Thursday, April 20, 2017
Thursday, September 1, 2011
The statutory provision
Under Section 6 of FCRA, it is clearly provided that any organisation having a definite cultural/ social/ educational/ religious/ economic object shall only accept foreign contribution after satisfying two conditions :
(i) It must registers itself with the Central Government.
The statutory provision
Provisions under section 6(1) and 6(1-A) are as under :
“Certain associations and persons receiving foreign contribution to give intimation to the Central Government : (1) No association [other than an organisation referred to in sub-section (1) of section 5] having a definite cultural, economic, educational, religious or social programme shall accept foreign contribution unless such association—
and every association so registered shall give, within such time and in such manner as may be prescribed, an intimation to 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 it :
Provided that where such association obtains any foreign contribution through any branch other than the branch of the bank through which it has agreed to receive foreign contribution or fails to give such intimation within the prescribed time or in the prescribed manner, or gives any intimation which is false, the Central Government may, by notification in the Official Gazette, direct that such association shall not, after the date of issue of such notification, accept any foreign contribution without the prior permission of the Central Government. (I-A) Every association referred to in sub-section (1) may, if it is not registered with the Central Government under that sub-section, accept any foreign contribution only after obtaining the prior permission of the Central Government and shall also give, within such time and in such manner as may be prescribed, an intimation to the Central Government as to the amount of 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 it.”
As per the provisions of Section 6 no association is entitled to receive foreign contribution unless it has either registered itself or has obtained prior permission.
Organisation must already be registered - Only those organisations are eligible for registration under FCRA, which are registered under Society Registration Act, 1860, the companies Act, 1956, the Bombay Public Trust Act, 1950 or as a public trust under general law. Though FCRA does not distinguish between registered and unregistered organisations, but the implications of section 6(1) virtually ensures that only register organisations would be able to get themselves registered as a legal entity underFCRA. Section 6(1) categorically specifies that organisation having a definite cultural, economic, educational, religious or social programme shall only accept foreign contribution. In the absence of registration and written documentation, it may not be possible for an organisation to prove definiteness of its aims and objectives.
Specification of bank branch - Sub-section (1)(b) of section 6 of FCRA further specifies that the foreign contribution should only be received from one of the branches of a bank as specified in the application. It is necessary to open a bank account designated for receipt of foreign contribution. The account can be opened with Indian funds before applying for registration. It may be noted that, subsequently, this account should exclusively remain for crediting foreign contribution only. Under no circumstance domestic contribution should be mixed in this account. This foreign contribution does not necessarily mean foreign currency or exchange, and therefore an organisation may receive foreign contribution in Indian currency as subsequently receivable or otherwise, within the scope of FCRA
Preventing acceptance of contributions - The proviso to section 6(1) states the circumstances under which the Central Government may prevent the organisation from accepting foreign contribution without prior permission. The circumstances are :
If the organisation commits any of the above-mentioned violations, then the Central Government may by notification, direct such organisation to receive foreign funds only after taking prior permission. It may be noted that the proviso to section 6(1) uses the word “may” thereby implying it to be a discretionary power in the lands of the Central Government which it has to exercise in a just and fair manner, keeping in view the facts and circumstances of each case.
Form for registration - Organisations desirous of registering themselves with the FCRA department are required to apply in Form FC-8 along with various documents.
Checklist of documents to be filed
The following documents must be filed for obtaining registration :
Time limit for making application for registration
No specific time limit has been provided under FCRA for making an application, unlike Income Tax Act, which requires an organisation to apply within one year from its creation or registration under section 12A. Normally FCRA is granted after 3 years of active existence, therefore, the application should be made after three years though nothing in the Act prevents from making such application earlier.
The requirement of submission of 3 years audited statements under Form FC-8, is only directory in nature and there is no reason to make an implicit presumption of a 3years waiting period before applying for registration. Incidentally, Form FC- ‘1A’, which is the application form for seeking, prior permission also requires submission of last 3 years audited statements. Therefore, if this submission of 3 years statements is assumed to be a mandatory pre-condition, then an organisation cannot even apply for prior permission before completion of three years.
