Registered trust cannot be denied tax exemption
Q: We have set up an educational institution in India and applied for exemption. The institution has already been registered with the Income-tax Department under section 12-AA. However, the exemption is denied on the ground that the institution has not complied with the provisions of the Right of Children to Free and Compulsory Education Act, 2009. Is the denial of exemption justified? A: Courts have taken the view that if a trust has been duly registered under section 12-AA of the Income-tax Act, exemption of its income cannot be denied on any ground. The reason is that while granting the registration, the tax department had examined the objects of the trust and were satisfied that the conditions applicable to a charitable trust are fulfilled. Subsequently, exemption can only be denied if there is breach of any conditions for granting exemption under the income-tax law.
The fact that the provisions of another statute, like the Right of Children to Free and Compulsory Education Act, are not complied with, it would not mean that the trust is not for educational purposes. Therefore, your trust in India may file a writ petition in the appropriate high court to challenge the denial of exemption under the tax law, provided your trust has complied with all the conditions of this law and not violated or contravened the provisions of sections 11, 12 and 13. Q: I want to set up a shop in Pune and subsequently Nagpur. How do I go about getting registered for starting this activity? Are there any relaxed guidelines in this regard? A: Recently, the Maharashtra Shops & Establishments (Regulation of Employment and Service Condition) Act has been amended. Small and medium-sized establishments which have less than 10 workers are exempted from the requirement to obtain a licence to run such a business. However, you will have to register online under the Act.
Persons working from home or who run an online business also do not have to apply for a licence. Shops are allowed to remain open in three shifts throughout the day, but one day leave has to be granted per week to every employee. You must apply for a permanent account number with the income-tax authorities as you will have to file tax returns every year. Registration under the Goods and Services Tax will also need to be done. Q: There are news reports about shell companies in India which are involved in manipulative transactions and for laundering unaccounted money. Is there any specific definition of a shell company under any law? A: So far, there is no specific definition under any law, but this is sought to be rectified. The Prime Minister’s Office constituted a task force in early 2017. This task force comprises officials from the Ministry of Corporate Affairs, Finance Ministry, Central Board of Direct Taxes, Enforcement Directorate, etc. It is likely that the task force will shortly come up with recommendations to define a shell company under the appropriate law.
However, shell companies are not necessarily set up for money laundering or for tax evasion. Many exist for legitimate purposes and are pure investment vehicles. Generally, shell companies are inactive and do not have regular income from any commercial operations. No comprehensive definition can be framed and, ultimately, the facts in each case would need to be considered to determine whether it is a shell company or not.
Q: Are there relaxed rules for setting up a small establishment? A: SMEs which have less than 10 workers are exempted from the requirement to obtain a licence to run such a business