In the months of November and December of every year, the consultative process for the finance bill for the next fiscal year starts. All the stakeholders, including professional organisations like ours, are granted audience to make our submissions with respect to direct as well as indirect taxes provisions. As an association of professionals, we make representations which are rational and help seamless collection of taxes, both under direct and indirect tax laws. This year too, this process has taken place. However, through this editorial, I would like to underline certain issues which are causing concern to organisations which are carrying out charitable activity. Especially, those organisations which have risen to the occasion during the COVID-19 pandemic and didn’t spare any stone unturned to provide relief to the needy.

The provisions dealing with charitable organisations give an impression that they are based more on mistrust rather than on a bona fides belief that the organisations are carrying out a genuine activity. The maze of rules and the compliance burden on the organisations put pressure on the scarce resources of the charitable organisation. While these are some general observations, the specific issue which I would like to point out is with respect to the Explanation 2 to section 10(2) and Explanation 5 to section 11( 1). These provisions were introduced through Finance Act, 2021. The newly inserted explanation provides that calculation of income to be made only by considering the receipts applied during the year without any set off or deduction or allowance of any excess application, of any of the year preceding the previous year. The earlier position of allowing surplus application towards the charitable objects of the organization in the subsequent years was just and equitable. Many courts had also recognised and upheld the said concept. However, now these amendments deprive the genuine charitable organisations, a logical benefit of funding the charitable activity carried in the earlier years out of the current or future donations . The position taken by the legislature with respect to this is unjustified and sends a message that there is a disincentive if an organisation carries on charitable activity. I personally feel that it is unfortunate that these provisions have been introduced through Finance Act, 2021 when the whole world was struggling with COVID-19 pandemic. To say the least, these provisions are insensitive and appalling. Similarly, the amendments made with respect to corpus donation also suggest that the government is not inclined to encourage any genuine charitable activity. The requirement of seeking fresh registration under section 12 AB of the Income tax Act, 1961 has also created many challenges to the charitable organisations. These certificates, issued pursuant to the fresh applications made in the above mentioned statutory provisions, mention several conditions which are not mandated by the statute. We professional organisations should take up these issues with the Authorities and make appropriate representations. If need be, we should explore the possibility of preferring a public interest litigation against such arbitrary and unreasonable actions.

In this issue of the AIFTP-Journal eminent professionals have contributed their articles. I thank them for sparing their valuable time for the journal. We are publishing the award winning research papers written by students who participated in the Padma Vibhushan N. A. Palkhivala Memorial National Research Paper Competition 2021 to provide encouragement and exposure to them.

K. Gopal,

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