Not just an Intelligence Bureau blacklist, the government’s crackdown on NGOs continues into the Budget.
The Finance Bill, 2014, has brought in a series of amendments in Sections of the Income Tax Act, which cover tax exemption for NGOs, trusts and charitable institutions, that give sweeping powers to the government — from withdrawing tax benefits or cancelling their registrations.
The current provisions, under Section 12AA of the Income Tax Act, for cancellation of registration by a principal commissioner or commissioners of Income Tax were only two: when the department found that the activities of the organisation were “not genuine” or if the “activities were not being carried out in accordance with the objects of the trust or institutions”.
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Now the Bill proposes to amend this Section by defining four more grounds for cancellation if the institution’s activities are being carried out in such a manner that:
* its “income does not enure for the benefit of general public”
* “it is for benefit of any particular religious community or caste”
* “any income or property of the trust is applied for benefit of specified persons like author of trust…”
* its “funds are invested in prohibited modes”
These amendments vastly expand the powers of the income tax authorities to clamp down on activities of NGOs that the government may not wish to see expand its role. The amendment doesn’t spell out what “benefit of general public” or “prohibited mode” means. Its interpretation is, possibly, left to the discretion of the principal commissioner or commissioners of income tax.
The Finance Bill has also tightened the rules under which an NGO or a trust can seek tax exemption for money it has received from the sale of a property “held under the trust”. The explanatory memorandum in the Budget document explains that often NGOs ask for such relaxation.
But it has clarified that when an NGO has got a tax exemption under Section 11 of the Income Tax Act which does not allow for such sale or transactions, it cannot ask for a switch over to another section 10(23c) of the Act to claim the tax exemption.
Shyamal Mukherjee, Executive Director of Price wate rhouse Coopers said the restrictions through these provisions are clearly meant to make it difficult for the NGOs to switch around funds. Activist Harsh Mander said the changes appeared to be “discretionary” in nature. “I have not read the fine print,” he said, “but the changes (in the Finance Bill) do appear to offer immense discretion to the tax authorities for cancelling the registrations (of trusts or NGOs).”