New Audit Report Requirements for Charitable Institutions
Discussion & Critical
Analysis on New Audit
Report 10B/10BB –
Charitable Institutions
Presented By-
CA Naresh Kumar Kabra
1
Notification – Related to New Audit Report Form
As per Notification No. 7/2023,
dated 21.02.2023
, CBDT issued New Audit
Report Form 10B & 10BB for charitable institutions.
The report of audit of the accounts of a fund
or
institution
or
trust
or
any university
or
other
educational institution
or
any hospital
or
other medical institution which is required to be
furnished under
clause (b) of the tenth proviso to clause (23C) of section 10
&
sub-
clause (ii) of clause (b) of sub-section (1) of section 12A
shall be in-
Form
10B
Form 10BB
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Irony Related to the Notification
•
Almost after the completion of
11 months
of Financial Year 2022-23, a
notification has been issued by CBDT about the Audit Report of charitable
institutions, which demands huge list of requirements by the assessee.
•
Applicability of this Audit Report
comes from April 1, 2023
, which means
that Audit Report for F.Y. 2022-23 has to be filed in the newly prescribed
format.
•
The most important thing is that, this notification comes for those assessees
which
requires more improvement
w.r.t accounting among all the assessees
covered under the Income Tax Act.
•
Most of the assessees in this sector has not shifted completely to the
computerized system of accounting. Moreover, some of them are still
maintaining the books of accounts in completely hand written formats also
known as Bahi – Khata.
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-
Applicability of Form 10B & 10BB (OLD)
Earlier, there was no concept of the
small trust or big trust
i.e., based upon criteria of
gross receipts of Rs. 5 Crore, Audit report format (whether Form 10B or 10BB) was decided
according to the section under which Trust was registered.
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Applicability of Form 10B & 10BB (NEW)
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Explanation related to applicability of Audit of Trusts
TOTAL INCOME
while assessing the applicability limit means the “
Gross Receipts”
of the charitable institution
which includes all the income of such institution i.e., revenue from direct & indirect sources.
For Example:-
ABC Trust has following details w.r.t A.Y. 2023-24:-
•
In addition corpus received for Rs. 5.00 Lakhs
Here, Question arises,
How Gross receipt (total income) will be calculated?
What will be treatment of Corpus?
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Explanation related to applicability of Audit of Trusts
Here, Total Income of ABC Trust for applicability of 10B will be calculated as sum of :-
Thus, the
Total Income
for calculating the limit for Form 10B is
8.5 Lakhs.
Note :-
•
While calculating the Total Income, Corpus donations will be considered & it will be added in gross
receipts.
•
There’s no relation of Total Income with the Net income over expenses.
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Coverage in Form 10B/10BB
New Audit Report
Format is the
consolidation of:
In nutshell, it is a compilation of trust laws from start to end & are
self speaking self Assessment Order
for
CI duly certified by CA,
only
for the ease of Department.
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Major Additions in 10B & 10BB
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I
s
it
Worth it –
To do comparison between Old vs
New Audit Report Form??
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Overview of Form 10B
1
General Information
Total Clauses (related to General information) – 20
•
Basic
Details (Clause 1 to 6)
•
Legal Clause (Clause
7 to 8)
•
Registration Details (Clause 9)
•
Management Details (Clause 10)
•
Object (Clause 11 to 12)
•
Commencement of Activities (Clause 13
)
•
Details of Place where books of accounts as per Rule 17AA and other documents have
been maintained
(Clause 14
)
•
Advancement of GPU (Clause 15 to 16)
•
Business Undertakings (Clause 17)
•
Business Incidental to objects (Clause 18)
•
Details of Receipts where TDS is deducted
(Clause 19)
•
Applicability of Provisions of Section 13(10)
(Clause 20)
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2
Computation of Taxable Income
Total Clauses – 14
•
Voluntary Contributions
(Clause 21 to 27)
•
Income
to be applied
(Clause 28
to 30)
•
Application of Income (Clause 31) – Most Important and trickiest Part of the form
•
Taxable income (Clause 32)
•
Income Taxable under Section 115BBI (Clause 33)
•
Anonymous Donation chargeable to tax (
Clause 34)
Overview of Form 10B
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Overview of Form 10B
Total Clauses – 15
•
Other Income (Clause 35)
•
Capital Assets u/s 11(1A) (Clause 36)
•
Application of Income out of different sources other than Income (Clause 37
)
•
Payment or credit in excess of Rs. 50 Lakhs to a Single person during previous year (Clause
38)
•
Details of Income u/s 13(10)
(Clause
39)
•
Details of expenses for religious purpose for 80G registered Trusts
(Clause
40)
•
Details of 13(3) Persons –Specified Persons (Clause 41-42)
•
Details of Specified violation u/s 13(2) –Specific Violations (Clause 43)
•
Details of claim of Depreciation where cost of asset is already claimed
(Clause 44)
•
Details of deduction u/s 10 (Clause 45)
•
Details regarding Section 269SS (Clause 46)
•
Details regarding Section 269ST(Clause 47)
•
Details regarding Section 269T (Clause 48)
•
TDS requirement as per Chapter XVII-B or Chapter XVII-BB (Clause 49)
Other Reportable Clauses
3
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Overview of Form 10BB
1
General Information
Total Clauses – 11
•
Basic
Details (Clause 1 to 6)
•
Legal Clause (Clause
7 to 8)
•
Management Details (Clause
9
)
•
Commencement of Activities (Clause 10
)
•
Details of Place where books of accounts as per Rule 17AA and other documents have
been maintained
(Clause 11
)
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Computation of Taxable Income
Total Clauses – 15
•
Voluntary Contributions (Clause 12 to 20)
•
Income to be applied (Clause 21 to 22)
•
Application of Income (Clause 23)
•
Taxable income (Clause 24)
•
Income Taxable under Section 115BBI (Clause 25)
•
Anonymous Donation chargeable to tax (Clause 26)
Other Reportable Clauses
Total Clauses – 6
•
Application of income out of different sources (Clause 27)
•
Details of 13(3) Persons –Specified Persons (Clause 28-29)
•
Details of Specified violation u/s 13(2) –Specific Violations (Clause 30)
•
Details of claim of Depreciation where cost of asset is already claimed
(Clause 31)
•
TDS requirement as per Chapter XVII-B or Chapter XVII-BB (Clause 32)
3
Overview of Form 10BB
2
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Clause to Clause
Discussion
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COMMON CLAUSES
15
Common Clauses in
Form 10B & 10BB
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
Clause 1 to 8 are same in both the forms 10B & 10BB w.r.t general information of assessee.
