Filing of FCRA ‘Nil’ Return

Dear Dialogue Members,

We have grant FCRA registration on 10.03.2015 and during the FY 2014-15 not received any foreign contribution, in this regards our quotation is “NIL” return (FC4) file for FY 2014-15, it is mandatory or not.

if it is mandatory but in the online FC4 without all documents attachment (Audited Statement,CA Certificate,Bank Statement which is not available for NIL Foreign contribution) not completed and not accepted.

Please suggest

Thanks with Regards
Sunil K Suryavanshi

Posted in FCRA, TAX, LEGAL | 6 Comments

FCRA Fund for ‘for Profit’ Company – Implications

Dear Members,

I received a foreign fund. I have to educate people for disaster management and also have to develop an equipment which could monitor the disastrous activity while disaster happens. developing the equipment is almost 80% of the total project cost. The equipment has to be researched and then developed and operated and monitored by the scientific company registered as “for profit”.

What kind of procedure/agreement/consultation/bills/mode should I adhere to undertake while dealing with this scientific company.

Please Help….

Amit Singh
Ganga Sansthan
32, Ameer Nagar,
Near Aishbagh Railway Station

Posted in FCRA, TAX, LEGAL | 2 Comments

Crowd Funding and FCRA

Dear Friends,
Please throw light on:

Gone are the days when donors used to crowd at the doors of some good NGOs for funding good works.
Gone are great men like Gandhiji whose call for funds in crowded public meetings used to net in enough for good causes. Accountability was ensured.

We are into new form of crowd sourcing of funds through platforms committed to social causes, not just commercial ventures. Question is how to account for crowd-funds under FCRA, if

  • some of the contributors through Indian platforms are foreigners
  • some of the contributors through foreign platforms are Indian Citizens
  • does Government have any check on anti-national elements taking advantage of such platforms?

Yes, NGOs have yet another method of sourcing funds for socioeconomic causes and also disaster relief and rehabilitation.


Posted in FCRA, TAX, LEGAL | 2 Comments

S.12AA Registration and certain other issues relating to Trusts

In a decision by ITAT-Delhi, following important aspects of a charitable institution were decided upon.

  • Whether for registration under S.12AA/12A, execution of a formal deed of trust is necessary, without which registration could not be granted ?
  • Whether tax authorities, while determining the registration under S.12AA/12A could go into the issue of income & expenditure account?
  • Whether the activities of the Trust for the benefit of a particular caste or community and performing charitable activities for this purpose would be debarred from registration under S. 12AA?
  • Whether supreme head of the Trust taking food and clothes, etc. from the funds of the Trust was violative of the provisions of S.13 of IT Act?

The case is relating to Tsurphu Labrang, a Trust created in 1159 AD and presently headed by the 17th Gyalwang Karmapa, residing in exile in Dharamsala. The Trust could not file the original Trust Deed, instead filed an affidavit that the trustees have in their possession all the Trust funds comprising of both movable & immovable properties, duly accounted for in its accounts and that all income arising from trust properties shall be applied for the aims and objects of the Trust, which were detailed in the affidavit itself.

The Tribunal stated that the Income Tax Act does not lay down any requirement that execution of a formal deed of Trust is necessary without which the registration could not be granted. It examined Rule 17A of Income Tax Act in this regard, which states that where the Trust is created under an instrument, copy of an instrument will need to be submitted with the application alongwith accounts for which activities have been completed, but in no case more than for 3 years. The second limb of the said Rule states that where Trust is created or the Institution is established, otherwise than under an instrument, the document evidencing the creation of the Trust is sufficient. There is no specific provision on what type of this document is required, thus it could be of any type. Even Indian Trust Act allows oral creation of a Trust and if the assessee is able to give some evidence of creation of such Trust by a word of mouth, the same shall be eligible for registration under S.12AA/12A. In this regard the present Head of the Trust has given a full declaration giving complete history of the organisation from 1159 AD. The Tribunal gave reference of Laxminarayan Maharaj vs CIT [1984] where Trust was created 100 years ago without any Trust document. MP HC decided in favour of the assessee on account of other evidences. Even an appeal to the SC was dismissed.

