Wednesday, May 18, 2011

NGOs in India are under the ambit of Right to Information Act

Dear Readers,


To bring transparency in the NGOs, there has been a movement to bring them under the Right to Information Act 2005 for quite some time. It is stressed that the Right to Information Act, 2005 aims to promote transparency and accountability in the working of public authority. Charitable institutions including trust have a laudable objective of serving society. Charity and secrecy do not go together. A charitable institution which receives financial benefits because of Statutory enablement has a greater imperative to be transparent.

With the recent developments and orders from the various High Courts as well as Information Commissioners, it is now settled that NGOs can be termed as Public Authorities under the Right to Information Act, hence should abide by the voluntary disclosure of information as mandated under Section 4 of the Act as well as other provisions to supply information sought by public.

The whole question revolves around the term “Public Authority” and applicability of Section 2(h) of the Right to Information Act, 2005 reproduced below,to the NGOs:-

“(d) by notification issued or order made by the appropriate Government, and includes any—

(i) body owned, controlled or substantially financed;

(ii) non-Government organization substantially financed, directly or indirectly by funds provided by the appropriate Government;”


Therefore, Non-Government organizations substantially financed directly or indirectly by funds provided by the appropriate Government are deemed to be a public authority, even though such bodies by nature and in substance are private organizations.

Kerala High Court in 2009(3) Civil Court Cases 273 (Kerala) has held that the words non-government organizations substantially financed directly or indirectly by funds provided by appropriate Government takes within its sweep all funds provided by appropriate government either from its own bag or funds which reach societies through appropriate Government or with its concurrence or clearance.

Interpreting the word “provided by appropriate government” as contained in Section 2(h) of the Act, the Court held that “provided” means to make ready before hand, to supply; to procure supplies, means or what may be desirable; make provision. It was held that when one proceeds to provide, the intention is not necessarily that it is provided from its own bag exclusively. If you provide something that someone needs or wants or you provide them with it, you give aid to them or make it available to them.

The Court, therefore, held that it is sufficient that the funds reach a society as a result of action taken by the Government thereby making available the necessary finance that may be required by the society for its activities. The essence of the word ‘provide’ is making available what is required to be provided.

Therefore, in light of the above decision of the Kerala High Court, any donation received by way of exemption under Section 80 G(5) will amount to having received the “financial assistance”, in so far as such assistance has been enabled by the Government of India through the statutory provisions of Income Tax Act by granting tax rebate to the donors.

Based on the above decision of Kerala High Court, the State Information Commission, Punjab in a recent case titled Harmanjit Singh Versus M/s Dream & Beauty Charitable Trust, declared the Trust to be a Public Authority because it enjoyed Section 80G exemption as well as it had availed Stamp Duty exemption in purchase of land.

The Commission held that the exemption granted and availed from payment of stamp duty would fall within the meaning of word ‘financed’ by the appropriate Government. Whether such assistance was substantially or not, would depend upon the facts of each case. The antonyms of the word “substantial” is : inconsequential, insignificant, little, trivial or negligible. Once exemption is granted under Section 80 G(5) or under the Stamp Act, it is an ongoing benefit which may be available on a continuous basis to the respondent, till such time, these benefits are withdrawn by the appropriate Government. This surely cannot be called trivial, negligent or insignificant.

It also referred to a case of Allahabad High Court in 2008(4) Civil Court Cases 352 (Allahabad) which held that wherever there is an iota of nexus regarding control and finance of public authority over the activities of the private body or institution or an organization etc., the same would fall within the provisions of Section 2(h) of the Act

This is a path breaking development and brings majority of NGOs in India by virtue of enjoying exemption under section 80 G of Income Tax Act, in to the ambit of Right to Information Act 2005.

I am hopeful that NGOs whose objectives are laudable in the development sector, would gladly and with open minds accept the mandate of transparency and trust that is posed on them both by law and by public faith

1 comment:

Sandy Shaw said...

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Charity in India