GENERAL
DETAILS
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Here the problem emerges that
if assessee has not submitted any intimation
to the jurisdictional
assessing officer, then whether we should report the other addresses if any of the books of account are
kept at that place?
Auditor shall give qualification in the observation/qualification paragraph of Audit Report.
Since department has already notified through
notification dated 10
th
Aug 2022
, to intimate the
addresses of other places where books of accounts are kept, now it is certifying from auditor whether
such addresses were intimated to assessing officer.
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
Clause 10/9 of Form No. 10B/10BB respectively.
Reporting under this clause will now lead to processing of information by department, furnished while
filing Form 10A/10AB for obtaining registration which may challenge the filed form in case of any
deviations between both of them.
Management
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
In case any person holds
status of more than one relation
as mentioned in above list, then which
relation has to be mentioned w.r.t such person?
Mention
two line items
specifying both the relation of that person with the charitable institution.
It may happen where there are
large number of members/trustees/officer bearers
, which may create
significant challenge to enter such large details in this clause.
We need to go through offline utility (via some software) where it gives option to directly import file of
such members.
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
Here, in this clause we have to report details of
authors & founders who does not hold any
designation
in charitable institution even during the previous year.
The same information is also required to be furnished in clause 41 of Form 10B & clause 28 of Form
10BB too.
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
Clause 34/18 of Form No. 10B/10BB respectively.
“Anonymous donation” means any voluntary contribution referred to in section 2(24)(iia), where a person receiving
such contribution
does not maintain a record of the identity
indicating the name and address of the person
making such contribution and such other particulars as may be prescribed.
Anonymous
Donation
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
Clause 41 & 42/28 & 29 of Form 10B/10BB respectively.
For Clause 28/41, in case of trusts have
large number of trustees
, it is highly problematic to fill details of each
members of trustees, which can be filled by using the offline utility (via software).
Specified
Persons
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
When we select
the code 2
i.e., any person who has made a substantial contribution to the trusts or institutions, then
only the amount tab is activated & respective amount has to be filled.
The assessee is required to maintain the records of specified person as referred in section 13(3), in case
such records
are not
maintained then how to report such details?
In such cases, auditor shall give observation/qualification in audit report.
Here, now the problem is that if any trust has huge number of line items of specified persons, then while filling
Form
10BB
it will be very difficult to fill one by one line item so again here the need of offline utility arise (i.e., via software).
From the circular dated 09
th
Oct 2023, it has become optional to fill the details of specified person if such
details are not available.
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
Clause 43/30 of Form No. 10B/10BB respectively.
In all the above clauses, if any of the violations has been selected as
“Yes”
, it may lead to consequences of scrutiny by
Department.
It will be auditor’s professional skepticism to report appropriate responses with proper supporting if “No” is selected.
Specified
Violations
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
Clause 44/31 of Form No. 10B/10BB respectively.
It has to be ensured that assessee is not claiming depreciation on those capital assets whose application of income
has already been considered while computing the application for the year in which such capital assets has been
acquired.
Claim of
Depreciation
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
Clause 49/32 of Form No. 10B/10BB respectively.
This Clause is similar to the details required to be furnished in tax audit reports (3CA/3CB-3CD) where following
details are required to be reported:-
1.
TDS required to be deducted under various sections & tax deducted
2.
Details of forms furnished w.r.t tax deducted (24Q/26Q/27Q)
3.
Amount of Interest payable u/s 201(1A) & interest paid
TDS/TCS
required to be
deducted/
collected
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There shall be no difference in the
There shall be no difference in the
information required to be filled in ITR-7 in
information required to be filled in ITR-7 in
comparison
comparison
to reporting in Audit report.
to reporting in Audit report.
This Audit Report will definitely make the
This Audit Report will definitely make the
practicioner expertise in Trust Law!!
practicioner expertise in Trust Law!!
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Detailed Clauses in
Form 10B
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Part of clause indicated in
RED BOX
are common in both
FORMS
Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 13/10 of Form 10B/10BB respectively.
Commencement
of activities
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Common Clauses
Clause to Clause Discussion of 10B & 10BB
All the forms i.e., Form 10A, Form 10AB were filed using the DSC of client itself.
But now department is keen to
certify
such details of commencement of activities & date of application for
provisional registration
by the auditor
.
If in any case,
incorrect information
is being furnished or there exists mismatch between the audit form & earlier
filed forms, then it may lead to enquires from department demanding the withdrawal of registration granted to such
institution.
Department is also collecting the auditor’s certified data from its assessees in order to
process such information
and issues notices to those charitable trusts who have submitted wrong/incorrect information.
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Clause to Clause Discussion of 10B & 10BB
Clause 14/11 of Form 10B/10BB respectively.
Here the problem emerges that if assessee has not submitted any intimation to the jurisdictional assessing officer,
then whether we should report the other addresses if any of the books of account are kept at that place?
Auditor shall give qualification in the observation/qualification paragraph of Audit Report.
Which are more detailed in 10B
Place of
books of
account
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Clause to Clause Discussion of 10B & 10BB
Here, form is giving option at last i.e.,
“any other documents containing any other relevant information as per
rule 17AA(1)(d)(x)”
which gives endless options for specifying the documents.