Rule does not specify any time limit - Rule 3A of the Foreign Contribution (Regulation) 1976, provides that an application for registration of an association under section 6, shall be made in Form FC-8. Rule 3A, does not provides for any period of restriction only after which the application can be made. It is only the Form FC- ‘1A’ and Form FC-8, which require as a part of enclosures, 3years audited statements and detail of activities. As far as Form FC- ‘1A’ is concerned it is a foregone conclusion that if 3 years audited statements are not available, lesser number of years audited statements could be enclosed. But, somehow a confusion in practice as well as understanding seemed to have crept in that application for registration can only be made after the completion of 3 years.
Supreme court’s view - In this regard, it is pertinent to refer the Supreme Court decision in STO vs. K.I. Abraham  20 STC 367, where is was held that the rule making authority had no power to prescribe any time restriction. Infact, the FCRA rules also do not provide any restrictive time limit. It is only the requirement of Form FC- ‘1A’ as well as Form FC-8, which requires 3 years audited statements and activity reports. Such requirements are directory and general in nature and therefore, should not be construed as a mandatory requirement of the FCRA.
Application can be filed at any time - Consequently, in our opinion, application for registration under FCRA can be filed any time after the registration of the organisation. But, the organisation with a considerable past history of activities have a greater chance of convincing the FCRA authorities with regard to the genuiness and the relevance of their purpose.
The FCRA department may ask the intelligence bureau for a report. Some authorities from the intelligence bureau may visit the office and the project area of the organisation and inspect the books of account and other records available. On the basis of the reports submitted by the intelligence bureau the FCRA department decides whether to accept or reject the application.
The FCRA department issues a registration certificate and provides a permanent registration number. This registration number is required to be quoted in all future correspondences and filling of returns and forms.
There is no time limit mentioned under the FCRA either for granting or rejecting the application. Normally, the application is expected to be processed within a period of six months but it is found that applications for registration are delayed for even two to three years. The FCRA guidelines available on the website of the Ministry of Home Affairs, provide that the certificates from recommending activities (District Collector, etc.) are very important and help in expending the process of registration. In the absence of a prescribed time limit, it is expected that the authority should dispose of the application within a reasonable time. The duration of such reasonable time will depend upon the prevailing facts and circumstances.
Undertaking by the Chief Functionary
The application form which is FC-8, was amended vide Foreign Contribution (Regulation) (Amendment) Rules, 1996[GSR 592(E), dt. 27.12.1996]. After the amendment an undertaking has to be given by the Chief Functionary, affirming that the informations are correct and the organisations would undertake to abide by the following :
Text of the undertaking : The text of the undertaking is a follows :
Nature and implication of the undertaking : It is important that the nature and implication of this undertaking is properly understood by the functionaries of the applicant organisation. The following analysis is made in brief :
As discussed above, that after 27.12.1996, all organisations applying or registration are required to give an undertaking which, among other conditions, specifies that foreign contributions, specifies that foreign contribution should not be accepted if more than 50% of office bearers, as were mentioned in the application for registration are changed or replaced. But the organisations who had applied before 27.12.1996 and were registered, are not bound by any such undertaking. The undertaking is a part of Form FC-8 and nothing in this regard has been mentioned in the FCRA. Therefore, those organisations who are not signatory to such undertaking are legally not bound by the clauses of the undertaking.The undertaking in the earlier form did not have the clause of change in more than 50% of office bearers. In the absence of any specific provision in the FCRA, the undertaking given in Form FC-8, does not create any mandatory obligation on the older organisations. But, the intent of the statute is very clear that it does not appreciate comprehensive changes in the governing structure. Therefore, it is desirable that, even the organisations who applied and were registered prior to the coming into effect of new Form FC-8 should also inform the FCRAauthorities regarding the changes in excess of 50% of the office bearers. But, the new organisations are bound under a legal obligation and therefore, should not under any circumstances accept foreign funds without prior permission.
