It is advisable to form a separate Chief Minister’s Fund satisfying the conditions under Sec. 80G(2)(a)(iiihf), have it registered under Sec. 12AA as a matter of abundant caution.
Will the contribution to Sri Lankan Tamils Relief Fund qualify for deduction under Sec. 80G? If it does so, will such relief be at 50 per cent or 100 per cent?
Presumably, the Fund has been formally formed by the State Government and that registration will also be obtained in due course under Sec. 12AA of the Income-tax Act. Even so, Sec. 11(1)(a) requires the exemption to be limited “to the extent to which such income is applied to such purposes in India”.
Since it is meant for application for relief of the Tamils in Sri Lanka, such amount applied may not qualify for deduction and on that score, Commissioner of Income-tax/ Director of Exemptions may not be in a position to give approval under Sec.80G(5)(vi).
Since such approval is a pre-condition for deduction under Sec. 80G, deduction even at 50 per cent may not be possible under the normal provisions.
Sec. 80G(1) read with sub-section (2) provides for 100 per cent deduction for some of the funds listed in Sec. 80G(2) such as Prime Minister’s National Relief Fund, Maharashtra Chief Minister’s Earthquake Relief Fund, Gujarat State Government Relief Fund for Earthquake and Andhra Pradesh Chief Minister’s Cyclone Relief Fund.
Surprisingly exemption for a Chief Minister’s Relief Fund generally covered under Sec. 80G(2)(a)(iiihf) though listed for relief is conspicuous by its absence for 100 per cent relief, notwithstanding the fact, that it is subject to the conditions “that it is the only fund of its kind..... under overall control of Chief Secretary or Department of Finance....”. Since Chief Minister’s Relief Fund is the only Fund of its kind now formed for relief of Sri Lankan Tamils and will presumably be subject to other conditions under Sec. 80G(2)(a)(iiihf), deduction at 50 per cent cannot possibly be denied.
Exclusion of Chief Minister’s Relief Fund satisfying the prescribed conditions for 100 per cent relief is a glaring omission, which is required to be made good.
As otherwise, it leads to discriminatory treatment as it happened in the case of Tsunami contributions in which case, those who contributed to Prime Minister’s Relief Fund for Tsunami Relief got 100 per cent deduction, while those collected by the State Government through Chief Minister’s Relief Fund were found eligible for relief only at 50 per cent under Sec. 80G. If Sec. 80G(1)(i) is not amended to include Sec. 80G(2)(a)(iiihf) or if no separate entry for 100 per cent relief is placed in the statute by amending Sec. 80G(1) and (2), the donors would not be entitled to 100 per cent relief as the law stands and as are available for other trusts and institutions for similar public causes.
It is advisable to form a separate Chief Minister’s Fund satisfying the conditions under Sec. 80G(2)(a)(iiihf), have it registered under Sec. 12AA as a matter of abundant caution and also move the Central Government to make appropriate amendments to law either by an Ordinance now or by an amendment during the next Finance Act or any Amendment Act.
In order that the donors through trusts and institutions may get the benefit, the amendment should be worded in the same language as under Sec. 80G(2)(d) for Gujarat Earthquake Fund, which reads as under:
“(d) Any amount paid by the assessee, during the period beginning January, 26, 2001, and ending September 30, 2001, to any trust, institution or fund to which this section applies for providing relief to the victims of earthquake in Gujarat.”
Meanwhile, a circular from the Central Government pending legislative change should facilitate appeal for donations. Hopefully, the State Government will be able to obtain such amendment or official assurance from the Central Government expeditiously.