Rejection of S.10(23C) no ground for cancellation of S.12AA registration – Court decision

A series on Impact on Taxation of NPOs due to hardening of tax authorities’ attitude …..(2)

Facts
In today’s series we bring out a case where Varanasi Catholic Education Society’s registration under S. 12AA was cancelled on the ground that its S. 10(23C) application has been rejected. The Order of the Commissioner tax while cancelling S. 12AA registration stated that the activities of the Society are not entirely charitable in nature and that the same was not in accordance with the aim and objects of the Society. However no material for arriving at this conclusion was made available in the order.

Decision
The Society appealed to Tribunal against the cancellation of S.12AA who decided against the Commissioner’s order and set it aside. Tax authorities appealed to the High Court against the Tribunal Order. High Court agreed with the Tribunal order and rejected tax authorities’ appeal.

Reasoning by High Court
Reason that some activities being undertaken were not solely for charitable purpose may not be a ground for cancelling the S.12AA registration, although it may be a ground for rejection for the registration under S.10(23C). It observed that the Commissioner has not recorded any reason if the charitable activities being undertaken by the Society are not genuine or if the Society’s activities are not in accordance with its objects. The Order stated that the Commissioner has solely relied on the order of the Chief Commissioner of Income Tax passed under Section 10(23C) (vi) of the Act while cancelling exemption under S.12AA.

[citation: 2014 (6) TMI 48 – Allahabad HC: CIT Vs Varanasi Catholic Education Society]

 


Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
e-mail: socio-research@sma.net.in; website: http://www.srr-foundation.org

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Is FCRA needed for “Gram Panchayaths” to get foreign funds?

Dear Friends,                                   
Is FCRA needed for “Gram Panchayaths” to get foreign funds?
As a corollary is FCRA needed for any local body to receive foreign funds?
Can Gram Panchayath and local bodies spend these and other funds they may raise from other than tax revenue with freedom we in Voluntary sector have, of course subject to government audit? Or do they need the consent of Government Officer?
Regards,
V.B.Chandrasekaran,
Chatti Mahatma Gandhi Aashramam, 
Chatti Post, Chinthur Mandal, East Godavari District, 
Andhra Pradesh, Pin Code: 507129. 
Posted in FCRA, TAX, LEGAL | 8 Comments

Is Repair and renovation of house allotted to an senior employee from CSR fund valid?

Dear Sir,
Is Repair and renovation of house allotted to an senior employee from CSR fund  valid ?  Should we treat  it as CSR project cost or to be treated as Admin Cost of that  particular CSR donor. As per CSR rule 5% admin is allowable. Pl suggest.
Ashok Mishra
SNS Foundation
Posted in CSR | Tagged | 1 Comment

Is it necessary to have original FCRA letter?

Greetings from AMIN trust Chairman

Dear friends
May you please write to me regarding FCRA permission letter from MOHA. We have registered trust from DELHI and had applied for FCRA  on 19th April 2014. It was November we went to J&K for relief work and there was no body in our Delhi office.
Ministry of Home Affairs FCRA department had sent a FCRA permission letter to our office.Since there was no body in the office,the post man didn`t deliver and was sent back to FCRA department. Which we came to know just two days ago from the post man.
Other hand,FCRA Department has sent one FCRA permission letter to the bank also where we have opened FCRA account.The Manager of the bank gave us a photocopy of the same letter the bank has received.In a letter FCRA registration is mentioned that means we are permitted FCRA.And I found our trust is permitted fcra registration from the website also.
Here my quiëry is  that “Is it necessary to have original FCRA letter that we supposed to receive from the post office from Ministry of Home affairs FCRA department or just knowing FCRA registration number and having its photocopy for our record? “
Please circulate this and write us fair reply.
Hope to hear from you all.
Thanks
Nazir Ahmad
Chairman/Founder
Amin Social Welfare Trust
Posted in FCRA, TAX, LEGAL | Tagged , | 5 Comments

Cancellation of S.80G certificate – Court decision

A series on Impact on Taxation of NPOs due to hardening of tax authorities’ attitude……(1)

We are increasingly finding situations where the Dept. is denying charitable status to various running NGOs by cancelling S.12AA & S.80G. We start a series from today highlighting some major decisions taken by the courts on these issues, most of you would find it of interest, considering it has a direct impact on taxability of NGOs.

