Dear Sir
A NGO (already registered under FCRA) has received funds (INR) from a Foreign Bank having operations in India for the purpose of sustainable development of an area.
These funds have been received from Mumbai branch of that bank and not routed through FCRA bank account and 80% already utilized during 2013-14. The FCRA return already filed for 2013-14.
Whether these are to be treated as contributions under FCRA and what is the remedy now for correcting this mistake.
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Thanks
Vikas Gupta
Vikas Gupta
M.Com, FCA
The fund received was FC because it was donated by a foreign bank, which must be having more than 50% shareholding by foreign source(s) to qualify it as a foreign bank. The inadvertent mistake committed by the NGO can be rectified. I am reproducing below the relevant Q&A from my book “FCRA, 2010 Made Easy”-300 Q&A:
“Q. 196 Is it possible for an Association to submit a revised annual return (FC-6) online after it notices that there are errors in the return already submitted?
Ans. Yes. The Association should immediately inform MHA about the mistakes committed and sent a revised FC-6 form with a request, on its letterhead duly signed by the Chief Functionary, to allow the Association to make online revision of the annual return. The Association may also use the FCRA Messaging System and send a request through e-mail to the Deputy Secretary (FCRA) [e-mail ID: ds-fcra@nic.in] to allow the Association to make online revision of the annual return submitted by it. If the request is sent through e-mail, a scanned copy of the signed letter from the Chief Functionary should be attached with the e-mail. After receipt of the request, MHA will send intimation (through e-mail) to the Association allowing it to revise the annual return online.”
Further, even if you do not receive a response from MHA, submit the hard copy of the revised return (through speed post or hand delivery) and preserve the speed post receipt or stamped receipt from MHA as proof of submission of the revised return.
After reading others, we need two clarification to judge ourselves. (1) 80% spent is it shown in FCRA returns or not, though received through non FCRA bank account? (2) If yes, fine. If not, how can it happen?
Just to give a case from our experience…those were early years and few funding agencies sent remittances by check. I and all seniors were out of office and over enthusiastic junior staff deposited in non FCRA account. We immediately write a letter to Home Ministry, transfered the amount to FCRA account and all is well. That it is not deposited in FCRA account was never raised as a qestion from MHA.
Regards,
V.B.Chandrasekaran
Dear Vikas,
Saw your query, I presume that the funds received by you fall under FCRA definition and by mistake these have not been credited into FCRA account and therefore not reported in your annual return. Problem under FCRA is that there is no provision for revision of FCRA return. In any case the only default that you have done is that FCRA funds got mixed up with non-FCRA funds and hence have not been reported in your annual return.
In case you now file a revised return manually (I am not sure you would be able to file it online, since your return has already been accepted and one needs to try out if the online system has facility to accept revise return), considering last date for filing of returns is still some 40 days away. Alongwith the return you could apply for condonation stating that lapse has already been rectified in the return. Present compounding rules (which have heavy penalties) cover only where one has accepted FC without having registration / permission, hence these would not be applicable in your case.
Under Income Tax there are several case laws which allow filing of revised return even after due date. I am sure courts would be quite sympathetic to your view. I think FCRA Dept also needs to be more considerate and must allow genuine errors & lapses to be rectified in a less distresssing manner.
Dear Guptaji,
As I understand, the funds have been received from a Foreign Bank having operations in India and the NGO in turn has received the funds for charitable purpose in a NFC account and 80% of the funds have been utilized.
If more than 50% of the shareholding in the Foreign Bank at the time of such fund transfer, is of foreigners, then the funds will be treated as FC and this will amount to violation of FCRA for the recipient as the funds are received in NFC. Compounding of offences has been provided in the Act by which in such a case the closest penal clause that may be applicable would be “Acceptance of FC without registration and utilizing the same even though the inquiry reveals that FC was not diverted for the purpose other than for which it was received.” The penalty is Rs. 1,00,000 or 5% of the FC, whichever is higher.
If the shareholding in the Bank is less than 50% of foreigners then it will not amount to FC funds. Then the funds will not attract any clauses under the FCRA.
As per my understanding there is no provision for filing revised returns in the Act.
I would request others to respond and clarify the query.
Thanks and regards,
B V Soma Sastry
Dear Sir,
From what I can make out of the narrative given here, I am sure that the fund received is a foreign contribution(refer to definitions given Clause 2(j) of FCRA, 2010). And the same should have been routed through the bank account registered with the FCRA authorities.
Accordingly, the income and expenditure on this fund should be included in the FC-6 return. In case this has not happened, it may be better to approach the FCRA authorities and seek their help in settling the matter.
Probably you took it easy and now scratching. Pl avoid next time.
My presumption of what you said. It is curious if you have noted or not that the Bank Head quarters have not transferred through FCRA account but through another account of yours. You should ask them explanation and forward it to Home Monistry and relax. Otherwise, even I am curious as to how is it possible? In any case, seek condonation of the lapse. Normally, it is accepted unless you have controversial history. Avoid it in future!