against the order rejecting the application expires and no appeal has been filed by the 5[specified person]; or

(b)  the order in any appeal, confirming the cancellation of the application, is received by the trust or institution,

in a case referred to in sub-clause (b) of clause (ii) of sub-section (3);

(iv) the date of merger in a case referred to in clause (b) of sub-section (1);

(v)  the date on which the period of twelve months referred to in clause (c) of sub-section (1) expires.

(6) The tax on the accreted income by the 5[specified person] shall be treated as the final payment of tax in respect of the said income and no further credit therefor shall be claimed by the 5[specified person] or by any other person in respect of the amount of tax so paid.

(7) No deduction under any other provision of this Act shall be allowed to the 5[specified person] or any other person in respect of the income which has been charged to tax under sub-section (1) or the tax thereon.

Explanation.—For the purposes of this section,—

(i) “date of conversion” means,—

(a) the date of the order cancelling the registration 3[under section 12AA or 6[section 12AB, or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10]], in a case referred to in clause (i) of sub-section (3); or

(b) the date of adoption or modification of any object, in a case referred to in clause (ii) of sub-section (3);

(ii) “specified date” means,—

(a) the date of conversion in a case falling under clause (a) of sub-section (1);

(b) the date of merger in a case falling under clause (b) of sub-section (1); and

(c) the date of dissolution in a case falling under clause (c) of sub-section (1).]

7[(iia) “specified person” means––

(a) any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub- lause (vi) or sub-clause (via) of clause (23C) of section 10; or

(b) a trust or institution registered under section 12AA or section 12AB]

(iii) registration 3[under section 12AA or section 12AB] shall include any registration obtained under section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996).

 

 

Notes:

1. Substituted by the Finance Act, 2020. Dated 01st February, 2020  Amendment Effective From 01st June,2020

for the words, figures and letters;

under section 12AA

The following shall be substituted namely;

under section 12AA or section 12AB

 

2. Substituted by Taxation and Other Laws (Relaxation and Amendment of certain Provision) Act, 2020 w.e.f 01st June, 2020 Notificatio No. 38/2020 dated 29th September, 2020.

for the words, figures and letters

1[under section 12AA or section 12AB]

wherever they occur, shall be substituted namely-

under section 12AA

 

3. Substituted by Taxation and Other Laws (Relaxation and Amendment of certain Provision) Act, 2020 w.e.f 01st April, 2021 Notificatio No. 38/2020 dated 29th September, 2020.

for the words, figures and letters-

2[under section 12AA]

wherever they occur, shall be substituted namely-

under section 12AA or section 12AB

 

4. Substitution proposed by Finance Bill, 2022 w.e.f 01.04.2023

Sub-section (1),(2) & (3) has been substituted-

(1) Notwithstanding anything contained in this Act, where in any previous year, a trust or institution registered  3[under section 12AA or section 12AB] has—

(a) converted into any form which is not eligible for grant of registration 3[under section 12AA or section 12AB]

(b) merged with any entity other than an entity which is a trust or institution having objects similar to it and registered 3[under section 12AA or section 12AB]; or

(c) failed to transfer upon dissolution all its assets to any other trust or institution registered 3[under section 12AA or section 12AB] or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause ( iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, within a period of twelve months from the end of the month in which the dissolution takes place,

then, in addition to the income-tax chargeable in respect of the total income of such trust or institution, the accreted income of the trust or the institution as on the specified date shall be charged to tax and such trust or institution, as the case may be, shall be liable to pay additional income-tax (herein referred to as tax on accreted income) at the maximum marginal rate on the accreted income.

(2) The accreted income for the purposes of sub-section (1) means the amount by which the aggregate fair market value of the total assets of the trust or the institution, as on the specified date, exceeds the total liability of such trust or institution computed in accordance with the method of valuation as may be prescribed:

Provided that so much of the accreted income as is attributable to the following asset and liability, if any, related to such asset shall be ignored for the purposes of sub-section (1), namely:—

(i)  any asset which is established to have been directly acquired by the trust or institution out of its income of the nature referred to in clause (1) of section 10;

(ii)  any asset acquired by the trust or institution during the period beginning from the date of its creation or establishment and ending on the date from which the registration 3[under section 12AA or section 12AB] became effective, if the trust or institution has not been allowed any benefit of sections 11 and 12 during the said period:

Provided further that where due to the first proviso to sub-section (2) of section 12A, the benefit of sections 11 and 12 have been allowed to the trust or the institution in respect of any previous year or years beginning prior to the date from which the registration 3[under section 12AA or section 12AB] is effective, then, for the purposes of clause (ii) of the first proviso, the registration shall be deemed to have become effective from the first day of the earliest previous year:

Provided also that while computing the accreted income in respect of a case referred to in clause (c) of sub-section (1), assets and liabilities, if any, related to such asset, which have been transferred to any other trust or institution registered 3[under section 12AA or section 12AB] or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, within the period specified in the said clause, shall be ignored.

(3) For the purposes of sub-section (1), a trust or an institution shall be deemed to have been converted into any form not eligible for registration 3[under section 12AA or section 12AB] in a previous year, if,—

(i) the registration granted to it 3[under section 12AA or section 12AB] has been cancelled; or

(ii) it has adopted or undertaken modification of its objects which do not conform to the conditions of registration and it,—

(a) has not applied for fresh registration 3[under section 12AA or section 12AB] in the said previous year; or

(b) has filed application for fresh registration 3[under section 12AA or section 12AB] but the said application has been rejected.

 

5. Substituted by Finance Act, 2022 dated 30.03.2022 w.e.f 01.04.2023

In sub-section (4), (5), (6) and (7), for the words-

“trust or the institution” and the words “trust or institution” 

The following shall be substituted, wherever it occurs-

specified person

 

6. Substituted by Finance Act, 2022 dated 30.03.2022 w.e.f 01.04.2023

in the Explanation, in clause (i), in sub-clause (a), for the word-

section 12AB

The following shall be substituted, wherever it occurs-

section 12AB, or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10

 

 7. Inserted by Finance Act, 2022 dated 30.03.2022 w.e.f 01.04.2023