Department has prescribed a huge list of books of account or other documents which are not even prescribed in
case of other assessees.
Which are more detailed in 10B
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Clause to Clause Discussion of 10B & 10BB
Which are more detailed in 10B
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Clause to Clause Discussion of 10B & 10BB
Which are more detailed in 10B
Since department has already notified through notification
dated 10th Aug 2022, to intimate the addresses of other
places where books of accounts are kept, now it is
certifying from auditor whether such addresses were
intimated to assessing officer.
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Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 21,22,23/12,13,14 of Form 10B/10BB respectively.
10BB require only gross amount
of donations not reported/ not required to be reported in Form 10BD.
Voluntary
Contribution
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Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 23(v)
is mainly discussed about the donations which are received in kind
but the question arise about the
calculation of amount of donations which are received in kind
there is no specific guidance on how to ascertain the amount of donation received in kind.
Auditor should take
management response for the donation received in kind
.
Notification dated 10
th
Aug 2022 has already conveyed to keep the details of donation received in kind, so assessee
can’t step back for providing the details of such donation.
Taking reference of AS-12 “Government Grants”, donation received in kind can be ascertained based
upon nominal
value of such goods received in kind
which has also to be reported in financial statements for true & fair view.
Technical guide on Donation received in kind:-
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Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 26/17 of Form 10B/10BB respectively.
Form 10B requires details of corpus donation received, invested, its application & its purpose.
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Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 29/19 of Form 10B/10BB respectively.
Here, irony is that Form10BB also requires reporting of income applied outside India although if any amount
is applied outside India, then 10BB can’t be filed as per the conditions of applicability of Form 10BB/10B
.
This clause also requires detailed reporting of income applied outside India for promoting international welfare in
which India is interested.
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Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Now comes the most difficult one.
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Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 31/23 of Form 10B/10BB respectively.
Application
of Income
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Clause 31 (i) –Form 10B
1
Application of Income
Application of income excluding application not eligible and reported under serial
number 37 of Form 10B.
2
Bifurcation of Application of Income (Object Wise)
Application of income should be bifurcated as per the objects reported under serial
number 11 of Form 10B.
Now, here is a catch that if the client bifurcated application of income in objects
specified under clause 11, those objects should be reconciled with objects specified
in Form 10AB. Otherwise it may attract scrutiny.
Another catch is point (IX) of Clause 31 sub-clause(b), which talks about application
which cannot be specifically categorized under objects at I TO VIII of Clause 31 sub –
Clause (b), now if we select in this head then again, scrutiny may be attracted as all
the objects according to section 2(15) is already specified in above points.
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3
Bifurcation of Application of Income (Electronic & Non-Electronic)
Application of income should be bifurcated in two modes one is electronic and other
one is non- electronic.
Electronic modes includes which are referred in rule 6AABA of income tax rules,1962:
•
Credit card
•
Debit card
•
Net Banking
•
IMPS
•
UPI
•
RTGS
•
NEFT
•
BHIM
All other modes of payment other than specified above will be classified as non –
electronic modes of Payment.
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4
Advances
/Prepaid Expenses
Since, department has not given any clause in which advances can be reported, so
such advances can be shown under “Amount actually paid during the previous year
which accrued during any earlier previous year but not claimed as application of
income in earlier previous year.
Treatment of various Adjustments ??
Outstanding Creditors
•
Outstanding Creditors as on 01.04.2022 should be shown in sub clause (iv) of Clause 31.
•
Outstanding Creditors should be shown in sub clause (iii) of Clause 31.
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5
Accrual vs Cash basis of Accounting
The problem of bifurcation into electronic & non-electronic arises due to the
maintenance of books of accounts on accrual basis.
If assessees have maintained books on cash basis, then it may have assisted in easy
bifurcation of application of income into electronic & non-electronic.
6
We have to show the amount of
outstanding liability in clause 31(i)
, then only we
will be able to deduct such amount from
Clause 31(iii)
, as Form is designed in such
a manner in which have to report in this way.
Another, question arises,
where to show such amount, whether in electronic or
non-electronic?
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Clause 31 (ii) –Form 10B
1
Details of application out of (i) (a) and (i) (b) of Clause 31
Here, the requirement of this clause is that if during the previous year, if
payment or credit is made to any person in excess of Rs. 50 lakhs then
following details of that person are required to be reported:-
Name of the
person
Amount of
application
Whether any
TDS has been
deducted
PAN of such
person
Mode of
application
Section under which
TDS has been
deducted
Here one dilemma point in this form is that, department wants to ask you about the details of those person
whom the auditee has paid or credited more than Rs. 50 lakhs to a person during the previous year in 2 clauses
– 31(ii) and 38, but we need to report under these only when we are filling the figures in Clause 31(i) & 37
respectively.
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Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Form 10BB does not require bifurcation as per clause 31 (vi) where bifurcation of application of income into revenue &
capital is required to filed.
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Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Section 40A(3)
Disallowance
Section 40(a)(ia)
Disallowance
Donation to other
trusts not having
similar objects
Any other
disallowance
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Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 33/25 of Form 10B/10BB respectively.
Form 10BB requires only amount of income taxable under section 115BBI.
Section
115BBI
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Taxability of Specified
Income
30% + applicable
surcharge (if any) and
cess without reduction
of expenditure or set
off of losses
If the trusts make violation of the following, than the
quantum of
amount involved in such types of violation will become taxable as
specified income
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Clause 37
is
discussed about
details and
bifurcation in
modes :- the
amount of
application out of
following sources
during the
previous year
Clause 37
Why this Clause
Income deemed to be applied in any
preceding year under clause 2
explanation 1 of section 11(1)
Income accumulated under third
proviso of section 10(23C) or u/s
11(2)
Income of earlier previous years up to
15% accumulated or set apart
Corpus
Borrowed Fund
Any other than Please specify it
This clause can
only be filled if we
have application of
Income more than
100%
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Application
out of
different
sources
Which are more detailed in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 37/27 of Form 10B/10BB respectively.
