Socio Research & Reform Foundation

To give more clarity to Civil society sector, regarding taxability of unspent grant, a recent decision by Courts has held that unspent grant cannot be treated as income. In a recent decision in JM Financial Foundation vs CIT[1]Mumbai Income Tax Tribunal has relied on the case of DIT vs Society for Development Alternatives.

CIT (Exemptions) added unspent grants of JM Financial Foundation received during the year as Income. Tribunal after considering the arguments of CIT (E) and assessee, decided that the income of the Trust was to be spent on Ashoka University as per the directions of the donor and hence cannot be stated to be income of the year. It relied on the case of DIT vs Society for Development Alternatives where it was held that the respondent assessee had received grants for specific purposes / projects from the government, NGOs, foreign institutions, etc. These grants were to be spent as per the terms and conditions of the project grant. The amount which remained unspent at the year-end, got spilled over to the next year and was treated as unspent grant.

The Tribunal noted that the grants are not free grants, but the donor require several reporting from the Trust for utilisiung the grant. These grants are can be further subjected to audit by the donor and if remains unspent at the end of the project has to be refunded back.

Thus, these are not free grants which the assessee could use according to its free will, but depends upon the donor requirements. case was on not utilised, remained unutilised and could not be treated as income of the Trust. Thus the matter was decided in the favour of assessee. Relying on the above principles mentioned in Development Alternative case, the Tribunal decided the matter in favour of the assessee.

[1]https://itatonline.org/digest/verdicts/jm-financial-ltd-v-dy-cit-itat-mumbai/

I have a question, our organization Center for Communication and Change India is registered as Trust (NGO) and we do not have FCRA so far. Is it mandatory for non-FCRA NGOs also to registered on the DARPAN portal of NITI Aayog and get a valid unique ID with updated details to receive funds from CSR or local UN organizations?

I would appreciate your valuable advice.

Regards,

Rajinder Mehra

Dear Sir,

We have received a notice from FCRA department asking to file Annual Returns for some previous years.
However, we have been regular in filing the returns within due date and all these returns are also appearing on the FCRA Portal, still this notice is stating that this is the last chance to submit it.
What does it meant for?

May I request you to throw some light on it?

Regards
Prabhat Kumar

Dear Sir,
Greetings!

We are in the process of filing FCRA Annual Return and facing a challenge
to update the forms related to list of Movable and Immovable Assets.

In the pop up window ( screenshot given below ), we have only 4 fields to enter – opening balance, assets bought during the year, assets disposed during the year and closing balance. We do not have any field to update for the depreciation value in the portal. Kindly advise where to mention the depreciation value so that the closing balance get matched with the current value of the assets ( As on 31st March 2023)

Rgds

Vimala D

Dear Sir,

We are in a dilemma in interpretation of two terms under the amended FCRR 2011. A hypothetical case is presented here:

1. A person XYZ is an employee of organisation ABC which is registered Trust/Society. S/he is invited by a Foreign organisation PQR which declares itself as ‘…a scientific, Political, and cultural organisation founded in xxx. It is an international network of scholars, health workers, and activists…”

2. Her/his travel, accomodation and other expenses are being met with by another foreign organization EFG. This organisation EFG declares itself as ‘ … one of the six major political foundations in the YYY tasked primarily with conducting political education both at home and abroad.”

3 The organization ABC has FCRA renewal application under process.

4. The organization ABC received substantial grant from State Govt. during past 10 years.

My dilemma is reflected in the following questions:

a) whether XYZ is a public servant as per FCRR 2011/FCRA 2010

b) whether XYZ comes under a ‘foreign hospitality’ as her travel, accommodation etc was paid by a political organisation for a conference organised by a political organisation

c) if it is what procedure should be followed, an NOC is essential from the Chief Functionary

d) if violated, what corrective measures need to be taken, is declaring in FC2 is adequate 

e) what is the interpretation as the organizer and the host which are foreign sources have political education in their objectives

Dhruv
Secretary
VACHAN

CBDT has clarified that while filling Form 10B & 10BB, details are required to be given of those persons who have contributed substantially. Present language in the Form defines ‘persons who have made a substantial contribution’ as any person whose total contribution upto the end of the relevant previous year exceeds fifty thousand rupees (as referred to under S.13(3)(b) of the Income Tax Act. Considering the language in the Act is such which would mean providing details of all persons who have contributed Rs 50,000 or more from inception of the NPO. Compiling this information, would not be an easy task, hence many NPOs and their advisors approached CBDT, stating difficulties that they are facing in compiling this information.

