Recently Chennal Income Tax Tribunal has given a judgement reversing the Income Tax Dept.’s order of cancelling an NGO’s (SAE India) section 12A registration because it has crossed the threshold limit of income (currently Rs 25 lakhs) under S. 2(15).
As many of you would know that under S.2(15) of Income Tax, an NGO whose objects falls under ‘the public utility clause’ income is currently limited to Rs 25 lakhs. Several Inocme Tax officers interpret this as that S.12A should be cancelled once this limit is crossed. This as per the judgement is a wrong interpretation.
The Honourable ITAT observed that assessee’s objects and activities (to serve as a forum where Engineers, Scientists, Technologists and Innovators in mobility engineering field can exchange ideas and learn from each other experience) are genuine and registration cannot be cancelled merely because receipts are exceeding the threshold limit.
It further opined that the IT Officer in case the limit u/s 2(15) exceeds the threshold amount than s/he has a right to levy tax in respect of these receipts but not to cancel the 12A Registration, which can be done only if the activities are not for general public utility.
We have provided the details of the above case, it may be possible that a number. of NGOs may be facing similar situation they can rely on this case to get the necessary benefit.
Citation :SAE India v/s DIT(E) (ITAT Chennai), I.T.A. No.386/Mds/2012, 17th October, 2014
__________________________________
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
Thank You For Sharinig This Information
SK.BASHEER,
Secretary,
Association for the Rural Development(ARD)
D.No.15/286, Valayanandapuram,
Gudur – 524 101,
SPSR Nellore Dt., Andhra pradesh
thanx for good orientations,timely and appropriate.
thanking you again
Anupam
“Charitable purpose” includes
a. Relief of the poor
b. Education
c. Medical relief
d. Preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest
e. Advancement of any other object of general public utility:
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity.
Further provided that it shall not apply if the aggregate value of the receipts from the activities is twenty-five lakh rupees or less in the previous year
I am glad Abid you have quoted verbatim from S. 2(15) of the Income Tax Act. While the second provisio states that first provisio will not be applicable where total income of the association is less than Rs 25 lakhs.
Even where the provisio becomes applicable (where income is above Rs 25 lakhs), it only states that the advancement of general public utility clause will no longer be for charitable purpose only if the activities from which Rs 25 lakhs have arisen are in the nature of trade, commerce or business even if the funds are to be used for charitable purpose.
The decision referred to above now states that even if such incomes are higher than Rs 25 lakhs, even then ITO cannot cancel registration under 12A, because the objects are genuine. All that ITO can do is tax those receipts.
There seems to be a conflict between S.12A and provisio under S.2(15). Considering wider ramifications, perhaps we have not heard the end of the story, since Revenue could go in for appeal against this judgement.
Thanks a good judgement.
Shivakumar
___
K. SHIVAKUMAR
Chartered Accountant
VK Illam, Gandhigram 624 302
Dindigul District, Tamil Nadu.
“VANI study on thematic issues namely Inclusive Growth, Sustainable Development, Financial Inclusion and Corruption and Governance”.
Dear Friends, 14th January 2015
WHY FEAR INCOME TAX IF OUR HOUSE IS IN ORDER. PLEASE READ THE FOLLOWING DOCUMENT. MANYTHINGS ARE GOING WRONG IN US.
We got from VANI the above referred booklets. We eagerly share our response to VANI. They must be useful to all of us in different struggles in our group. For detailed report, please visit, http://www.vaniindia.org
Let us fix it with focus stay on who are our Primary Clients!!! These apply to all National level organisations, movements, networks and activists.
We appreciate your enduring efforts to serve the Voluntary sector by different studies and the excellently made four booklets are standing examples of your yeoman services. We in “Chatti Mahatma Gandhi Aashramam” join you in this endeavour.
Wish you a happy Pongal and Sankranthi-2015.
We read the booklets thoroughly. Our concern is…are we going wrong in our basics? Are we doing studies with pre-set minds and the study is only to reinforce our closed minds? Are we also like government focussing upon operational convenience rather than on public needs? Are we unwilling to shed the cocoon of comfort zone?
In our experience and opinion, the Review and Way Forward should first and for now, only focus upon the Local Self Governing Institutions and Voluntary Organisations at grass root, national and international levels. VANI addressing the Government is like calling the GOD- wrong number- PK.
Because…
1. At the time of Independence, Mahatma Gandhi wanted self-reliant and Swadeshi village communities. Nehru as the Prime Minister opted for a welfare State. Ambedkar wanted a more centralised State. Nehru and Ambedkar wanted Welfare and centralisation in the given context of poverty to literal starvation, caste dominance in rural areas and such factors. They were right but agreed with Gandhi to include Local Self Governance in Directive Principles. The scenario is changed and we have liberated Local Self-governance as an act being implemented with half heart by the centralised powers and power brokers.