Form 10BB does not require bifurcation between electronic & other than electronic modes.
Here, If we select the option “ Any other”, it may lead to further enquiry by the department.
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There shall be no difference in the
There shall be no difference in the
information required to be filled in ITR-7 in
information required to be filled in ITR-7 in
comparison
comparison
to reporting in Audit report.
to reporting in Audit report.
This Audit Report will definitely make the
This Audit Report will definitely make the
practicioner expertise in Trust Law!!
practicioner expertise in Trust Law!!
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Clauses only in 10B
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This is important to notice that clauses only asked in form 10B, which interprets that
departments also wants to first focus on the big trust than on small trust so they didn’t
asked various information in Form 10BB.
Only in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 9 is exclusively discussed in Form 10B, which asks about the details of registration with date of
approval.
It need to be ensured that details are filled accurately as it will process such details with details of
registration filled while filing Income Tax Return (ITR).
Here details of
registration under section 10(23)(c), 12AB, 80G & section 35(1)(iii)
is also required to be
reported.
Registration
details
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Registration
details
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 11 is exclusively present only in Form 10B which enquires about the objectives of the auditee.
It has to be ensured that these objects should not deviate from the objects selected while filing form
10AB.
Also, after the
supreme court judgment dated 19
th
Oct 2022
, any charitable activity claiming
exemption under Advancement of any other objects of General Public Utility (GPU) may attract scrutiny by
department.
Objects of
the Auditee
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
GPU Related
details
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Business
Undertakings &
business Incidental
to Objects
Clause 17
is for
business undertaking
i.e., whether the auditee has any of business undertaking which referred u/s
11(4) if the auditee has any of undertaking then it has to furnished details like Nature of it , Business code,
Separate BOA have been maintained for it, Income from undertaking for the previous year which is not included
and which are included in total income as per 11(4)
Clause 18
is for
business incidental to objects
here if auditee has any income being profit and gains from any business as
referred in seventh proviso to clause 10(23C) or u/s 11(4A) then same details has to be furnished by the auditee
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 19
is exclusively in form 10B which enquires about the details of the receipts of the auditee, on which
the tax has been deducted at source under the section 194C,194J,194H,194Q.
In short, Clause 19 talks about the 26AS of the client.
This clause helps to carve out the effect of quoting wrong section under which the tax has been deducted by the
deductor, so here a responsibility of auditor arises that auditor have to request the auditee to provide a
reconciliation of the amounts reported therein and the amounts which are reflected in the auditee’s books of
accounts along with the details of the nature of such income.
This clause focuses on whether the receipts of the trusts are in nature of commercial or not.
Details of
receipts on
which TDS was
deducted
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
62
Section 13(3)
& 22
nd
Proviso
to 10(23C)
Clause 39
of Form No.10B requires the auditor to provide details when provisions of twenty second proviso to section
10(23C) or section 13(10) are applicable on the auditee.
Different provisions mandate denial or restriction of exemption to the trusts or institutions under both the regimes –
Section 11 and 10(23C).
T
he provisions under which exemption is not available due to violation are as follows:
If auditee is having
receipts from trade or
commerce out of GPU,
more than 20% of total
receipts as provided
under first proviso to
section 2(15)
If audit report not filled
within the due time
Not furnishing the
return of income within
time allowed under
Section 139(1) or (4) in
accordance with Section
139(4A) or (4C).
i.e, ITR-7
Not getting the books of
account audited on or
before the specified
date as referred to in
section 44AB and
furnished by that date
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
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Section 13(3)
& 22
nd
Proviso
to 10(23C)
Only in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 20
information is once again required to be reported under
clause 39
. In case the answer is affirmative,
clause 39 requires further details to be reported. The said clause has accordingly been dealt in detail in clause 39
and may be referred therefrom.
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 35
of form 10B is discussed about the other income of the client which does not form the part of
application of income or the violated income as per explanation 3B of section 11(1).
In Clause 35(a), if a medical or educational institution has made available any
services to specified persons
less than fair price of such services
, then the difference amount will be deemed to be income of the trusts
chargeable to tax.
Other Income
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 35(b) states that violation by trusts or institution of conditions specified in
Explanation 3A to
section 11(1) read with 80G(2)(b)
, i.e., application other the specified purpose, donation of such corpus to
any other person, or not depositing in 11(5) modes will treat such corpus as income.
Clause 35(c) states that that violation by trusts or institution of conditions specified in
Explanation 1A to
third proviso to section 10(23C)
, i.e., application other the specified purpose, donation of such corpus to
any other person, or not depositing in 11(5) modes will treat such corpus as income.
Clause 35(d) states taxability of “Income from business undertaking” to be included in total income.
Other Income
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Clause 36 is
discussed about
the details of
Capital assets
transferred u/s
11(1A)
Clause 36
W
hy
this Clause
Capital assets held under trust wholly
for charitable or religious purpose
Deemed application claimed as per
clause (a) of section 11(1A) and amount
of such deemed application
Capital assets held under trust in part only
for charitable or religious purpose and the
net consideration for which it is transferred.
Deemed application claimed as per
clause (b) of section 11(1A) and
amount of such deemed application
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 36
of Form 10B is the clause which asks about the details of capital assets transferred u/s 11(1A)
Capital Asset
transferred
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
•
Clause 38
of form 10B is discussed about the details of application where during previous year excess
of Rs. 50 lakhs to a single person paid or credited.
•
Clause 38
will required to be filled only if we report application of funds from different sources in
Clause 37.
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Clause 40
of Form 10B is discussed about the expenses done by client for the Religious Purpose.
It should be noted that if no information is furnished by the assesee in Form 10A & 10AB & furnishes
details in this clause, then it may lead to mismatch between them.
Expenditure
for Religious
Purpose
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Department is active these days by covering the assessees doing disallowance of Section 269SS/ST/T.
