Tax on
Accreted Income- Section 115TD
1. Objective
of Section
a) Trust
or institution registered u/s 12AA enjoy tax exemption on its income
b) If
due to charging event, specified in section 115TD, income of such trust
or institution is made taxable currently, then section 115TD provides for
charging tax on “accreted income” (past exempted income) of such trust or
institution
c) The
measurement of accreted income is FMV of assets less book value of liabilities
on Specified Date
d) Tax
on accreted income is to be paid at Maximum Marginal rate (30% currently)
2. Charging
event- if any of the following event occurs, then section 115TD will be
applicable and Trust/institution has to pay tax on accreted income
a) Case-
1 – Trust/Institution is converted into any FORM, which is not eligible for grant
of registration u/s 12AA. It consist of following 2 situations:-
i)
Case 1(a) – Registration under section 12AA has
been cancelled
ii)
Case 1(b) – Trust/Institution has undertaken
modification of its object, which do not confirm to conditions of registration
and
·
Case 1(b)(i) – has not applied for fresh
registration u/s 12AA
·
Case 1(b)(ii) – has applied for fresh
registration u/s 12AA but application has been rejected
b) Case
2 – Trust/Institute has merged with any other entity, other than entity
registered u/s 12AA and has its object similar to trust/institution
c) Case
3 – Trust/Institution has been dissolved but failed to transfer its assets and
liabilities to either Trust/institution registered u/s 12AA or other
institution registered u/s 10(23C)((iv)/(v)/(vi/(via), within period of 12
months from the end of the month in which dissolution take place.
3.
Previous year in which accreted income
is taxable, specified date for computing accreted Income, Payment of tax on
accreted income
Case
|
Situation
|
PY in which accreted
Income is taxable
|
Specified date for
computing accreted income
|
Date of Payment of Tax
(max time)
|
1(a)
|
No appeal has been filed
against cancellation order
|
FY in which order is passed
by Commissioner cancelling the registration
|
Date of order of
Commissioner cancelling the registration
|
74 (60+14) days from the
date, on which order of Commissioner cancelling the registration is received
|
1(a)
|
Appeal is filed but
cancellation of registration is confirmed in appellate proceedings
|
FY in which appellate order
is received
|
Date of order of
Commissioner cancelling the registration
|
14 days from the date on
which appellate order is received
|
1(b)(i)
|
Has not applied for fresh
registration u/s 12AA on modification of objects
|
FY in which modification of
object is done
|
Date on which modification
of object is done
|
14 days from the end of the
previous year in which modification of object is done
|
1(b)(ii)
|
No appeal is filed against
order rejecting application
|
FY in which order is passed
by Commissioner rejecting the application.
|
Date on which modification
of object is done
|
74 days from the date, on
which order of Commissioner rejecting the application is received.
|
1(b)(ii)
|
Appeal is filed but
rejection of registration in confirmed in appellate proceedings
|
FY in which appellate order
is received
|
Date of order of
Commissioner rejecting the application.
|
14 days from the date on
which appellate order is received
|
Case 2
|
FY in which merge is done
|
Date of Merger
|
14 days from the date of
merger
|
|
Case 3
|
FY in which 12 months from
end of month in which dissolution take place falls
|
Date of dissolution
|
14 days from the date on
which said period of 12 months expires.
|
4. Examples
i.
Example 1
a) Registration
of Trust is cancelled on 01/03/2018 and such order is received on 05/03/2018
b) No
appeal is filed against such order
PY in which accreted income
is taxable
|
Specified Date
|
Date of Payment of tax
|
PY 17-18 (FY in which order
is passed by Commissioner)
|
01/03/2018 (date
of order cancelling registration
|
74 days from 05/03/2018
|
ii.
Example-2
Registration
of Trust is cancelled on 01/03/2018, appeal is file against said order with
ITAT,ITAT confirm cancellation by an order dated 01/05/2019 and order is
received on 15/05/2019. No further appeal is filed
PY in which accreted income
is taxable
|
Specified Date
|
Date of Payment of tax
|
PY 19-20 (FY in which ITAT
order is passed received)
|
01/03/2018 (date
of order cancelling registration)
|
14 days from 15/05/2019
|
iii)
Example- 3
a) Modification
of objects of trust is done on 1/2/2018 , which do not confirm to condition of
registration u/s 12AA
b) No
application is made for fresh registration u/s 12AA
PY in which accreted income
is taxable
|
Specified Date
|
Date of Payment of tax
|
PY 17-18 (FY in which
modification of object is done)
|
01/02/2018 (date
of modification of object)
|
14 days from 31/3/2018 (14
days from the end of the PY in which modification of object is done)
|
iv)
Example – 4
a) Modification
of objects of trust is done on 1/2/2018 , which do not confirm to condition of registration
u/s 12AA
b) Application
is made for fresh registration u/s 12AA on 1/3/2018
a) Order
is passed by commissioner rejecting the application on 30/9/18 and order is
received on 4/10/2018
PY in which accreted income
is taxable
|
Specified Date
|
Date of Payment of tax
|
PY 18-19 (FY in which
application for fresh registration is rejected)
|
01/02/2018 (date
of modification of object)
|
74 days from 04/10/2018.
|
v)
Example- 5
c) Modification
of objects of trust is done on 1/2/2018, which do not confirm to condition of registration
u/s 12AA
a) Application
for registration is rejected; appeal is filed before ITAT, which confirm
rejection. ITAT passed the order on 1/6/2019 and order is received on 10/6/2019.
No further appeal is filed
PY in which accreted income
is taxable
|
Specified Date
|
Date of Payment of tax
|
PY 19-20 (FY in which ITAT
order is received)
|
01/02/2018 (date
of modification of object)
|
14 days from 10/06/2018.
|
5. Special
point relating to computation of accreted income:-
a) Accreted
income is FMV of assets and Liabilities of trust/institution as on specified
date
b) In
computing FMV of assets, following assets shall not be included:-
i)
Assets, which have been acquired directly out of
agriculture income referred to in section 10(1).
ii)
Assets which have been acquired between the
period beginning from the date on which trust in created and ending on the date
on which registration u/s 12AA become effective, if no benefit u/ 11 and 12 is
given during said period.
iii)
In case of dissolution of trust , the assets
which have been transferred to either Trust/institution registered u/s 12AA or
other institution registered u/s 10(23C)((iv)/(v)/(vi/(via), within period of
12 months from the end of the month in which dissolution take place