The Tribunal relying on several judgments stated that at the time of registration revenue authorities are required to examine only the aims and objects of the Trust and whether these are charitable in nature. The stage for application of income shall arise only when the Trust files its IT return. Cases relied upon include CIT vs Surya Educational & Charitable Trust [2013] a decision by Punjab & High Court.

Tax authorities argued that the trustees took refuge in Sikkim for 35 years but neither any Income Tax returns were filed nor any application moved under S.12A. The Tribunal stated that the Trust has moved application for registration on 31st March 2011 and therefore delay is not relevant, since the assessee has sought exemption from AY 2011-12 onwards only. It also rejected the argument of the Dept. that name of the 17th Karmapa is involved in certain foreign contribution violations, that those proceedings are on a different footing and would continue in a different court.

The Tax authorities’ objections that the objects given under the Declaration could not be original objects as existing in 1159, the Tribunal stated that the Objects of a Trust are likely to be dynamic which can always be modified to reflect present human needs and need not remain stagnant. Main consideration should be that the objects at the time of filing of declaration are charitable in nature and other essential conditions required for an organisation to be granted exemption are existing.

The Tribunal also rejected the argument that the activities of the Trust are for the benefit / charitable purpose of a particular community. The Tribunal stated that it is a well settled law that an object beneficial to a section of the public is an object of general public utility. The intention of the institution should be impersonal in nature and for a sufficiently defined and identifiable section of the public. It referred to several cases while arriving at this conclusion, including Ahemdabad Rana Caste Association vs CIT, Gujarat (1971 – SC) & CIT vs Dawoodi Bohra Jamat [2014 – SC].

The last issue that the Tribunal decided whether the Supreme Head of the institution who was receiving food and clothes, etc. from the funds of the Trust was violative of S.13. The Tribunal observed that the 17th Karmapa, who has renounced the world. He even diverts all offerings made to him to the Trust. He was full-time involved in the affairs of the Trust and was not taking any salary or other monetary compensation for the same. It observed that Section 13 does not debar the genuine basic expenditure of the Mehant or supreme head of the trust for their survival. The provision is meant to debar the author or trustees from parting away part of the income or Trust property for their personal benefit.

Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in FCRA, TAX, LEGAL | Comments Off on S.12AA Registration and certain other issues relating to Trusts

Dealing with situation when an NGO has both PP & Registration

Dear Sir,

How to deal a situation when you have a Prior permission FCRA account and also the organisation received a permanent registration.

Do we need to file two separate Annual return or it can be mergered into one return.
As the organisation has two fcra bank account one for prior permission and another for permanent registration.

Kindly clarify.

Thanking you,

With warm regards,

Ravistan Anthony

Posted in FCRA, TAX, LEGAL | 3 Comments

Resolution of Ford Foundation’s working in India

Resolution of Ford Foundation’s working in India

In April last year, Ford Foundation was put on ‘watch list’ by MoH. It created a huge stir within the NGO community as well as in diplomatic relations considering the clout of Ford Foundation in US Administration. Ford Foundation has been behind several think tanks and research endeavors in India. It is reported that it has invested some $ 500 million (as per a report in Huffington Post) in India since 1952.

While the initial action against the Ford Foundation may have been due to political reasons, it later turned out that Ford Foundation had never registered itself in India, despite the requirements, thus clearly putting Ford Foundation on defensive.

Requirement: Ford Foundation set up its office in India way back in 1952, when even Companies Act 1956 was not on statute book. Companies Act 1913 which was operative then required that all foreign entities incorporated outside British India, but starting a place of business within British India would need to be registered as Foreign Company under the 1913 Act. The same position continued under the Companies Act 1956, albeit British India replaced with India. It is not clear, if Ford Foundation took necessary registration under this Act. At that time situation was quite informal and several agencies got into India, based on even bilateral agreements between Indian Govt and the entities concerned. It is understood that Ford Foundation was operating under an invitation from former prime-minister Jawaharlal Nehru.

