FCR Bill 2006 – Request for Reconsidering Some Issues

Heading

Details

Section

2(1)(j)(vi) and 2(1)(g)

Issue

Definition of Foreign Source read with a company within the meaning of the Companies Act 1956

Text of Section

2(1)(j)”foreign source” includes,

(vi) a company within the meaning of the Companies Act 1956, (1 of 1956), and more than one-half of the nominal value of its share capital is held, either singly or in the aggregate, by one or more of the following, namely:–

(A) the Government of a foreign country or territory;

(B) the citizens of a foreign country or territory;

(C) corporations incorporated in a foreign country or territory;

(D) trusts, societies or other associations of individuals (whether incorporated or not), formed or registered in a foreign country or territory;

(E) foreign company;

2(1)(g) “foreign company” means any company or association of body of individuals incorporated outside India and includes –

(ii) a company which is a subsidiary of a foreign company”

Reconsideration Requested

An explanation be added to exclude companies whose shares are listed on any of the stock exchange(s) in India or whose turnover from its Indian operations exceed Rs. one crore in both the sections i.e. 2(1)(j)(vi) and 2(1)(g)

Reason for Request

(i)                  More than 51% of the equity capital of an Indian company maybe held by its parent foreign company but if the equity shares are listed on any of the stock exchanges in India it is deemed to be widely held. The Income tax Act also treats such companies as domestic companies.

(ii)                The turnover and income of such companies is generated in India and hence donations being given by such a company would be out of funds generated within India.

(iii)               A recipient of donations from such a company may not even realize that it is a foreign company and would violate the law by treating the donation as from an Indian source rather from a foreign source.

(iv)              Donations from such companies are not detrimental to national interests since such companies are interested to do business in India, pay Indian taxes, provide employment to Indian nationals and would always like to increase their business in India.

(v)                The limit of Rs. one crore has been taken to reflect that the Indian company is operating and conducting business within India.

Heading

Details

Section

8(1)

Issue

Restriction to utilize foreign contribution for administrative purpose.

Text of Section

8. (1) Every person, who is registered and granted a certificate or given prior permission under this Act and receives any foreign contribution,–

(a) shall utilise such contribution for the purposes for which the contribution has been received:

Provided that any foreign contribution or any income arising out of it shall not be used for speculative business;

(b) shall not defray as far as possible such sum, not exceeding fifty per cent of such contribution, received in a financial year, to meet administrative expenses:

Provided that administrative expenses exceeding fifty per cent of such contribution may be defrayed with prior approval of the Central Government.

(2) The Central Government may prescribe the elements which shall be included in the administrative expenses and the manner in which the administrative expenses referred to in sub-section (1) shall be calculated.

Reconsideration Requested

1.       Sec 8(1)(a): The words “except on a temporary basis for a period upto one year for such other purpose as per the objects of the association.” before the provisio.

2.       Sec 8(1)(b) and 8(2) be deleted.

Reason for Request

1. Sec 8(1)(a): (i) At times an association may have to utilize the funds for another project on an emergency basis e.g. natural calamity, delay in receipt of funds from the donor, which are then reimbursed by a donor.

(ii) At times grants are received towards the end of the year but the programme is an ongoing one, which if stopped would lead to a disruption in the programme.

(iii) donor requires that the donee first implement the programme and the donor then gives a reimbursement grant.

2. Sec 8(1)(b) and 8(2): (i) Use of funds should be left to a decision between the donor and the donee.

(ii) Administrative expenses are not detrimental to national interest or for matters connected therewith or incidental thereto.

(iii) A decision on what is administration will always be a matter that is very subjective, e.g. salaries to doctors in a hospital, salaries to teachers in a school, telephone expenses during natural calamities etc.

Section

8(1)(a)

Issue

Restriction to utilize foreign contribution.

Text of Section  

8. (1) Every person, who is registered and granted a certificate or given prior permission under this Act and receives any foreign contribution,–

(a) shall utilise such contribution for the purposes for which the contribution has been received:

Provide   that any foreign contribution or any income arising out of it shall not be used for speculative business;

Reconsideration Requested

The words “not be used for speculative business” be substituted by the words “be used as per the provisions applicable under the Income Tax Act 1961 and the Rules thereunder.”

Reason for Request

1.       The words “speculative business” is redundant as the Income Tax Act 1961 specifies categorically the manner in which the funds of a charitable institution can be invested and used. The relevant provision under the Income Tax Act 1961 is section 11(5) read with Rule 17(C).

2.       The words “speculative business” is not defined.

3.      When one law specifies the mode of investment then another law should adhere to that law so that there is uniformity.

Section

12(3)(ii)

Issue

Grant of Certificate of Registration

Text of Section

 If on receipt of an application for grant of certificate or giving of prior permission and after making such inquiry as the Central Government deems fit, it is satisfied that –

has not indulged in activities aimed at conversion through inducement or force, either directly or indirectly, from one religious faith to another;

Reconsideration Requested

(i) The word “inducement” be substituted by the word “fraud”.

(ii) The word “indirectly” be deleted.

Reason for Request

(i)                  The word “inducement” has not been defined.

(ii)                The word “inducement” could mean providing of drinking water to persons; building houses for the disaster affected people, providing medical relief to the poor, downtrodden or infected; providing clothes / sarees; providing education free of cost or at a concession can all be termed as inducement. This clause itself will defeat the very principle for which funds are sought i.e. work having “having a definite cultural, economic, educational or social programme.