CBDT after due examination and consideration, has clarified that for the purpose of Form 10B & Form 10BB, persons who have contributed substantially during the Financial Year only needs to be disclosed.

Further CBDT has clarified that as far as ‘relative’ for such persons is concerned it may be provided to the extent information is available. Similarly details of concerns in whom such person referred to have substantial interest may be provided to the extent available.

This provides some relief both to the NPOs and their auditors. However bigger question is this definition has been there on the statute for long, why not change the definition in the statute, if it is found difficult to comply. (click here for circular)

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

Last Date for applying for Re-registration of 12A & 80G

First of all anyone who havestill not applied for re-registration under S.12A & S.80G must apply by 30^th September 2023. If you have not done so, please apply within the deadline.

Provisional to be treated as Registration / Approval

Of course, in most cases people have not only applied but received registration both under S.12A & S.80G for 5 years. However, the Dept. while issuing re-registration ordersin Form 10AC included the words ‘Provisional’ in the order. This caused a lot of confusion, as many persons mistook it that they need to reapply for registration. That is not the case.

CBDT has issued a clarification in this regard vide Circular No. 11 of 2022 dt 3-6-2022. The clarification acknowledges the error it states

(ii) where due to technical glitches, Form No. 10AC has been issued during FY 2021-2022 with the heading “Order for provisional registration” or “Order for provisionalapproval” instead of “Order for registration” or “Order for approval”, then all suchForm No. 10AC shall be considered as an “Order for registration or approval”

So, in case your Form 10AC has words Provisional, but if it is for 5 years, need not worry. Get the above circular from the link above for any future reference.

However, in case any organisation is yet to apply for re-registration, please do immediately 30^th September’23 is the last date.

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

MHA has amended the Foreign Contribution Regulation Rules, 2011 through a notification issued on 22^nd September 2023. Through this notification MHA has revised the FCRA Annual Return (Form-FC4). Currently details of purchase of fresh assets purchased are required to be provided para 3b.

Now the new paras 3ba & 3bb in the Form of Tables have been added.

Table under 3ba requires that movable assets procured (like: computers, furniture, office equipment, vehicles, etc) are now to be disclosed giving following details:

• Description
• Value of movable assets at the beginning of the year
• Value of assets acquired during the year
• Value of assets disposed of during the year
• Value at the end of the year (should match with the Balance Sheet)

From above it does appear that one need not give details of individual assets, but only category-wise details of assets that have been capitalized during the year.

Table under 3bb requires that immovable assets acquired as at year end be disclosed under this Table.

In both cases, details of assets as at year end has to be provided, that means in case of immovable property each property has to be mentioned, which for movable assets category-wise details of assets brought-forward as well as acquired and disposed during the year have to be provided.

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

A Relief, even if a temporary one, to all those who are waiting for their FCRA renewal.

FCRA authorities have extended again extended the validity of existing FCRA registration certificates upto 31^st March 2024.

This is applicable to all those who have applied for FCRA renewal before expiry of 5 year period from the date of previous FCRA registration. In case renewal application is refused then the validity of the certificate shall be deemed to have expired on the date of refusal of application of renewal. In such a situation organisation would not be eligible to either receive or utilize FCRA funds after such date.

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

Dear Sir/Madam,

I am Noel Sushant Gole from Belagavi Karnataka. I would like to thank you for your website and your blog and they are very helpful. I would need a few queries to be answered by you if you do not mind.

If a Educational institution created partly out of FCRA Donations and partly put of donations from CSR funds of companies, then the income generated out of the said Educational Institution is to be treated as Foreign Source in entirely or is it to be taken proportionately as foreign source Other income?

Do the trustees need to file return under Lokpal as of 2023, The last post I saw in your website was of a 2016 post.

The school general running account needs to be reported as utilization account or not?
If new school is opened out of the profits of the original school then does the new school also fall within FCRA and the new school income is to be treated as other income in FCRA

Regards,

Noel Sushant Gole
Belagavi, Karnataka.