2. We only as Voluntary Organisations can follow the Ahimsa path and enable the Citizens and communities positively assert their independence by means of literal Civil Disobedience OR similar movements. Our “Right Number” will be Citizens and Communities- local bodies and not the Government.
We as Voluntary Organisations pride in reaching out in both geographical and thematic areas. We pride in doing things where government fails or government has limitations or there are practical problems. Let us be honest that most of us are suave lobbyists and advocates for the cause of the community. Up to a point of convenience the government would welcome, appreciate and encourage us. But, after that naturally the rulers will pick up on our mistakes through CBI and such agencies. We are experiencing this now.
Now it is time to change our strategies, open new fronts while taking “forward the present activism on low profile”. We suggest the following typical ones to VANI as an active member and friend.
1. Let us draw from a Telugu saying- “Inti gelichi raccha geluvu”- First win at home then go win in Panchayaths- traditional courts. A time has come to act on our own displeasure to the growing corruption in our sector. Shall we broadly redefine Volunteerism and Voluntary Sector- with reference to the use of nomenclature NGO?” Shall we be positive that without blaming others we in VANI call ourselves as not corrupt and has good governance in our members? To say this, few or more in our sector lacks certain professional skills and minimum resource base. Can VANI build desired linkages? Like Christian missionaries and all cadre based initiatives, can VANI build a cadre of volunteers with empathetic dialogue attitudes to support such groups?
Summary of a World Bank study on “Understanding Voluntary Organisations:
Voluntary development organizations have demonstrated substantial comparatiave advantage in developing countries – especially in their ability to innovate, adapt to local conditions, and reach and work with poor and difficult to reach populations. These capabilities are a function of their values, special skills, small size, limited resources, flexibility, and freedom from political constraints. Their weaknesses are a function of many of the same characteristics – particularly their value commitments, small size, independence, and lack of administrative rigidity. The authors explain that the strongest Voluntary Organizations (VOs) and People’s Organizations (POs) respond to more than financial incentives. Their strength lies in the fact that they are not the same as government organizations or businesses. At the same time, they are not immune to financial incentives, which if wrongly applied can destroy the voluntarism of all but the most strongly aware of VOs and POs
Good Reference for dialogue is World Bank study Permanent URL for this page: http://go.worldbank.org/91UCAMTSP0
2. Can VANI along with other National level bodies and grass root organisations identify few issues of National significance and develop informed Citizens whose ideas has cumulative impact on local bodies and they do the lobbying and advocacy that we are now doing.
3. Instead of killing the terrorists- at least Indians among them, can we in VANI rope in Humanists, Gandhians, Marxists and the corporate et al to enable the communities and the local bodies like Panchayaths to enter into a process of empathetic dialogue and mutual support drawing inspiration from JP and VINOBHA? Government is incompetent to do this, because they cannot abdicate their bounden responsibility to maintain law and order protecting lives of Citizens.
We will be sending a more detailed reflection based on our 40 years of experience and fairly thorough reading of your policy papers/booklets.
We will feel encouraged to write more or stop writing if these ideas find useful to VANI- And we know that.
With Regards,
V.B.Chandrasekaran, Chatti Mahatma Gandhi Aashramam,
Chatti Post, Chinthur Mandal, East Godavari District,
Andhra Pradesh, Pin Code: 507129.
Are we missing the wood for forest. TRUE VOLUNTARY ORGANISATIONS NEED NOT FEAR SUCH INCOME TAX OR FCRA. FAULT LIES THAT WE LOST VOLUNTEERISM TRACK.
Summary of a World Bank study on “Understanding Voluntary Organisations:
Voluntary development organizations have demonstrated substantial comparatiave advantage in developing countries – especially in their ability to innovate, adapt to local conditions, and reach and work with poor and difficult to reach populations. These capabilities are a function of their values, special skills, small size, limited resources, flexibility, and freedom from political constraints. Their weaknesses are a function of many of the same characteristics – particularly their value commitments, small size, independence, and lack of administrative rigidity. The authors explain that the strongest Voluntary Organizations (VOs) and People’s Organizations (POs) respond to more than financial incentives. Their strength lies in the fact that they are not the same as government organizations or businesses. At the same time, they are not immune to financial incentives, which if wrongly applied can destroy the voluntarism of all but the most strongly aware of VOs and POs
Good Reference for dialogue is World Bank study Permanent URL for this page: http://go.worldbank.org/91UCAMTSP0