In today’s edition we share a case, where the NGO concerned leased some of its surplus land to a commercial organisation having common directors, due to which tax authorities did not renew its S.80G certificate and even cancelled S.12AA. Ashoka Education Foundation while running school gave leased part of its surplus land to another organisation on rental purposes. The authorities alleged that the letting out of land to a commercial organisation for installation of RMC Plant on its land amounted to commercial activity. It further stated that the since there were common persons on the Board of the company to whom the land was let out and that of the charitable organisation, which means benefit had been given to persons covered under S.13(3) and hence it should be denied S.80G registration and its S.12AA registration cancelled.

Income Tax Tribunal (Pune) in its order stated that CIT while renewing the application for S.80G needs to verify if Charitable institution was undertaking the charitable activities as covered under its objects. Merely if some part of its land, it has let out on commercial basis does not mean that the entity is no longer undertaking the education / charitable activities as specified in its objects.

The judgement further stated that even if CIT has established that there was benefit given to persons falling under S.13(3), that will need to be considered at the time of tax assessment for that particular year by the assessing officer. Thus the charitable organisation cannot be denied S.80G registration if it is undertaking the educational & charitable activities as specified in its objects. It also declared S.12AA cancellation null & void, since the assessee was not given sufficient opportunity to defend why the same should not be cancelled. [citation: Ashoka Education Foundation v CIT (ITAT-Pune) 2009]

__________________________________
Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
e-mail: socio-research@sma.net.in; website: http://www.srr-foundation.org

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Admin Expenses under CSR

Dear Sir,

We have a query from a Corporate partner on whether they can pay a registered charity organisation, its 10 per cent administration fees to run the projects, because the recent CSR bill caps administration expenses to 5 per cent.

As we understand the current CSR rule. Provision of administrative expenses of 5 per cent in the recent CSR rule is been made to enable corporates to build their internal capacity  and / or consult with for profit organisation for CSR strategy / implementation plans etc. Once the corporate donate its 95 per cent CSR funds to a registered charity organisation, the registered charity organisation can charge 10 per cent admin fee from / within the 95 per cent donation received from the corporate to run the project. This does not violate the 5 per cent administration expenses clause of CSR rule.

Please do share your views on the same.

Thanks and regards,

Manish

Posted in CSR | 1 Comment

Is section 50C applicable while calculating net consideration u/s 11(1A)?

As per section 50C of income tax act, if the consideration receivable on transfer of land and building is lower than the stamp duty value than such stamp duty value is to be considered as consideration for calculation of capital gain.

As per section 11(1A) of the act, if any capital asset is sold by the society than capital gain is taxable in the hands of socity provided that the net consideration on transfer of such asset is not invested in procurement of another asset.

Now the question is to take stamp duty value for calculation of capital gain in case of society or not?

Rahul Gupta

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Ten FC Donors Under Prior Permission

For quite some time, Indian banks have been asked by RBI to refer some international remittances to FCRA Wing. The RBI has now issued a general circular on this. Remittances from following donors are subject to prior-approval from Ministry of Home Affairs:

  1. Danish International Development Agency (DANIDA)
  2. Danish Institute of Human Rights (DIHR)
  3. Catholic Organization for [Relief] and Development Aid (CORDAID)
  4. Dan Church Aid (DCA)
  5. Mercy Corps, USA
  6. Inter Church Peace Council _ Pax Christi (IKV- PC) , Netherlands
  7. HIVOS, Netherlands
  8. ICCO Stretegische Samenwerking (ICCO), Netherlands
  9. Green Peace International
  10. Climate Work Foundation (CWF), US

If you are receiving funds from one of these donors, be prepared for long delays in credit of the funds to your accounts.

Ref: RBI/2014-15/408 DCBR.BPD (PCB/RCB) Cir.No.13/14.01.062/2014-15 dated January 15, 2015; Available at http://www.srr-foundation.org/circulars/RBI-Circular-16012015.pdf

Source: AccountAid

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Is Income tax Paid treated as application of Income?

As per section 11 of the income tax act, an organization is required to apply 85% of total receipts during the year. However it couldn’t be applied during time limits mentioned in the relevant section of the act and accordingly tax was paid on such underutilized amount.

Now my query is whether such income tax paid shall be treated as application of income during the year in which it was paid?
Regards
Rahul
Posted in FCRA, TAX, LEGAL | 3 Comments

Do any organization is required to file returns if it has received FCRA funds by Prior permission/ prior approval?

Do any organization is required to file returns if it has received FCRA funds by Prior permission/ prior approval?

Shekar

Posted in FCRA, TAX, LEGAL | 3 Comments