BUSINESS/CONSULTANCY
RECEIPTS
OF CHARITABLE ORGANISATION
Should
Business/Consultancy income be considered as a part of
Foreign Contribution
Consultancy
fees received by an NGO is not a grant or a voluntary contribution.
It is received against services rendered, therefore, the
question arises whether it should be considered as foreign
contribution or not. The FCRA does not specifically say
that, ‘foreign contribution’ shall not comprise
transaction of commercial or professional in nature, further
the purpose of FCRA is to restrict foreign receipt to certain
categories of persons and organisation. NGOs belong to
one such conditional category of receivers of foreign funds
i.e. NGOs in order to receive foreign funds have to comply
with the provisions of FCRA. On the other hand, private
individuals are not required to comply with any conditions
to receive foreign contribution except in the nature of
scholarship or stipend exceeding Rs.36,000/- per annum.
NGOs in receipt of foreign funds are subject to regulation
of FCRA. In our opinion, even the business receipts/consultancy
fees of an NGO should be shown as foreign contribution
income in Form FC-3.
Interpreting
the definition of ‘Foreign Contribution’
Further,
section 2(1)(c) defines foreign contribution as follows
:
“ foreign contribution” means the donation, delivery or transfer
made by any foreign source —
| (i) |
of
any article, not being on article given to a person
as a gift for his personal use, if the market value,
in India, of such article, on the date of such gift,
does not exceed one thousand rupees :
|
| (ii) |
of
any currency, whether Indian or foreign; |
| (iii) |
of
any foreign security as defined in clause (i) of
section 2 of the Foreign Exchange Regulation Act,
1973 (46 of 1973)
|
On
analysis of the above definition, we can have the following
possible modes of foreign contribution :
| (i) |
Donation
of any article |
| (ii) |
Donation
of any currency |
| (iii) |
Donation
of any foreign security |
| (iv) |
Delivery
of any article |
| (v) |
Delivery
of any currency |
| (vi) |
Delivery
of any foreign security |
| (vii) |
Transfer
of any article |
| (viii) |
Transfer
of any currency |
| (ix) |
Transfer
of any foreign security |
The
above modes are wide enough to include any conceivable
form of foreign receipt by an NGO. Further, the intent
of FCRA to include all kinds of receipts under ‘foreign
contribution’ is also emphasised in section 8, which
applies to restricted individual like political, journalist,
government servant, etc. This section provides that receipt
such as salary, wages, business, remittances, commission,
gifts can be accepted without the prior permission. The
moot point here is that, even though the aforesaid receipts
are excluded, but, they are considered as ‘foreign
contribution’. Otherwise, the question of exclusion
would not have arose.
No
exceptions provided for NGOs
The
FCRA does not provide any exceptions to the foreign contribution
receipt of NGOs as it does for restricted individuals under
section 8. Under the provision of section 8, the individuals
restricted from receiving foreign contribution (under section
4) are allowed to receive certain kind of foreign contribution,
such as salaries, business receipts etc. The provision
of section 8 are as under :
“ Persons to whom section 4
shall not apply
The provisions of Section 4 of FCRA shall not apply to the acceptance
of any foreign contribution by any person specified therein if
such contribution is accepted by him :
(a) by way of salary, wages or other remuneration due to him
or to any group of persons working under him, from any foreign
sources or by way of payment in the ordinary course of business
transacted in India by such foreign source; or
(b) by way of payment, in the course of international trade or
commerce or in the ordinary course of business transacted by
him outside India; or
(c) as an agent of foreign source in relation to any transaction
made by such foreign source with Govt. or
(d) by way of gift or presentation made to him as a member of
any Indian delegation, provided that such gift or present was
accepted in accordance with the regulation made by the Central
Govt. with regard to the acceptance or retention of such gift
or presentation; or
(e) from his relative when such foreign contribution has been
received either with the previous permission of the Central Govt.
or where it does not exceed Rs.8000 per annum and an intimation
is given by him to the Central Govt. as to the amount received,
its source and the manner and purposes for which same was utillised
by him; or
(f) by way of remittance received in the ordinary course of business,
through any official channel, post office or any authorised dealer
in foreign exchange under FCRA”
There in no provision under FCRA, which allows NGOs to receive
any kind of oreign contribution without having FCRA registration.
Therefore, NGOs cannot be equated with private individuals or
commercial organisations who are entitled to receive foreign
contribution in the normal course of business, trade, employment,
etc.
In
the light of the above discussions, it seems that NGOs
should not accept even consultancy fees or any other business
receipts without having prior permission or FCRA registration.
Further, such receipt should be shown reflected in the
Form FC-3 return as well as foreign contribution Cash book.
Course
Fee/Consultancy Charges from NRI’s and Foreigners
In
India many NGOs provide consultancy and training courses
to foreign clients and students. An NGO without FCRA registration
should be careful about receiving course fee/training charges
from foreign nationals. It may be noted that, even if such
fees are received in Indian rupees in India, they will
be treated as foreign contribution. On the other hand foriegn
currency received from NRI’s may not be considered
as foreign contrbibution. Therefore, it becomes important
for the organisation to properly segregate the domestic
and foreign component and there should be no inter- mingling
of funds.
Overall
Summary
To
sum up the discussions :
(i) Consultancy fees of business income received from foreign
sources should also be treated as foreign contribution for the
purpose of FCRA.
(ii) Under the provision of section 8, the individuals restricted
from receiving foreign contribution (under section 4) are allowed
to receive certain kind of foreign contribution, such as salaries,
business receipts etc
(iii) Course fee/consultancy charges received from foreigner
in Indian rupees is a part of foreign contribution.
(iv) Course fee/consultancy charges received from NRI in foreign
currency is not a part of foreign contribution, if the NRI is
a valid Indian citizen.
