|Can a charitable trust registered under the Income-tax, 1961 having exemption under section 11 of the Act; receive donation from NRI staying outside India; without being getting registered or prior permission under Foreign Contribution Regulation Act, (FCRA)?
|The main object of FCRA, 2010 is to consolidate the law to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies and to prohibit acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto.
The said object has been reflected in section 3 of FCRA which provides for prohibition to accept foreign contribution by certain persons or associations, viz, candidate for election, correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper, Judge, Government servant or employee of any corporation, or any other body controlled or owned by the Government, member of any Legislature, political party or office bearer thereof, organization of political nature as may be specified by the Central Government, or association or a company engaged in the production or broadcast of audio news or any other visual news or current affairs programmes through any electrical mode or any other electronic form as defined in section 2(1)( r) of the Information Technology Act, 2000 or any other mode of mass communication or correspondent or columnist, cartoonist, editor, owner of the said association of the company. This clause further prohibits acceptance of any foreign contribution or any foreign currency on behalf of any political party or a person referred to above. Further, it is provided that any currency whether Indian or foreign which has been accepted from any foreign source shall not be delivered to any person if such person intends, or is likely to deliver such currency to any political party or any of the aforesaid persons.
Section 11 of FCRA provides that no person having a definite cultural, economic, educational, religious or social programme shall accept any foreign contribution unless such person obtains a certificate of registration from the Central Government. If a person is not registered with the Central Government, such person may accept any foreign contribution only after obtaining the prior permission from the Central Government.
The word ‘definite’ has not been defined either under FCRA or FEMA or under Income-tax Act, or under the Companies Act, hence the dictionary meaning has to be considered. Webster’s Encyclopedic Unabridged Dictionary defines ‘definite’ means clearly defined or determined; not vague or general; fixed; precise; exact;. Further, Webster’s New World Thesaurus explains synonyms to ‘definite’ as ‘specific, particular, etc’.,
Section 2(15) of the Income tax Act, defines a ‘charitable purpose’, which includes relief of the poor, education, medical relief, reservation of environment (including watersheds, forest and wild life) and reservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility.
So, a charitable trust who wants to accumulate or set apart the income under section 11(2) of the Income-tax Act, for particular/specific charitable or religious purpose like acquisition or construction of school, hospital, etc.; would fall under this category and would require registration or prior permission before receiving foreign contribution.
Section 2(1)(h) of FCRA defines ‘foreign contribution’ means the donation, delivery or transfer made by any foreign source, –
(i) of any article, not being an article given to a person as a gift for his personal use, if the market value, in India, of such article, on the date of such gift, is not more than such sum as may be specified from time to time, by the Central Government by the rules made by it in this behalf;
(ii) of any currency, whether Indian or foreign;
(iii) of any foreign security, as defined in clause (h) of section 2 of the Securities and Contracts (Regulation) Act, 1956 and includes any foreign security as defined in clause (o) of section 2 of the Foreign Exchange Management Act, 1999.
However, the Ministry of Home Affairs, Government of India has issued a citizen charter, which clarifies that contribution made by a citizen of India living in another country, from his personal savings, through the normal banking channels, is not treated as foreign contribution. It is advisable to obtain passport details of the concerned citizen of India before accepting such contributions. So, any contribution received from citizen of India, who is non-resident will not be considered as foreign contribution. So, any charitable trust who does not have any definite educational or religious or charitable purpose is entitled to receive contribution which would be applied under section 11(1) of the Income-tax Act, without obtaining registration or prior permission under FCRA.
Now, the Government of India has permitted a duel citizenship, so, if an NRI has obtained the citizenship of other country without surrendering the citizenship of India, then, in such case, the NRI would still remain citizen of India and therefore his contribution to the charitable trust would not fall under the category of “foreign contribution”.
Further, section 2(1)(j) of FCRA defines ‘foreign source’, which inter-alia includes a citizen of foreign country as well as, a foreign trust or foreign foundation, by whatever name called, or such trust or foundation mainly finance by a foreign country or territory. So, any non-Indian organization, which is not controlled by Indian is a foreign source. However, a question arises that if any organization situated outside India and controlled by Indians i.e. citizens of India, whether such organization would fall under foreign source? According to me, it would fall under foreign source as it is mainly financed by a foreign country or territory and therefore any contribution from the such organization would be a foreign source. Hence, charitable trust receiving donation from foreign trust or foundation should have registration or prior permission under FCRA.
|CA. H. N. Motiwalla
|3 of FCR Act
|Foreign Contribution (Regulation) Act
|charitable trust, FCR Act
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