Explanation to Income Tax S. 12AB(4) on 'Specified Violations' Introduced in Finance Act, 2022 Applies Prospectively Only: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that a specific explanation added to Section 12AB(4) of the Income Tax Act applies prospectively, not retrospectively. This explanation, which deals with "specified violations" by charitable and religious trusts, was introduced by the Finance Act, 2022. The ITAT held that since the amendment was substantive in nature and not merely clarificatory, it cannot be applied to assessment years prior to its introduction. The tribunal's decision is a significant relief for trusts, as it prevents the tax department from using this new, stricter provision to cancel their registrations for alleged violations that occurred in the past. This ruling upholds the principle that new tax liabilities or more stringent conditions should generally not be imposed with retrospective effect, providing certainty to taxpayers.