Section
269SS/ST/T
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Only in 10B
Clause to Clause Discussion of 10B & 10BB
Details required even outside the requirement of Chapter III of Income Tax Act,
1961.
Here, in the form 10B some of the details which it requires to fill is outside the chapter
III of Income Tax Act, 1961. Like :-
Clause 46 which is same as section 269SS of chapter XX – B
Clause 47 which is same as section 269ST of chapter XX – B
Clause 48 which is same as section 269T of chapter XX– B
It
states that in coming year further clauses from different chapter will also be
included in the audit report. So, be prepared for the same. Like
section 36(1)(va)
,
any
sum received from employees towards contributions to
any provident fund
or
superannuation fund or any other fund gets disallowed.
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There shall be no difference in the
There shall be no difference in the
information required to be filled in ITR-7 in
information required to be filled in ITR-7 in
comparison
comparison
to reporting in Audit report.
to reporting in Audit report.
This Audit Report will definitely make the
This Audit Report will definitely make the
practicioner expertise in Trust Law!!
practicioner expertise in Trust Law!!
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Focus Clauses of 10B
Clause 10
Details of Author, Founder, Settlor etc.
Clause 11
Objects of auditee
Clause 14
Place of books of accounts maintained
Clause 19
Details of tax has been deducted at source (26AS)
Clause 23 (V)
Donations received in kind
Clause 29
Income applied outside India
Clause 31
Application of income and their bifurcation
Clause 36
Capital asset transfer
Clause 37
Application of income out of different sources
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Focus Clauses of 10B
Clause 41
Details of Specified person as per section 13 (3)
Clause 44
Claim of Depreciation
Clause 49
TDS
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Focus Clauses of 10BB
Clause
9
Details of Author, Founder, Settlor etc.
Clause 11
Place of books of accounts maintained
Clause 12 - 20
Voluntary Contribution
Clause
23
Application of income
Clause 28
Details of Specified person as per section 13 (3)
Clause
32
TDS
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Tools which
may ease in Filing Form 10B/10BB
in line of 3CD Annexures
77
Form
10B
Form
10BB
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Recent Relevant Updates related to the Form 10B & 10BB
1
Extension of timelines
The due date for filing of audit report (Form 10B & 10BB) is
extended from 30
th
September, 2023 to
31
st
October, 2023
& Due date for furnishing of return in form ITR 7 is extended
from 31
st
October,2023 to
30
th
November, 2023
.
Via
notification dated 18.09.2023.
2
Technical guide by ICAI
Technical guide on reports of Audit under section
12A/1023(C) of Income- tax Act, 1961 (Form -10 B &
10BB) issued by ICAI. On dated 04.10.2023.
3
Substantial contribution
to the Trust or institution
Clause 28/41 of Form 10BB/10B respectively. Requires
details of the persons making substantial contribution.
Relaxation, has been provided for the same as details can be
filled if available.
Via notification dated 09.10.2023.
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Practical Issues faced while filing Audit Report
1
JSON File uploading issue
•
Even after making the error free JSON file of audit report, means which is ready to upload
even after that issues may arise.
•
Issue was rectified by following steps :-
Grievance filled on income tax portal
Grievance filled on the mail of income tax
efilingwebmanger@incometax.gov.in
We tried calling on the helpline number provided on the income tax portal
•
After all these we were able to connect with the income tax department, income tax
department provided zoom link to solve the issue, hence the issue was resolved.
•
If, issue is faced in uploading the JSON before following the above steps, first we
should clear the temp. cache. of the PC and try to file it through the different PC.
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Practical Issues faced while filing Audit Report
2
Not Applicable PDF
•
While uploading JSON file generated on the income tax portal, it requires Balance
Sheet & Profit & Loss Statement of business
undertaking of trust.
•
Even if the trust has no business undertaking than also it mark necessary to upload
the file & portal will not allow to process you further until or unless PDF is uploaded.
•
So, here we can upload the pdf of not applicable on the particular tab.
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Practical Issues faced while filing Audit Report
3
Filing of FORM 10B & 10BB
•
Offline Mode
Through Software –
Means filling the data of audit report through software and
generating a JSON file of the same and uploading that file on the Income Tax Portal.
Manual Filing of the JSON -
Download JSON file from portal than fill it manually
and upload it on the income tax portal.
•
Online Mode
O
nline mode means filling the data of audit report direct on the portal itself
.
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There shall be no difference in the
There shall be no difference in the
information required to be filled in ITR-7 in
information required to be filled in ITR-7 in
comparison
comparison
to reporting in Audit report.
to reporting in Audit report.
This Audit Report will definitely make the
This Audit Report will definitely make the
practicioner expertise in Trust Law!!
practicioner expertise in Trust Law!!
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82
QUERIES???
QUERIES???
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Contact Us
CA NARESH KUMAR KABRA
(PARTNER)
Email: naresh@soganiprofessionals.com
Mobile: 9982222442
R Sogani & Associates
Chartered Accountants
Web: www.soganiprofessionals.com
Email:
rsa@soganiprofessionals.com
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CBDT has issued a new audit report form, 10B and 10BB, for charitable institutions, demanding extensive requirements from the assesses. The notification applies from April 1, 2023, emphasizing the need for improved accounting practices. The applicability of Form 10B and 10BB differs based on the institution's registration status and income criteria. The shift to computerized accounting is crucial, considering the evolving regulatory landscape.
