FINANCE ACT 2008 ON BUSINESS ACTIVITIES OF NGOs:
STEPS TO BE TAKEN BY NGOs
All NGOs should verify the object clause as per the Memorandum of Association or the Trust Deed, if there is any clause about carrying on business activities then such clause should be amended.
A separate organisation should be floated for carrying on business activities,
even if such activities are incidental to the purposes of society. Before making any divestment of business activity it would make sense to wait for the explanatory circular to be issued by CBDT which is expected by the end of this year. This circular will provide the list of activities which will not be considered as business activities.
Going by the statute and various case laws, activities such as - rent from properties
- income from conference halls - income from one time activities such as charity shows, etc.- professional service related with expertise incidental to charitable work, etc shall not be considered as business income.
However, absolute legal clarity will come only after the release of the explanatory
The recent amendments seem to be arbitrary and unfair towards genuine NGOs working at the grassroot. The problem in our country is that the same set of law apply for all categories of NGOs, right from a village level organisation to a national level
organisation. This amendment may affect huge organisation like Board for Control
of Cricket in India (BCCI) and at the same time it may also impact a small Gandhian Village NGO which works on the principle of Swaraj and manufactures and sells
It is very important that immediate remedial statutory measures are taken. For instance, the Government may consider exempting, say, incidental business income upto 5 or 10 lakh per year which will save thousands of genuine NGOs from possible
harassment. Further depriving one whole class of NGOs only under an apprehension that there are certain commercial organisations in disguise of NGOs, defies natural justice and the constitutional validity of such amendment needs to be questioned.
Reference Book : Taxation of Trust and NGOs with FCRA by Manoj Fogla, published by TAXMANN Publications.