50% Change in Board of Organisations who applied prior to 27.12.1996

50% Change in Board of Organisations who applied prior to 27.12.1996
As discussed above, that after 27.12.1996, all organisations applying or registration are required to give an undertaking which, among other conditions, specifies that foreign contributions, specifies that foreign contribution should not be accepted if more than 50% of office bearers, as were mentioned in the application for registration are changed or replaced. But the organisations who had applied before 27.12.1996 and were registered, are not bound by any such undertaking. The undertaking is a part of Form FC-8 and nothing in this regard has been mentioned in the FCRA. Therefore, those organisations who are not signatory to such undertaking are legally not bound by the clauses of the undertaking.The undertaking in the earlier form did not have the clause of change in more than 50% of office bearers. In the absence of any specific provision in the FCRA, the undertaking given in Form FC-8, does not create any mandatory obligation on the older organisations. But, the intent of the statute is very clear that it does not appreciate comprehensive changes in the governing structure. Therefore, it is desirable that, even the organisations who applied and were registered prior to the coming into effect of new Form FC-8 should also inform the FCRA authorities regarding the changes in excess of 50% of the office bearers. But, the new organisations are bound under a legal obligation and therefore, should not under any circumstances accept foreign funds without prior permission.
Whether form can provide for a limitation
It has been debated in several case laws whether direction by virtue of a Form can create legally mandatory obligation on the assessee. Many High Courts held that a limitation provided under a Form was beyond the scope of the Act and therefore not tenable. But, recently the Supreme Court in CIT v. Nagpur Hotel Owners Association (2001)247 ITR 201, discussed this issue in context of filing of Form 10, under Income Tax Rules for accumulation under section 11(2) of the IT Act. The Court reversed the order of the High Court holding that condition prescribed in a Form can also be of mandatory and binding in nature, if the purpose and the scheme of the pertaining Act is threatened to be defeated. Some observations of the Court are as under :
“Therefore, even assuming that there is no valid limitation prescribed under the Act and Rules even then, in our opinion, it is reasonable to presume that the intimation required under section 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of this income, the assessing authority cannot entertain the claim of the assessee under section 11 of the Act, therefore, compliance with the requirement of the Act will have to be any time before the assessment proceedings. Further, any claim for giving the benefit of section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment order will have to be reopened. In our opinion, the Act does not contemplate such re-opening of the assessment. In the case in hand it is evident from the records of the case that the respondent did not furnish the required information till after the assessments for the relevant years were completed.”