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Discussion Analysis Report Charitable Institutions & New Critical Audit on 10B/10BB Presented By- CA Naresh Kumar Kabra 1
Notification Related to New Audit Report Form As per Notification No. 7/2023, dated 21.02.2023, CBDT issued New Audit Report Form 10B & 10BB for charitable institutions. The report of audit of the accounts of a fund or institution or trust or any university or other educational institution or any hospital or other medical institution which is required to be furnished under clause (b) of the tenth proviso to clause (23C) of section 10 & sub- clause (ii) of clause (b) of sub-section (1) of section 12A shall be in- Form 10BB Form 10B R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 2 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Irony Related to the Notification Almost after the completion of 11 months of Financial Year 2022-23, a notification has been issued by CBDT about the Audit Report of charitable institutions, which demands huge list of requirements by the assessee. Applicability of this Audit Report comes from April 1, 2023, which means that Audit Report for F.Y. 2022-23 has to be filed in the newly prescribed format. The most important thing is that, this notification comes for those assessees which requires more improvement w.r.t accounting among all the assessees covered under the Income Tax Act. Most of the assessees in this sector has not shifted completely to the computerized system of accounting. maintaining the books of accounts in completely hand written formats also known as Bahi Khata. Moreover, some of them are still R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 3 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
- Applicability of Form 10B & 10BB (OLD) Form10B Form 10BB If the charitable institution was registered under section 12AB of Chapter III of Income Tax Act,1961. If the charitable institution was registered under section 10(23C) of Chapter III of Income Tax Act,1961. Earlier, there was no concept of the small trust or big trust i.e., based upon criteria of gross receipts of Rs. 5 Crore, Audit report format (whether Form 10B or 10BB) was decided according to the section under which Trust was registered. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 4 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Applicability of Form 10B & 10BB (NEW) Form 10B Form 10BB The total income of the charitable institution, exceeds rupees five crores during the previous year; or Such charitable institution has received any foreign contribution during the previous year; or If the conditions of Form 10B are not applicable, then Form 10BB has to be filed. Such charitable institution has applied any part of its income outside India during the previous Year. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 5 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Explanation related to applicability of Audit of Trusts TOTAL INCOME while assessing the applicability limit means the Gross Receipts of the charitable institution which includes all the income of such institution i.e., revenue from direct & indirect sources. For Example:- ABC Trust has following details w.r.t A.Y. 2023-24:- Expenditure Amount (Lakhs) 1.50 Income Amount (Lakhs) 2.50 To Distribution of Blanket By Donation received To Excess of income over Expenditure TOTAL 2.00 By Interest income 1.00 3.50 TOTAL 3.50 In addition corpus received for Rs. 5.00 Lakhs Here, Question arises, How Gross receipt (total income) will be calculated? What will be treatment of Corpus? R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 6 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Explanation related to applicability of Audit of Trusts Here, Total Income of ABC Trust for applicability of 10B will be calculated as sum of :- Particulars Amount (Lakhs) Interest Income Donation Income 1.00 2.50 Corpus 5.00 Total 8.50 Thus, the Total Income for calculating the limit for Form 10B is 8.5 Lakhs. Note :- While calculating the Total Income, Corpus donations will be considered & it will be added in gross receipts. There s no relation of Total Income with the Net income over expenses. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 7 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Coverage in Form 10B/10BB All amendments of Income Tax Act Also covers provision in addition to Chapter III Earlier 10B Earlier 10BB ITR- 7 Compilation of Personal Information details of Trust and Trustee Assessment Order of AO Assessment Order of CIT Assessment Order of ITAT Order of HC Order of SC Experience of registration under new law Registration Form 10A/ 10AB Notification for Books of accounts New Audit Report Format is the consolidation of: It will make filing of ITR 7 easier. In nutshell, it is a compilation of trust laws from start to end & are self speaking self Assessment Order for CI duly certified by CA, only for the ease of Department. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 8 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Comparison Old vs New (Form 10B & 10BB) Major Additions in 10B & 10BB New Audit Report Old Audit Report 40(a)(ia) 40(A)(3) 10B: 17-18 Pages (Big trust- More than Rs. 5 Crores) 10BB: 10-12 Pages (Small trust- Less than & equal to Rs. 5 crores) 269SS/ST/T 10B: 5 Pages 10BB: 6 Pages Details of capital assets transferred TDS on receipts Books of account as per Rule 17AA Donations received in Kind 10B: 8+8 Clauses 10BB:19 Clauses 10B: 49 Clauses 10BB: 32 Clauses Payment in excess of 50 Lakh in AOI Management details Advancement of GPU Bifurcation of application of income in electronic & non electronic mode TDS provisions of Chapter XVII-B or XVII-BB & many more R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 9 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Is it Worth it To do comparison between Old vs New Audit Report Form?? R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 10 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Overview of Form 10B 1 General Information Total Clauses (related to General information) 20 Basic Details (Clause 1 to 6) Legal Clause (Clause 7 to 8) Registration Details (Clause 9) Management Details (Clause 10) Object (Clause 11 to 12) Commencement of Activities (Clause 13) Details of Place where books of accounts as per Rule 17AA and other documents have been maintained (Clause 14) Advancement of GPU (Clause 15 to 16) Business Undertakings (Clause 17) Business Incidental to objects (Clause 18) Details of Receipts where TDS is deducted (Clause 19) Applicability of Provisions of Section 13(10) (Clause 20) R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 11 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Overview of Form 10B 2 Computation of Taxable Income Total Clauses 14 Voluntary Contributions (Clause 21 to 27) Income to be applied (Clause 28 to 30) Application of Income (Clause 31) Most Important and trickiest Part of the form Taxable income (Clause 32) Income Taxable under Section 115BBI (Clause 33) Anonymous Donation chargeable to tax (Clause 34) R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 12 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Overview of Form 10B Other Reportable Clauses 3 Total Clauses 15 Other Income (Clause 35) Capital Assets u/s 11(1A) (Clause 36) Application of Income out of different sources other than Income (Clause 37) Payment or credit in excess of Rs. 50 Lakhs to a Single person during previous year (Clause 38) Details of Income u/s 13(10) (Clause 39) Details of expenses for religious purpose for 80G registered Trusts (Clause 40) Details of 13(3) Persons Specified Persons (Clause 41-42) Details of Specified violation u/s 13(2) Specific Violations (Clause 43) Details of claim of Depreciation where cost of asset is already claimed (Clause 44) Details of deduction u/s 10 (Clause 45) Details regarding Section 269SS (Clause 46) Details regarding Section 269ST(Clause 47) Details regarding Section 269T (Clause 48) TDS requirement as per Chapter XVII-B or Chapter XVII-BB (Clause 49) R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 13 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Overview of Form 10BB 1 General Information Total Clauses 11 Basic Details (Clause 1 to 6) Legal Clause (Clause 7 to 8) Management Details (Clause 9) Commencement of Activities (Clause 10) Details of Place where books of accounts as per Rule 17AA and other documents have been maintained (Clause 11) R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 14 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Overview of Form 10BB 2 Computation of Taxable Income Total Clauses 15 Voluntary Contributions (Clause 12 to 20) Income to be applied (Clause 21 to 22) Application of Income (Clause 23) Taxable income (Clause 24) Income Taxable under Section 115BBI (Clause 25) Anonymous Donation chargeable to tax (Clause 26) Other Reportable Clauses 3 Total Clauses 6 Application of income out of different sources (Clause 27) Details of 13(3) Persons Specified Persons (Clause 28-29) Details of Specified violation u/s 13(2) Specific Violations (Clause 30) Details of claim of Depreciation where cost of asset is already claimed (Clause 31) TDS requirement as per Chapter XVII-B or Chapter XVII-BB (Clause 32) R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 15 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 16 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