(iii)               The word ‘indirectly’ has also not been defined. Some persons may falsely be put up to claim to be acting on behalf of the concerned person so as to get the person into trouble or some people can be interpreted to be deemed to be acting on behalf of the concerned person and the person will find it difficult to immediately contest such insinuations.

(iv)              Clause of (iii) of the same section deals with creation of communal tension or disharmony in any district or part of the country and hence for there is an adequate safeguard for the Government to act upon.

Section

12(3) and 16(3)

Issue

Grant of Certificate of Registration – Time Limit

Text of Section

12(3) the last para of the section states: “the Central Government may register such person and grant him a certificate or give him prior permission, as the case may be, subject to such terms and conditions as may be prescribed.”

16(3) “The Central Government shall renew the certificate subject to such terms and conditions as it may deem fit and grant a certificate of renewal for a period of five years:

Provide that the Central Government may refuse to renew the certificate in case where a person has violated any of the provisions of this Act or rules made thereunder.”

Reconsideration Requested

The existing FCRA 1976 Act specifies a time frame for the Central Government to dispose of the applications and accordingly a time frame for disposing the applications should be fixed by adding the existing section 11(2) at both the places i.e. in the proposed bill in clauses 12(3) and 16(3).

Reason for Request

1. The current FCRA 1976 Act states the following:

11 (2) If an application referred to in sub-section (1) is not disposed of within ninety days from the date of receipt of such application, the permission prayed for in such application shall, on the expiry of the said period of ninety days, be deemed to have been granted by the Central Government:

    PROVIDED that, where in relation to an application, the Central Government has informed the applicant the special difficulties by reason of which his application cannot be disposed of within the said period of ninety days, such application shall not, until the expiry of a further period of thirty days, be deemed to have been granted by the Central Government.

2. If a time frame is not specified then applications can remain pending, which is not correct.

Section

12(5) read with section 16(3)

Issue

Grant of Certificate of Registration and Renewal of Certificate

Text of Section

1. Grant of Certificate of Registration

12(5) The certificate granted under sub-section (3) shall be valid for a period of five years and the prior permission shall be valid for the specific purpose or specific amount of foreign contribution proposed to be received, as the case may be.

2. Renewal of Certificate

16(3) The Central Government shall renew the certificate subject to such terms and conditions as it may deem fit and grant a certificate of renewal for a period of five years:

Provided that the Central Government may refuse to renew the certificate in case where a person has violated any of the provisions of this Act or rules made thereunder.

Reconsideration Requested

1. Delete sections 12(5) and 16(3)

Reason for Request

1. The proposed Bill under:

(i)                  Sections 23 to 27 of the proposed Bill empower the government to inspect accounts, records of any recipient.

(ii)                Section 13 empowers the Government to suspend the certificate of registration of the recipient.

(iii)               Section 14 empowers the Government to cancel the certificate of registration of the recipient.

(iv)              Section 18 requires every recipient to provide intimation to the Government of foreign contribution received and utilized.

3.       Renewal is an administration requirement whereas effective MONITORING is more useful to the government, which is possible through the above mentioned proposed sections.

4.       Section 12(3) ends by stating the following:

“the Central Government may register such person and grant him a certificate or give him prior permission, as the case may be, subject to such terms and conditions as may be prescribed.”

   Under this proposed section there is scope for prescribing conditions.

5.       The Government will be able to utilize its time more effectively by monitoring 20% of the registered associations each year i.e. 100% in five years rather than spending time in granting renewal of registration every five years.

Section

18(2)

Issue

Intimation

Text of Section

18. (1) Every person who has been granted a certificate or given prior approval under this Act shall give, within such time and in such manner as may be prescribed, an intimation to the Central Government, and such other authority as may be specified by the Central Government, as to the amount of each foreign contribution received by it, the source from which and the manner in which such foreign contribution was received, and the purposes for which, and the manner in which such foreign contribution was utilised by him.

(2) Every person receiving foreign contribution shall submit a copy of a statement indicating therein the particulars of foreign contribution received duly certified by officer of the bank or authorised person in foreign exchange and furnish the same to the Central Government along with the intimation under sub-section (1).

Reconsideration Requested

Delete sections 18(2)

Reason for Request

1.       The recipient of foreign contribution could submit an audited statement of account to the Government since section 18(1) requires submission of an intimation and the government has the power to prescribe the intimation.

2.       An audited statement of account duly certified by a Chartered Accountant is universally accepted by the government, and all institutions.

3.       Section 17(2) of the proposed Bill already requires the following:

“(2) Every bank or authorised person in foreign exchange shall report to such authority as may be specified —

(a) the amount of foreign remittance;

(b) the source and manner in which the foreign remittance was received; and

(c) other particulars,

in such form and manner as may be prescribed.”

             And hence proposed section 18(2) should be deleted.

Section

5(1) and 54(2)(b)

Issue

1. Procedure to notify an organization of a political nature

2. Repeal and Saving

Text of Section  

5.(1) The Central Government may, having regard to the activities of the organisation 3 or the ideology propagated by the organisation or the programme of the organisation or the association of the organisations with the activities of any political party, by an order published in the Official Gazette, specify such organisation as an organisation of a political nature not being a political party, referred to in clause (f) of sub-section (1) of section 3.

54(2)(b) any organisation of a political nature, not being a political party, to whom the prior permission was granted under section 5 of the repealed Act, shall continue to be the organisation of a political nature, not being a political party, under clause (f) of sub-section (1) section 3 of this Act, till such permission is withdrawn by the Central Government;

Reconsideration Requested

The words “political nature” should be defined in the Act itself and not in the Rules.

Reason for Request

Since the words “political nature” are not defined it is open to wide interpretation, which could be very subjective.