We incorporated a Section 8 Company four months ago. We recently received our first large donation into the bank account but haven’t started our field projects yet. Does this receipt of donation count as the ‘Commencement of Business’? specifically, does this trigger the deadline for filing Form INC-20A (RoC) and Form 10AB (Income Tax).
You are mixing two different statutes. The “Commencement” timeline is different for the RoC (MCA) and the Income Tax Department.
- For MCA (Form INC-20A):
• The Trigger: “Commencement of Business” is triggered by the receipt of Subscription Money from the promoters, not by receiving a donation.
• The Risk: Technically, you are not allowed to exercise borrowing powers or accept donations until you file Form INC-20A.
• Action: File INC-20A immediately based on the bank statement showing the capital contribution from promoters. - For Income Tax (Form 10AB):
• The Trigger: “Commencement of Activities” is generally triggered when you start incurring expenses on your charitable objects (fieldwork).
• Donations: Mere receipt of a donation is considered a “preparatory act” (judgement reference: Imame Rabbani Foundation vs. CIT(E)). It does not automatically trigger the 6-month deadline for Form 10AB.
• Action: The countdown for Form 10AB starts when you begin spending the funds on your actual cause.
Summary:
• MCA: File INC-20A now (Triggered by Capital).
• Income Tax: Wait until project work begins (Triggered by Expense).