Transcript CIT vs. TAV Trust

FORMATION AND
REGISTRATION OF
CHARTIABLE TRUSTS OR
INSTIUTUTIONS, NGOS, NPOS
CA Dr. N. Suresh, B. Com, F.C.A, PhD.
Basics on Formation
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a.
b.
c.
d.
Brief Introduction
Forms of Constitutions
Trust
Society
Section 8 Company
Branch/ Liaison Office
Governing Principles for selection of
forms
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Size of the institution
Legal requirement
Initial cost
Recurring cost
Compliances required
Corporate structure
Number of persons required to constitute
Trend
Global appearance
Activities
Formation of a Trust
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a.
b.
c.
d.
Historical importance of Trust
Meaning of Trust
Definition of Author of Trust
Governing enactments
Charitable Endowment Act, 1890
Indian Trust Act, 1882
Bombay Public Trust Act, 1950
Charitable and Religious Trust Act, 1920, etc
Elements to constitute a valid trust
a.
b.
c.
d.
e.
f.
Author or Settlor of the Trust
Intention to create a Trust
Trust Property
Trustee
Beneficiaries
Objects of the Trust
Divesting of Property
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Back Ground
Meaning and Concept
Conditions for divesting of property
Types of Trust
a. Oral Trust
b. Trust by Deed of Declaration
c. Trust by will
d. Trust by inter vivos
Creation of Trust
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Meaning
Who can create a trust?
Whether Minor can create a trust?
CIT vs. T.A.V Trust (1987) 166 ITR 848 (Kerala),
Ajit Traders Vs.CIT (1990) 181 ITR 451 (Ker)
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How to create a trust?
Hanmantram Ramnath v. CIT (1946) 14 ITR 716 (Bom)
Court Receiver v. CIT (1964) 54 ITR 189 (Bom)
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Can a Trust be created by book entries?
Contents of the trust deed
a.
b.
c.
d.
e.
f.
g.
h.
Intention of the Author
Trust Property
Objects of the Trust
Beneficiaries
Trustees
Period of the Trust
Winding up of the Trust
Amendment to Trust Deed
Declaration of Trust
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Whether formal deed of trust is required?
All India Spinners Association V.CIT (1944) 12 ITR 482(PC)
Radhasoami Satsang Saomi Bagh v.CIT (1992) 193 ITR 321
(SC)
Classification of Trust
a. Trust by an act of party and Operation of law.
b. Simple and Special Trust
c. Ministerial and discretionary Trust
d. Expressed and implied trust
e. Resulting and constructive trust
f. Public and Private Trust
g. Precatory Trust
h. Charitable or Religious Trust
Public and Private Trust
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a.
b.
c.
Importance
Applicability of Indian Trust Act, 1882
Exemption under Income Tax Act, 1961
Taxation
Formation of a Society
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a.
b.
c.
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Meaning
Governing enactments
Societies Registration Act, 1860
Religious Societies Act, 1880
Respective State Societies Registration Act
Purposes for which society can be formed
Formation of a Society
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a.
b.
c.
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Procedure for registration
Filing of documents for registration
Registration Fees
Certificate of registration
Significance of registration
Executive Board – Constitution
Can a Foreign National become a member of a society?
Are there any restrictions under Foreign Exchange
Management Act, 1999 or Foreign Contribution (Regulation)
Act, 2010 for a foreign national to become a member of a
society?
Formation of Sec 8 Company (Sec 25
of Companies Act, 1956)
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a.
b.
c.
i.
ii.
Meaning
Purpose of constituting Sec 8 Company
Conditions
Procedure of incorporation of Sec 8 Company
Obtain DSC
Obtain DIN
Name Availability
Rule 8 of The Companies (Incorporation) Rules, 2014 contains the
guidelines for determining the proposed name of the Company. A
company cannot be registered with an undesirable name.
General Circular No. 45/2011 dated 8th July, 2011 has made
the rules for selecting the name – Companies (Name Availability)
Rules, 2011, with effect from 24th July, 2011.
Application for license- Rule 19 of The
Companies (Incorporation) Rules, 2014
File application in Form INC-12 along with fees and
a. Draft MOA & AOA
b. Declaration in Form No.INC.14
c. Estimate of the future annual income and expenditure
of the company for next three years, specifying the
sources of the income and the objects of the
expenditure
d. Declaration by each of the persons making the
application in Form No. INC.15
 MOA in Form INC-13
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Registration
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Verification of registered office – Rule 25 of The
Companies (Incorporation) Rules, 2014
Declaration at the time of commencement of
business – Form No. INC 21- Rule 24 of The
Companies (Incorporation) Rules, 2014
Publication of name by company - Rule 26 of The
Companies (Incorporation) Rules, 2014
Effect of registration - Rule 9 of The Companies
(Incorporation) Rules, 2014
Revocation of License
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Delegation to Regional Director (RD) – yet to be
notified by Official Gazette
Circumstances for revocation – Sec 8(6)
Opportunity of hearing
Windup or amalgamate with another Sec 8
Company – Sec 8(7)
Amalgamate to form single company – Sec 8(8)
Differences between S 8 and S 25
Companies
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Scope of Sec 8 has broadened objects over Sec 25
Sec 25 can be formed as private or public company. Sec 8
can also be formed as One Person Company (OPC) or
Association of Persons (AOP)
For any violation of terms of license, the maximum action by
Central Government was revocation of license incase of Sec
25 Company. Whereas Section 8 provides for revocation of
license and also direction for winding up of the company
incase affairs are being conducted fraudulently or are
prejudicial to the public interest in addition to violation of
terms of license.
