Applicability to earlier years of the registration granted to a trust or institution

     The existing provisions of section 12 A of the Act provide that a trust or an institution can claim exemption under sections 11 and 12 only after registration under section 12AA has been granted. In case of trusts or institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively.

     Non-application of registration for the period prior to the year of registration causes genuine hardship to charitable organisations. Due to absence of registration, tax liability gets attached even though they may otherwise be eligible for exemption and fulfil other substantive conditions. The power of condonation of delay in seeking registration is not available under the section.

     In order to provide relief to such trusts and remove hardship in genuine cases, it is proposed to amend section 12 A of the Act to provide that in case where a trust or institution has been granted registration under section 12AA of the Act, the benefit of sections 11 and 12 shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted.

     Further, it is proposed that no action for reopening of an assessment under section 147 shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year.

     However, the above benefits would not be available in case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA or a registration once granted was cancelled.

     These amendments will take effect from 1st October, 2014.

[Clause 8]

Registration-linked exemption relief prevents reopening earlier assessments when a trust's registration is subsequently granted, subject to conditions. Amendment grants registration-linked retrospective relief: where a trust or institution is later granted registration, the benefit of tax exemptions applies to income from trust property in earlier assessment years pending on the date of registration, provided the objects and activities in those years match those on which registration was granted; reopening of assessments for preceding years is barred solely for lack of prior registration. Relief excludes cases where registration was refused or a granted registration was cancelled.