FORCE not in force!
The Indian Revenue Service Association (IRSA) has submitted a recommendation paper called Fiscal Options & Response to Covid-19 Epidemic (FORCE) to the Central Board of Direct Taxes on the economic impetus to fight the Covid-19 pandemic and revive the economy. However, Chairman of the Central Board of Direct Taxes (CBDT) has been directed to seek an explanation from these officers for writing such “ill-conceived views” in public without having any authority to do so. After criticizing the suggestions, the CBDT has launched an inquiry against the officers claiming that “suggestions on official matters is a violation of extant Conduct Rules.”
Some suggestions are good
Though these recommendations are not likely to be implemented by the government of India some of the recommendations concerning CSR and NGOs are worth consideration by the Government of India.
Recommendations worth considering
- Companies undertaking COVID relief activities under CSR should be allowed to claim such expenditure incurred as business deduction Section 37 of Income tax Act 1961 for FY 2020-21 only.
- Companies may be allowed to treat salaries paid to their non-managerial staff during the COVID crisis as part of their obligation under CSR.
- While contribution by companies to PM CARES Fund have been included for the purposes of CSR, there is a need to include the CM Relief Funds for this purpose as well, as requested for by many State Governments.
- A number of NGOs are carrying out Covid relief activities without enabling provisions in their trust deed or memorandum of association. Given the special circumstances all relief work towards Covid relief can be deemed to be considered a part of definition of charity as stipulated in the Section 2(15) of the Income Tax Act so that activities can be suitably carried out by the various charitable institutions.
- There is need for recognition of a Risk Management framework that underwrites the increased risks to which NGOs are exposed in these uncertain times. We need a tax policy that enables a much greater risk-sharing approach so that NGOs do not shoulder the burden of financial risk alone – but one that is also acceptable to donors.
- Inter charity donations should be allowed not restricted to the similarity of the subjects of the donor trust and the donee trust, if the purpose is Covid relief and response.
- Substantial refunds of many trusts due to the TDS wrongfully deducted by the payers/ donors treating their payments as professional/contractual income in spite of 12A registration of these trusts, are pending and their release must be expedited to ease the liquidity crunch which is being faced by these charitable institutions.
- The recently released 3rd Notification by MCA pertaining to Corporate Social Responsibility Rules, 2014 define the various modalities of how CSR expenditure is to be undertaken by charitable organisations. CSR activities can only be undertaken by a Section 8 company under the Companies Act. Given the fact that considerable Covid relief efforts are undertaken by trusts and the societies, the CSR policy needs to be accommodative to such trusts and societies also and companies should be allowed to make donations to these trusts and societies as a part of their CSR expenditure.
- Cap on overall deduction under 8OG to charitable institution can be temporarily lifted from 10 percent of total income to 25 percent, where such donation is given to charitable intuitions engaged in relief of the poor or providing medical facilities.
- Registered charitable organisations should be allowed to engage in activities other the ones originally mentioned in their deed of registration if it pertains to fighting the current pandemic.