Section 8 provides for amalgamation of a Section 8
company with another Section 8 company registered with
same objects.
Can a Foreign National be director on
the Board?
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Are there any restrictions under Foreign Exchange
Management Act, 1999 or Foreign Contribution
(Regulation) Act, 2010 for a foreign national to
become a Director on the Board?
Applicability of FCRA, 2010
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Incase of donation in the form of Foreign
Contribution
Incase of share capital from Foreigner in the form
of Foreign Contribution
Branch/ Liaison Office
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a.
b.
c.
d.
Applicability for charitable objects
Governing Enactments
Foreign Exchange Management Act, 1999
Companies Act, 2013
Foreign Contribution Regulation Act, 2010
Income Tax Act, 1961
Registration under FEMA, 1999
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Notification No.22/2000-RB dated May 3, 2000
and Master Circular No. 7/2013-14 dated July 1,
2013 issued by the Reserve Bank of India. The
Master Circular is valid for a year and will stand
withdrawn on July 1, 2014.
Prescribed application under FNC-1
The application FNC should be signed by the
authorized signatory of Foreign Company/Institution.
Documents to be filed
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English version of the Certificate of the Incorporation/ Registration or
Memorandum or Articles of Association of Company /Institution
incorporated outside India.
Latest audited Balance Sheet of the Foreign Company /Institution.
If the Parent Company’s home country laws/regulations do not insist on
auditing of accounts, an Account Statement certified by a Certified Public
Accountant (CPA) or any Registered Accounts Practitioner by any name,
clearly showing the net worth may be submitted
Both the documents have to be attested by Notary Public and by Indian
Embassy in foreign country.
Bankers' Report from the Foreign Company’s banker in the host country /
country of registration showing the number of years the applicant has had
banking relations with that bank.
Details of the activities proposed to be undertaken.
Documents to be filed
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Details of activities carried out in the host country and other countries by the
Foreign Company
Expected level of funding for operations in India
A report/opinion may be sought from the bankers of the Foreign Company
by Government of India/Reserve Bank of India
Authorisation in favour of the consultant, if any.
Letter of Comfort from the Foreign Company may be required. The format
is given in Annexure.
Board Resolution from the Foreign Company for :
Decision to open Liaison/ Branch Office in India
Authorising official of the Foreign Company to sign the required documents
Details about operations of proposed bank account
Three years' Financial Statements of the Foreign Company incase of a
Liaison Office and five years’ in case of a Branch Office.
Issues
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Whether charitable activities can be undertaken by
Branch/ Liaison Office?
Renewal of permission of Liaison Office
Elevation of Liaison Office to Branch Office
Whether Additional activities can be undertaken?
Registration under Companies Act, 2013 and
Companies (Registration of Foreign Companies) Rules,
2014
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Application to be made in Form FC-1 alongwith:
a certified copy of the charter, statutes or memorandum and articles,
of the company or other instrument constituting or defining the
constitution of the company and, if the instrument is not in the English
language, a certified translation thereof in the English language;
the full address of the registered or principal office of the company;
a list of the directors and secretary of the company containing such
particulars as may be prescribed;
the name and address or the names and addresses of one or more
persons resident in India authorised to accept on behalf of the
company service of process and any notices or other documents
required to be served on the company;
the full address of the office of the company in India which is
deemed to be its principal place of business in India;
Registration under Companies Act, 2013 and
Companies (Registration of Foreign Companies) Rules,
2014
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particulars of opening and closing of a place of business in India on
earlier occasion or occasions;
declaration that none of the directors of the company or the
authorised representative in India has ever been convicted or
debarred from formation of companies and management in India or
abroad; and
any other information as may be prescribed.
The application shall also be supported with an attested copy of
approval from the Reserve Bank of India under Foreign Exchange
Management Act or Regulations, and also from other regulators, if
any, approval is required by such foreign company to establish a
place of business in India or a declaration from the authorised
representative of such foreign company that no such approval is
required.
Time Limit for Application
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As required under Section 380 of the Companies
Act 2013, an application to be filed within 30 days
from the date of commencement of liaison office/
branch office in India.
Applicability of FCRA, 2010
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Foreign Contribution (Regulation) Act, 2010 will
apply when the charitable trust or institution
receives foreign contribution from a foreign source.
Registration under Section 12A of
Income Tax Act, 1961
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Governing provisions for registration
Mandatory requirements
Documents to be furnished for making application
Time Limit for application to be made
Furnishing of formal trust deed is necessary?
Effect on non registration
Procedure for registration under Sec
12AA
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Scheme of procedure for registration
Cancellation of registration