It has been debated in several case laws whether direction by virtue of a Form can create legally mandatory obligation on the assessee. Many High Courts held that a limitation provided under a Form was beyond the scope of the Act and therefore not tenable. But, recently the Supreme Court in CIT v. Nagpur Hotel Owners Association (2001)247 ITR 201, discussed this issue in context of filing of Form 10, under Income Tax Rules for accumulation under section 11(2) of the IT Act. The Court reversed the order of the High Court holding that condition prescribed in a Form can also be of mandatory and binding in nature, if the purpose and the scheme of the pertaining Act is threatened to be defeated. Some observations of the Court are as under :
“Therefore, even assuming that there is no valid limitation prescribed under the Act and Rules even then, in our opinion, it is reasonable to presume that the intimation required under section 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of this income, the assessing authority cannot entertain the claim of the assessee under section 11 of the Act, therefore, compliance with the requirement of the Act will have to be any time before the assessment proceedings. Further, any claim for giving the benefit of section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment order will have to be reopened. In our opinion, the Act does not contemplate such re-opening of the assessment. In the case in hand it is evident from the records of the case that the respondent did not furnish the required information till after the assessments for the relevant years were completed.”
Whether registration under Income Tax Act necessary
The FCRA does not specify registration under Income Tax Act as a pre-condition for getting registration under the FCRA. There are instances where FCRA registration has been provided without section 12A registration under the Income Tax Act. But, sinceFCRA registration is normally provided after satisfying the existence of activities and genuineness of the objectives, which may take sometime and for Income Tax purposes, the organisation has to apply within one year of its creation. Therefore, it is expected of an NGO to have completed its Income Tax registrations prior to applying for registration under FCRA.
Foreigners on Board at the time of registration
The FCRA does not distinguish between registered and unregistered organisations, but the implications of section 6(1) virtually ensures that only already registered organisations would be able to get themselves registered under FCRA. Section 6(1), categorically specifies that organisations having a definite cultural, economic, educational, religious or social programme shall only accept foreign contribution. In the absence of registration and written documentation, it may not be possible for an organisation to prove definiteness of its aims and objectives. Therefore only those organisations will be eligible for registration under FCRA, which are registered under Societies Registration Act, 1860, the Companies Act, 1956, the Bombay Public Trust Act, 1950 or as a public trust under general law.
In the light of the above discussion, under FCRA, an organisation registered in India, having a definite cultural, economic, educational, religious or social programme is entitled to apply for registration. In India legally valid charitable organisations can be registered as society or trust with foreigners as board members/trustees. Therefore, there is no legal bar on such organisation in making an application to the FCRA. FCRA authorities may exercise greater vigil and caution in processing such application. But as a matter of internal practice FCRA is not granting registration to organisation with foreigners on board. Such registration are given only in exceptional circumstances, very few instances are available.
NGOs bringing out newspapers/newsletters
NGOs engaged in publishing newspaper registered under the Press Registration of Books Act, 1867 are required to furnish details regarding such newspaper and also give a declaration in Form X (enclosed in Annex. 3.1). The Government Of India issued a notification in 1987 allowing NGOs which have publications other than newspaper as defined in section 1(1) of Press and Registration of Books Act, 1867. Further, a certificate is also required to be obtained from the Registrar of Newspapers of India, that the publication of the NGOs does not form in the category of newspaper as per section 1(1) and falls in the category B, which is permissible. The text of the notification is as under :
“S.O.760(E), Dated August 3, 1987 [F.No.II/21022/14(5)/87-FCRA-
In exercise of the powers conferred by Section 31 of the Foreign Contribution(Regulation) Act,1976(49 of 1976), the Central Government hereby exempts from the operation of the provisions of section 4(1)(b) any association(not being a political party), organisation or individual (not being a candidate for election) whoso printed work is -
Certificate of Recommendation
Foreign Contribution Amendment Rules, 2000, inserted clause 10A in Form FC-1A, requiring the insertion of a certificate from a competent authority. This certificate can be given by any one of the following :
Refusal to grant registration
As far as the rejection or refusal of an application for registration is concerned, section 6 does not state anything clearly. Section 6(1) is completely silent about the grounds or the reasons on the basis of which an application can be rejected. In the case of MARPU, Hyderabad v. Union of India, Andhra Pradesh High Court, WP No. 756, dated 1987 it was held that the scope of section 6(1) was confined to registration of an organisation having a definite cultural, economic, educational, religious or social programme. There was no indication in section 6 regarding the grounds on which an application for registration could be declined. However some indications in this regard are available from section 10 which talks about the power of Central Government to prohibit receipt of foreign contribution if it believes that it may effect the sovereignty and integrity of India or the public interest.