COMMON CLAUSES 15 Common Clauses in Form 10B & 10BB R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 17 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB GENERAL DETAILS Common Clauses Clause 1 to 8 are same in both the forms 10B & 10BB w.r.t general information of assessee. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 18 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Here the problem emerges that if assessee has not submitted any intimation to the jurisdictional assessing officer, then whether we should report the other addresses if any of the books of account are kept at that place? Auditor shall give qualification in the observation/qualification paragraph of Audit Report. Since department has already notified through notification dated 10thAug 2022, to intimate the addresses of other places where books of accounts are kept, now it is certifying from auditor whether such addresses were intimated to assessing officer. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 19 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Management Common Clauses Clause 10/9 of Form No. 10B/10BB respectively. Reporting under this clause will now lead to processing of information by department, furnished while filing Form 10A/10AB for obtaining registration which may challenge the filed form in case of any deviations between both of them. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 20 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Common Clauses In case any person holds status of more than one relation as mentioned in above list, then which relation has to be mentioned w.r.t such person? Mention two line items specifying both the relation of that person with the charitable institution. It may happen where there are large number of members/trustees/officer bearers, which may create significant challenge to enter such large details in this clause. We need to go through offline utility (via some software) where it gives option to directly import file of such members. R SOGANI & ASSOCIATES JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023 SEMINAR ON CURRENT ISSUES 21
Clause to Clause Discussion of 10B & 10BB Common Clauses Here, in this clause we have to report details of authors & founders who does not hold any designation in charitable institution even during the previous year. The same information is also required to be furnished in clause 41 of Form 10B & clause 28 of Form 10BB too. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 22 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Common Clauses Anonymous Donation Clause 34/18 of Form No. 10B/10BB respectively. Anonymous donation means any voluntary contribution referred to in section 2(24)(iia), where a person receiving such contribution does not maintain a record of the identity indicating the name and address of the person making such contribution and such other particulars as may be prescribed. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 23 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Specified Persons Common Clauses Clause 41 & 42/28 & 29 of Form 10B/10BB respectively. For Clause 28/41, in case of trusts have large number of trustees, it is highly problematic to fill details of each members of trustees, which can be filled by using the offline utility (via software). R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 24 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Common Clauses When we select the code 2 i.e., any person who has made a substantial contribution to the trusts or institutions, then only the amount tab is activated & respective amount has to be filled. The assessee is required to maintain the records of specified person as referred in section 13(3), in case such records are not maintained then how to report such details? In such cases, auditor shall give observation/qualification in audit report. Here, now the problem is that if any trust has huge number of line items of specified persons, then while filling Form 10BB it will be very difficult to fill one by one line item so again here the need of offline utility arise (i.e., via software). From the circular dated 09thOct 2023, it has become optional to fill the details of specified person if such details are not available. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 25 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Specified Violations Common Clauses Clause 43/30 of Form No. 10B/10BB respectively. In all the above clauses, if any of the violations has been selected as Yes , it may lead to consequences of scrutiny by Department. It will be auditor s professional skepticism to report appropriate responses with proper supporting if No is selected. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 26 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Claim of Depreciation Common Clauses Clause 44/31 of Form No. 10B/10BB respectively. It has to be ensured that assessee is not claiming depreciation on those capital assets whose application of income has already been considered while computing the application for the year in which such capital assets has been acquired. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 27 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
TDS/TCS required to be deducted/ collected Clause to Clause Discussion of 10B & 10BB Common Clauses Clause 49/32 of Form No. 10B/10BB respectively. This Clause is similar to the details required to be furnished in tax audit reports (3CA/3CB-3CD) where following details are required to be reported:- 1. TDS required to be deducted under various sections & tax deducted 2. Details of forms furnished w.r.t tax deducted (24Q/26Q/27Q) 3. Amount of Interest payable u/s 201(1A) & interest paid R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 28 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
There shall be no difference in the information required to be filled in ITR-7 in comparison to reporting in Audit report. This Audit Report will definitely make the practicioner expertise in Trust Law!! R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 29 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Detailed Clauses in Form 10B Part of clause indicated in RED BOX are common in both FORMS R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 30 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Commencement of activities Which are more detailed in 10B Clause 13/10 of Form 10B/10BB respectively. Special Focus Date of Commencement of Activities R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 31 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Common Clauses All the forms i.e., Form 10A, Form 10AB were filed using the DSC of client itself. But now department is keen to certify such details of commencement of activities & date of application for provisional registration by the auditor. If in any case, incorrect information is being furnished or there exists mismatch between the audit form & earlier filed forms, then it may lead to enquires from department demanding the withdrawal of registration granted to such institution. Department is also collecting the auditor s certified data from its assessees in order to process such information and issues notices to those charitable trusts who have submitted wrong/incorrect information. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 32 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Place of books of account Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Clause 14/11 of Form 10B/10BB respectively. Here the problem emerges that if assessee has not submitted any intimation to the jurisdictional assessing officer, then whether we should report the other addresses if any of the books of account are kept at that place? Auditor shall give qualification in the observation/qualification paragraph of Audit Report. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 33 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Here, form is giving option at last i.e., any other documents containing any other relevant information as per rule 17AA(1)(d)(x) which gives endless options for specifying the documents. Department has prescribed a huge list of books of account or other documents which are not even prescribed in case of other assessees. R SOGANI & ASSOCIATES JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023 SEMINAR ON CURRENT ISSUES 34
Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 35 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Since department has already notified through notification dated 10th Aug 2022, to intimate the addresses of other places where books of accounts are kept, now it is certifying from auditor whether such addresses were intimated to assessing officer. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 36 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Voluntary Contribution Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Clause 21,22,23/12,13,14 of Form 10B/10BB respectively. 10BB require only gross amount of donations not reported/ not required to be reported in Form 10BD. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 37 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Clause 23(v) is mainly discussed about the donations which are received in kind but the question arise about the calculation of amount of donations which are received in kind there is no specific guidance on how to ascertain the amount of donation received in kind. Auditor should take management response for the donation received in kind. Notification dated 10thAug 2022 has already conveyed to keep the details of donation received in kind, so assessee can t step back for providing the details of such donation. Taking reference of AS-12 Government Grants , donation received in kind can be ascertained based upon nominal value of such goods received in kind which has also to be reported in financial statements for true & fair view. Technical guide on Donation received in kind:- R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 38 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Clause 26/17 of Form 10B/10BB respectively. Form 10B requires details of corpus donation received, invested, its application & its purpose. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 39 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Clause 29/19 of Form 10B/10BB respectively. Here, irony is that Form10BB also requires reporting of income applied outside India although if any amount is applied outside India, then 10BB can t be filed as per the conditions of applicability of Form 10BB/10B. This clause also requires detailed reporting of income applied outside India for promoting international welfare in which India is interested. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 40 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Now comes the most difficult one. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 41 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Application of Income Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Clause 31/23 of Form 10B/10BB respectively. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 42 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause 31 (i) Form 10B Application of Income 1 Application of income excluding application not eligible and reported under serial number 37 of Form 10B. Bifurcation of Application of Income (Object Wise) 2 Application of income should be bifurcated as per the objects reported under serial number 11 of Form 10B. Now, here is a catch that if the client bifurcated application of income in objects specified under clause 11, those objects should be reconciled with objects specified in Form 10AB. Otherwise it may attract scrutiny. Another catch is point (IX) of Clause 31 sub-clause(b), which talks about application which cannot be specifically categorized under objects at I TO VIII of Clause 31 sub Clause (b), now if we select in this head then again, scrutiny may be attracted as all the objects according to section 2(15) is already specified in above points. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 43 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Bifurcation of Application of Income (Electronic & Non-Electronic) 3 Application of income should be bifurcated in two modes one is electronic and other one is non- electronic. Electronic modes includes which are referred in rule 6AABA of income tax rules,1962: Credit card Debit card Net Banking IMPS UPI RTGS NEFT BHIM All other modes of payment other than specified above will be classified as non electronic modes of Payment. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 44 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Treatment of various Adjustments ?? 4 Advances /Prepaid Expenses Since, department has not given any clause in which advances can be reported, so such advances can be shown under Amount actually paid during the previous year which accrued during any earlier previous year but not claimed as application of income in earlier previous year. Outstanding Creditors Outstanding Creditors as on 01.04.2022 should be shown in sub clause (iv) of Clause 31. Outstanding Creditors should be shown in sub clause (iii) of Clause 31. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 45 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
5 Accrual vs Cash basis of Accounting The problem of bifurcation into electronic & non-electronic arises due to the maintenance of books of accounts on accrual basis. If assessees have maintained books on cash basis, then it may have assisted in easy bifurcation of application of income into electronic & non-electronic. We have to show the amount of outstanding liability in clause 31(i), then only we will be able to deduct such amount from Clause 31(iii), as Form is designed in such a manner in which have to report in this way. 6 Another, question arises, where to show such amount, whether in electronic or non-electronic? R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 46 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause 31 (ii) Form 10B Details of application out of (i) (a) and (i) (b) of Clause 31 1 Here, the requirement of this clause is that if during the previous year, if payment or credit is made to any person in excess of Rs. 50 lakhs then following details of that person are required to be reported:- Whether any TDS has been deducted Amount of application Name of the person Section under which TDS has deducted Mode of application been PAN of such person Here one dilemma point in this form is that, department wants to ask you about the details of those person whom the auditee has paid or credited more than Rs. 50 lakhs to a person during the previous year in 2 clauses 31(ii) and 38, but we need to report under these only when we are filling the figures in Clause 31(i) & 37 respectively. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 47 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Form 10BB does not require bifurcation as per clause 31 (vi) where bifurcation of application of income into revenue & capital is required to filed. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 48 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Donation to other trusts not having similar objects Section 40A(3) Disallowance Section 40(a)(ia) Disallowance Any other disallowance R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 49 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
Section 115BBI Clause to Clause Discussion of 10B & 10BB Which are more detailed in 10B Clause 33/25 of Form 10B/10BB respectively. Form 10BB requires only amount of income taxable under section 115BBI. R SOGANI & ASSOCIATES SEMINAR ON CURRENT ISSUES 50 JAIPUR BRANCH OF CIRC OF ICAI- 13/10/2023
