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Deal firmly with illegal charity: CBDT to IT dept

Deal firmly with illegal charity: CBDT to IT dept

Taxman should dig out solid proof against "black sheep" entities in the country who claim illegal income tax exemptions from the government in lieu of doing charity, CBDT has told the I-T department.

Asking tax sleuths to crack down on such activities which lead to huge loss of revenue, the apex policy making body of the tax department has asked them to deal with these cases "firmly" as activities of non-profit organisations (NGOs) have grown considerably and their "regulation" is essential in view of huge taxes "foregone".

"Separating black sheep from white sheep is not an easy task especially when the tax evaders pulls wool over the taxman's eyes. However, this is a task with which all tax officers are familiar. Their expertise lies in providing proof of the real colour rather than merely naming the colour which even a layman can do.

"While this needs to be done in any jurisdiction, in the case of charities, the default colour is white and the officers need to be careful in handling them with sensitivity and discretion. Charities are encouraged as matter of public policy which is effected through tax policy and tax administration needs to be in line with the same," the Central Board of Direct Taxes (CBDT) said in its latest strategy paper.

The paper prepared for deliberations and action during the recently concluded national conference of tax officers here, also accessed by PTI, is meant to guide I-T department officials during the current financial year of 2015-16.

The Board has also asked the I-T department to diligently and "delicately" separate wheat from the chaff and ensure that genuine acts of charity and well-being do not suffer the I-T heat.

"Genuine charities and charities abiding by the regulations need to be given full support and assisted so as to minimise their administrative cost of compliance so that they can devote their time and surplus for the noble work they are doing.

"At the same time, cases of serious breach of regulations and pocketing of profits by persons controlling such institutions need to be dealt with firmly," it said.

Giving an example, a senior officer said, "Recently, when the tragic earthquake struck Nepal, CBDT created a single- window mechanism to make faster the process of granting exemptions to NGOs wanting to work there and provide succour to the affected.

"But, this was done keeping in mind that any mismatch in the words and deeds of any NGO cleared under this system will be acted upon seriously and firmly under the law."
CBDT has chronicled the problems faced by the I-T department in this context.

"The ground reality faced by tax officers is that many charities are in substance businesses and the charity is done in form and not in substance. The formidable challenge before the tax officers is to prove the violations particularly violations of the nature where money is diverted into the pockets of interested persons," the paper said.
It said not only such violations lead to loss of exemption granted and the registration for an accused organisation, such "abhorrent" acts are also not considered "favourably" by the courts.

The officer said thousands of NGOs and other entities working in the field of social service, science, religious and political sectors, among others, are currently enjoying I-T exemptions and are given full tax relaxation on their incomes.

He said the latest measures are aimed at encouraging serious-minded charity organisations.

"To facilitate the non-profit sector in realising its potential it is necessary to create a legal and fiscal framework which allows voluntary non-profit organisations to come into existence without restraint and in a manner that is easy and inexpensive and to have direct and indirect access to funds through tax benefits," CBDT said.

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