However in 1973 with promulgation of Foreign Exchange Regulation Act (FERA), RBI became the nodal agency for regulating all such entities with registration outside the country. This Act was replaced by Foreign Exchange Management Act 1999. RBI came out with an order notified through a circular in May 2000. This Order basically brought out specifics on how such agencies were required to become operative. One of the essential requirement was that every company having a place of business in India, but incorporated outside would formally apply to RBI for permission and obtain a UIN no. It seems Ford Foundation never complied with this regulation.

Thus the present resolution seems to be that Ford Foundation would be registered under FEMA, which it is understood, it has already done so and also approved by the Govt.  However an Economic Time report states that it would still need to ‘inform’ MoH of all donations / grants that it makes to Indian NGOs and individuals, however whether this would mean ‘seeking permission’ or just ‘intimation’ can be said only after reading the RBI order that has allowed Ford Foundation to operate in India.

Although question remains how this ‘intimation’ vs ‘Permission’ reconciles with FCRA is anybody’s guess?

Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in FCRA, TAX, LEGAL | 6 Comments

Mandatory Disclosure on Website

Annual audited FCRA accounts
Rule 13 (a): Earlier NGOs receiving more than Rs 1 crore were required to put up a summary of receipts & payments on their website, however the amended rule requires that all NGOs to display audited FCRA accounts including Balance Sheet, Income & Expenditure & Receipts & Payments account for a financial year within 9 months of the year-end. Considering 9 month period ended on 31st December and the rules have been amended effective 14th Dec 2015, there is a school of thought which states that NGOs should display their FCRA accounts on their website by 31st December 2015.

Quarterly donor receipts
Rule 13 (b): All NGOs receiving Foreign Contribution are required to disclose on quarterly basis following information:

  • Donor-wise details of FC amounts received in its Designated account as well as the date of receipt.

The above information is to be disclosed within 15 days of the quarter-end. Considering these rules were notified on 14th Dec 2015, this information is will become due for 31st December quarter and should be on the website by 15th January 2016.

In view of the above amendments, we urge all NGOs receiving FC to display the above information on their official websites, at the earliest. Please do note the above amendments are applicable to all NGOs registered under FCRA or having prior permission, irrespective of the amount received.

Credit for the above information being brought to our notice goes to Account Aid Team.
Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in FCRA, TAX, LEGAL | 9 Comments

A favorable Taxation decision for tax assessment of Trusts

We summaries below some important decisions taken by Banglore ITAT in the case of Dy Dir of IT (Exempt.), Circle 17(2), Banglore vs Ohio University Christ College, Academy for Management Education [2015(12) TMI 42- ITAT Banglore].

Academy for Management Education whose objects are provision of higher studies, offers MBA courses in Banglore. It has entered into an arrangement with Ohio University, USA, under which Ohio university sends its faculty for teaching Academy’s students in India for which the Academy pays fees to the Ohio University. Tax authorities raised several objections during the assessment.

  • Payments made outside India

Payment made to Ohio University, being outside India cannot be considered as application for charitable purposes in India. Tribunal held that even if payments are made outside India, as long as the benefit of those payments is for the charitable purpose in India, it would be treated application in India. It relied on several judgments, including Nasscom v DDIT [130 TTJ 377 (Del)]. It stated that S. 11(1)(a) of the Act clearly shows that the words used are ‘is applied to such purpose in India’. The words are not ‘is applied in India’. The fact that the legislature has put the words “to such purpose” between ‘is applied’ and ‘in India’ shows that the application of the Income need not be in India, but the application of funds should result and should be for the purpose of charitable and religious purpose in India.

