Society - Tax rates

[Guest]

NOTE FOR OPINION DETAILS OF THE SOCIETY It is a society registered in 1979 under the Socities Registration Act, 1860. The main object of the Society is promotion of quality education, setting up of education standards, evolve strategies for cuuiculum development, examination reforms etc, to liaison among various STATE BOARDS and so on. The Trust is managed by Trustee under supervision of President etc . It receives following income : 1)Annual Contributions from members which are credited to P/L account. 2)Bank Interest on FDR which is credited to P/L account 3)It also received in few years, Donations towards Corpus Fund (Last received in FY 2005-06). The same has been directly credited to Capital Fund in B/S and not reflected in P/L account. 4)The Society also receives Grants from Ministries for specified Projects. The same are shown in Liability side. The expenses incurred for the Project are debited to Grant account. The excess expenditure incurred by us for the Project over and above the grant amount are debited to P/L account as our contribution. The short expenditure incurred has to be returned to the concerned Ministry. In most of the years, there is a marginal loss as per P/L account after incurring administrative expenses , Depreciation and expenses incurred for pursuing main objects. The substantial part of expenses are for administration . The Accounts are got audited every year. The above Society is not registered u/s 11, 12 of the Income Tax Act and has never filed its Return of Income, nor deducted any TDS till date. It doesnot have any PAN Number. QUERIES FOR OPINION The Society wants to regularize the matter and your expert opinion is sought on the following matters. 1)Whether it would be assessable as AOP . If yes, a)what would be the Tax Rates ( whether rates applicable for individuals would be applicable or maximum marginal rate would be levied.) b)Whether its Taxable Income would be Net Profit/Loss as per P/L account or Gross receipts as per P/L would be the Taxable Income. c)Whether Donations for corpus fund credited to Capital Fund in B/S would also be included in Taxable income. d)Wheher it would be liable for TDS e)Whether Grants received would form part of Turnover for purposes of 44AB f)Whether it can file Return from AY 2007-08 after paying TDS, FBT and Income -tax if any. Whether it should have filed its ITRs even though its Net Profit as per P/L account was below the maximum taxable limit. 2) Whether it can apply for exemption u/s 12 now. What would be the implications in respect of earlier years. 3)Whether it should be registered as a fresh Charitable Trust having SAME NAME with the Sub Registrar and apply for exemption u/s 12. After obtaining exemption, can it take over the assets and liabilities of the existing society. What can be the possible consequences in that case. It cannot be registered with same name under the Societies Reg Act, 1860 4) What is the best alternative and what can be the worst consequences in the above circumstances.

[Surender Gupta]

It should be treated as AOP and rate of income tax depends on the prescribed factors.

AI Summary

Association of Persons classification affects tax treatment and compliance obligations for unregistered educational society, including TDS and exemption options The central operative question is whether the unregistered educational society is assessable as an Association of Persons, with attendant issues on applicable tax rates, the taxable base (net profit versus gross receipts), treatment of corpus donations credited to capital fund, TDS obligations, whether grants count as turnover for audit thresholds, and the ability to apply for charitable exemption now and the consequences of reorganising as a new charitable trust and transferring assets and liabilities.