Special provisions relating to tax on accreted income of certain trusts and institutions
Chapter – XII EB
Sec 115TD- Tax on Accreted Income
- Situation and consequence:Where in any previous year, a trust or institution registered u/s 12AA has:
- Conversion:converted into any form which is not eligible for grant of registration u/s 12AA
- Merger:merged with any entity other than an entity which is a trust or institution having objects similar to it and registered u/s 12AA
- Dissolution:failed to transfer upon dissolution all its assets to any entity registered u/s 12AA or to any entity referred to in Sec 10(23C) (iv)/(v)/(vi)/(via) within a period of 12 months from the end of the month in which the dissolution takes place.
Note:
- date of conversion” means
Consequence:
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Additional income tax = 30% of Accreted Income
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- Accreted Income:
| Accreted Income = Fair market value of total assets (-) Total liabilities
The following asset and liability, if any, related to such asset shall be ignored:
– any asset which is directly acquired out of agricultural income u/s 10(1) – any asset acquired during the period beginning from the date of establishment till the date of registration u/s 12AA, if no benefit u/s 11 and 12 were allowed during the said period.
Where due to the first proviso u/s 12A(2), the benefit of sec 11 and 12 have been allowed prior to the date of registration u/s 12AA is effective, then, for the purposes of this clause, the registration shall be deemed to have become effective from the first day of the earliest previous year for which the benefit u/s 12AA was available.
– Further, in the case of dissolution, assets and liabilities, if any, related to such asset, which have been transferred to any other trust or institution registered under section 12AA orto any entity referred to in Sec 10(23C) (iv)/(v)/(vi)/(via), within the period specified in the said clause, shall be ignored. |
Note:
- Value shall be determined in accordance with prescribed methods as at the specified date
Specified date means date of conversion or merger or dissolution as the case may be
3 . Deemed violation on conversion:
A trust or an institution shall be deemed to have been converted into any form not eligible for registration u/s 12AA in a previous year, if:
- the registration granted to it u/s 12AA has been cancelled; or
| – 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 u/s 12AA in the said previous year; or | |
| (b) | has filed application for fresh registration u/s 12AA but the said application has been rejected. |
4 . Payment irrespective of regular income tax due:
Additional tax on accreted income is payable 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.
5 . Due date for payment of tax on Accreted Income:
The principal officer or the trustee and the trust or the institution shall also be liable to pay the tax on accreted income within 14 days from:
| Situation | Due date |
| Cancellation of registration | 14 days from the date on which:
– the period for filing appeal u/s 253 against the order cancelling the registration expires and no appeal has been filed by the trust or the institution; or – the order in any appeal, confirming the cancellation of the registration, is received by the trust or institution |
| Where the entity has adopted or undertaken modification of its objects which do not conform to the conditions of registration and:
Ithas not applied for fresh registration u/s 12AA in the said previous year |
14 days from the end of the previous year |
| It has filed application for fresh registration u/s but the said application has been rejected. | 14 days from the date on which:
– the period for filing appeal under section 253 against the order rejecting the application expires and no appeal has been filed by the trust or the institution or – the order in any appeal, confirming the cancellation of the application, is received by the trust or institution,
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| Merger | 14 days from the date of merger |
| Dissolution and failure to transfer all assets | 14 days from the date on which the period of 12 months for transfer expires
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- No credit for tax paid: The tax on the accreted income 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 trust or the institution or by any other person in respect of the amount of tax so paid.
- No deductions allowed: No deduction under any other provision of this Act shall be allowed in respect of the accreted income which has been charged under this section
Interest payable for non-payment of tax – Sec 115TE
Where there is a failure to pay the whole or any part of the tax on the accreted income within the time allowed u/s 115TD(5), simple interest @ 1% for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid shall be levied.
Trust or institution is deemed to be assessee in default – Sec 115TF
(1) Failure to pay tax on accreted income:Where there is a failure to pay tax on accreted income in accordance with the provisions of sec 115TD, then, the Principal Officer or the entity shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply.
(2) In case of dissolution: Notwithstanding anything contained in sub-section (1), in a case where the tax on accreted income is payable owing to failure to distribute on dissolution, the person to whom any asset forming part of the computation of accreted income thereof has been transferred, shall be deemed to be an assessee in default in respect of such tax and interest thereon and all the provisions of this Act for the collection and recovery of income-tax shall apply:
However the liability of the person shall be limited to the extent to which the asset received by him is capable of meeting the liability.