  • Specific CBDT approval required for application of Income outside India

Tax authorities also had made an argument that the Trust should apply for specific approval if it wanted to apply funds outside India. Although the Tribunal allowed application of income outside India as long as it was for the charitable purposes in India, however it went on to state that specifc exemption from CBDT is ‘..specified only for those trusts that have as its objects, the promotion of international welfare….’ [lesson learnt, all those trusts which aspire to work outside India, please include an appropriate clause in your memorandums, so that you can work outside India as be objects of trust]

  • Liabilities not paid within the year are not application

Tax authorities disallowed liabilities debited to Income & Expenditure account as not an application for charitable purposes, since these are merely credit entries. Tribunal disagreed with authorities contention. In their argument they relied on AP High Court’s decision HEH Nizam’s Charitable Trust, quoting ‘……We agree with the Tribunal that it is not correct to equate the word ‘applied’ with the word ‘spent’. If the legislature intended that the amounts should actually be spent, there was nothing preventing it from using that word.…..The Tribunal was right in holding that the actual payment is irrelevant for purposes of finding out whether there has been an application of the funds…’

It further added ‘Even where income has been earmarked and allocated for the purpose of carrying out the objects of the institution, it might be deemed to be applied for that purpose.’ [CIT v Radhaswami Satsang Sabha, CIT v Thanthi Trust]

  • Loss on account of foreign exchange fluctuation

Loss on account of foreign exchange fluctuation arises on account of amount to be agreed to be paid in USD to Ohio University. Since the Tribunal already considered such expenditure to be treated as application any related cost on account of the said expenditure also needs to be treated as application. Accordingly loss on account of foreign exchange fluctuation was allowed by Tribunal to be treated as application of income.

  • Proper reasons not given for accumulation of Income

Assessing Officer disallowed accumulation of Income as Form 10 did not give specific reasons for accumulation. Trust had stated the purpose of accumulation of income in Form No. 10, as purchase of fixed assets and fulfillment of the objects of the trust. Karnataka High Court in a case [DIT v Envisions (2015)] held that as long as the objects of trust are charitable in character and purposes mentioned in Form No. 10 are for achieving the objects of the Trust, merely because the details about plan of such expenditure has not been given, it would not be sufficient ground to deny the benefit.

It is hoped that the above decision of Banglore Tribunal will be of utility to the SRRF Dialogue members, who may be facing similar situations.
Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in FCRA, TAX, LEGAL | Comments Off on A favorable Taxation decision for tax assessment of Trusts

Latest Annual Return (FC-4) Practical Problems: Disclosure of Foreigners

Dear Members

Warm greetings from New Delhi!

As per the new FC-4 Return, following is to be shown:

“Total number of foreigners working (salaried/honorary capacity)”

Who all are to be included in the term “foreigners”?

NRI or PIO holding Foreign Passport to be included in the term “foreigners”?

NRI or PIO holding dual Citizenship/Passport to be included in the term “foreigners”?

You are requested to guide us with the acceptable definition of foreigners for the purpose of FC-4 Return with reference to any circulars, if any.

Warm Regards

Posted in FCRA, TAX, LEGAL | 5 Comments

Latest Annual Return (FC-4) Practical Problems: Local Sources

Dear Members

Warm greetings from New Delhi!

As per the new FC-4 Return, following is to be shown separately:

“Foreign Contribution received during the financial year:
(i) Directly from a foreign source
(ii) as transfer from a local source”

Earlier the FCRA Rules were requiring disclosure of Name, Address, Purpose etc. of both Direct Foreign Contribution as well as FC through an Indian entity (deemed FC).

Our query is regarding the deemed FC. Whether the same should be shown in FC-4 under:
(i) Directly from a foreign source or
(ii) as transfer from a local source

If FC is received through an Indian entity & has an Indian address, as per the “deemed FC” concept, such contribution should be shown under “as transfer from a local source”. However, when we enter details as per purpose-wise contribution, it takes only the contributions received “Directly from a foreign source”.

It means one of the following:
(i) FCRA does not require Donor particulars of “deemed FC”
(ii) Even “deemed FC” should be shown as “Directly from a foreign source” which may be considered as not correct presentation
(iii) FCRA new software has to be amended to accommodate this problem

You are requested to guide us with the correct presentation for contributions received from donor with Indian address considering the above mentioned limitation

Warm Regards

Posted in FCRA, TAX, LEGAL | 2 Comments