Any authority possessing the power to register has an implicit power to reject or refuse to register, as well, but the power of refusal should not be arbitrary, ambiguous and unreasonable and should be in consonance with the purpose and intent of section10 of the Act. If the application of an association is refused, then the authorities have to communicate the reasons for refusal to the applicant. It is necessary that the order of rejection must contain the reason on the basis of which the refusal has been made, so that in case of an appeal the court could study the tenability of such reasons. The principles of “audi alteram partem” are very much applicable during the rejection of an application as basic principle of natural justice.
Powers of Government to prohibit acceptance of contributions
In the light of the powers conferred on the Central Government under section10, it is abundantly clear that any association applying for registration may not automatically get registration. Precaution and discretion can be exercised by the Central Government in order to ensure that the purposes of FCRA are safeguarded. The Central Government may prohibit acceptance of foreign contribution, if it is satisfied that such acceptance is likely to affect the following :
Measures likely to be adopted - In the likelihood of the above mentioned eventualities the Central Government may resort to any of the following measures :
Text if satisfactory provision - The provisions of section10 are as under :
“Power of Central Government to prohibit receipt of foreign contribution, etc. in certain cases. - The Central Government may —
Provided that no such prohibition or requirement shall be made unless the Central Government is satisfied that the acceptance of foreign contribution by such association or person or class of persons, as the case may be, the acceptance of foreign hospitality by such person, is likely to affect prejudicially-
If an application is rejected and the applicant believes that an unjust order was passed against him, then he can appeal to High Court within a period of sixty days from the date of the order of rejection. The period of sixty days should be counted from the date of the order and not the date of receipt of the order.
The statutory provision - The provision for appeal is provided as per section 21(2) & (3) which is an under :
(3) Every appeal preferred under this section shall be deemed to be an appeal from an original decree and the provisions of Order XLI of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908), shall, as far as may be, apply thereto as they apply to an appeal from an original decree.
Appeal against prohibition to receive contribution - It may be noted that by FCR(Amendment) Act, 1985, the scope of section 6 was enlarged and penalty for non-compliance of certain provisions of section 6 was provided vide the proviso to sub-section (1). It would have been proper if section 21(2) had also been suitably amended thus allowing the aggrieved organisation to appeal against an order passed under section 6 of FCRA. However the power to prohibit an organisation from receiving foreign contribution is rejected, therefore, can go for an appeal within 60 days from the date of the order to the High Court within the local limit of whose jurisdiction the appellant organisation’s office is located. The appeal shall be made as per the provisions of Order XLI of the First Schedule to the Code of Civil Procedure, 1908.
To sum up the discussions :
(i) Inform within 30days regarding change of name, address, objects, etc., with evidence.
I, on behalf of the association named hereinafter declare that the printed work/publication of which the association is the owner/editor/printer/publisher and whose details have been furnished hereafter, is not a ‘Newpaper’ as per definition of Section 1(1) of Press and Registration of Books Act, 1867 and/or is not required to be registered under part 6(a) of the said Act (a copy of certificate issued by Registrar of Newspapers for India to the effect that the said printed work falls within the category ‘B’ of publication as per classification made by Rergistrar of Newpaper for India to be attached).
I further undertake to abide by the following conditions in respect of the above printed work/publication :
(1) That it does not and shall not in future contain any political news, views or comments thereon and will be absolutely non-political.
in case of any query contact me at
Friday, September 4, 2009