November 2022

Charitable Trusts - Recent Amendments Pertaining to Books of Accounts and Other Documents - Part 2

R. S. Kadakia, Chartered Accountant

[Part I of this article was published in October, 2022 BCAJ. In this concluding part, the author has analysed the remaining provisions in detail.]

The following records are also required to be maintained:

Rule 17AA(1)(d)(iv)(Text)

Record of the following, out of the income of the person of any previous year preceding the current previous year, namely:-


(I)    application out of the income accumulated or set apart containing details of the year of accumulation, amount of application during the previous year out of such accumulation, name and address of the person to whom any credit or payment is made and the object for which such application is made;

(II)    application out of the deemed application of income referred to in clause (2) of Explanation 1 of sub-section (1)    of section 11 of the Act, for any preceding previous year, containing details of the year of deemed application, amount of application during the previous year out of such deemed application, name and address of the person to whom any credit or payment is made and the object for which such application is made;

(III)    application, other than the application referred to in Item (I) and Item (II), out of income accumulated during any preceding previous year containing details of the year of accumulation, amount of application during the previous year out of such accumulation, name and address of the person to whom any credit or payment is made and the object for which such application is made;

(IV)    money invested or deposited in the forms and modes specified in sub-section (5) of section 11 of the Act;

(V)    money invested or deposited in the forms and modes other than those specified in subsection (5) of section 11 of the Act;

Analysis


This sub-clause requires details of application out of the income of any previous year preceding the current previous year. Ordinarily, this would be the income exempt up to 15 per cent u/s 11(1)(a) or the income of preceding years accumulated u/s 11(2).

It appears that the main purpose behind seeking these details is to ascertain the amount of application which is not allowable u/s 11(1).

Application out of the deemed application of income referred to in explanation 1(2) of section 11(1) [item (ii)]

Ordinarily, the details of credit balance in income and expenditure accounts are not maintained year-wise. The assessee may now have to split up the credit balance in income and expenditure year-wise based on the accounts of preceding years, and then consider their utilization. In such a case, the assessee may also have to record the basis on which the amounts have been quantified. To illustrate, the credit balance in the income and expenditure

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