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CHAPTER XVII

NON-PROFIT ORGANISATIONS

211. Procedure for the approval of a non-profit organisation. – (1) An institution, fund, trust, society or any other organisation established in Pakistan for religious or a charitable and community services purposes requiring approval of the Commissioner under clause (36) of section 2 of the Income Tax Ordinance, 2001, shall make an application to the Commissioner in the following form, namely --

APPLICATION FOR A RULING FOR THE PURPOSES OF SUB-SECTION (36) OF SECTION 2 OF THE INCOME TAX ORDINANCE, 2001

The Commissioner (As per jurisdiction specified)

_________(City)

Dear Sir.

With reference to clause (36) of section 2 of the Income Tax Ordinance, 2001, the undersigned hereby applies, on behalf of __________ (State the name of the institution, fund, trust, society or organization) for its approval for the purpose of the said clause for the tax year ending ________.

Necessary particulars are set out below, in the schedule to this application.

The following documents required under sub-rule (2) of rule are enclosed –

(i) ______________________

(ii) ______________________

(iii) ______________________

(iv) ______________________

(v) ______________________

(vi) ______________________

(vii) ______________________

Yours faithfully,

Signature____________________

Name in block letters____________

Designation __________________

Application must be signed either by the President or the Secretary of the Institution or by a Trustee of the Institution/Trust or any other organization.

SCHEDULE

PARTICULARS

1. Name of the Institution/Fund/Trust/Society/ organization (in block letters)_______________________________________________________

2. Full address of the Institution/Fund/Trust/Society/ organization (in block letters)_______________________________________________________

3. Date of registration of the Institution/Fund/Trust/Society/ organization ___________________________________________________________

4. Its aims and objects.

(a)

(b)

(c)

(d)

5. Whether the Institution/Trust has been registered under the Societies Registration Act, 1860 or the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 or any other law or established in pursuance of a Trust Deed. Please give/state the law and the number and date of registration ____________________________.

6. Whether the Trust Deed/ Constitution /Rules and Regulations/ Memorandum of Association in conforms to the provisions of sub-rule (1) of rule 220..If so, please give the number of Article/ Clause/ Rule for each provision.

7. Whether the Institution Fund/Trust/ Organization ensures for the benefit of the general public or a particular community or class or persons only (give full details).

8. The number of members of the institution on the date of application.

9. Accounting year of the institution/Trust commence on ________and ends on ________.

10. The following books of accounts are being regularly maintained by the institution and are open for inspection without that any hindrance to the general public.

Signature______________________

Name in block letters______________

Designation_____________________

(2) An application under sub-rule (1) shall be accompanied by -

(a) a duly attested copy of the constitution, memorandum and articles of association, rules, regulations or bye-laws, as the case may be, of the institution, fund, trust or society specifying the aims and objects for which it is established.

(b) in case of a trust, the original registered trust deed, together with duly attested copy thereof;

(c) in the case of a society or agency where registration of the institution has been made under the Societies Registration Act, 1860 (XXI of 1860), the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961), or under any other law as applicable, the original registration certificate of the society or agency, together with a duly attested copy thereof;

(d) duly attested copies of the balance-sheet and of revenue accounts of the institution, fund, trust, society or organisation as audited by a chartered accountant for the year immediately preceding the year in which the application is made; where application is made for the renewal, the following requirements may be met.

(e) the names and addresses of the President, Secretary, Treasurer, Manager and other office bearers, Trustees or organisation , as the case may be, of the institution, fund, trust or society, and indicating clearly their family relationships, if any, with each other; and

(f) duly attested copies of the balance sheet and of revenue accounts, as audited by a qualified accountant for the year immediately preceding the year in which application is made. The qualified accountant means:-

a. A retired officer of the government not below grade-18 or Bank Manager, provided its receipts and expenditure pass through the bank accounts for non-profit organisation with annual receipts upto Rs. 0.5 million.

b. A cost and management accountant for those with annual receipts upto 3 million.

c. A chartered accountant for any amount of annual receipts.

(g) a detailed report with regard to the performance of the institution for achieving its aims and objects during the three income years preceding the application duly evaluated, certified and rated by an independent agency approved by an authority designated by the Government of Pakistan for this purpose or till that authority is established, under arrangements made by the Central Board of Revenue.

212. Decision on application.- (1) On receipt of an application under rule 211, the Commissioner may make such inquiries or call for such further information as the Commissioner may deem necessary and after completion of formalities may approve the institution, fund, trust, society or organisation for the purpose of clause (37) of section 2 of the Income Tax Ordinance, 2001.

(2) An approval granted under sub-rule (1) shall be

(a) notified in the official gazette;

(b) subject to such conditions as the Commissioner may specify in the approval; and

(c) valid until the 31^st day of December of the calendar year next following the calendar year in which the approval is granted.

213. Refusal to grant approval.- (1) The approval shall not be granted if the constitution, memorandum or articles of association, rules, regulations or bye-laws, or trust deed, as the case may be, specifying the aim and objects of the institution, fund, trust or society do not provide -

(a) for the audit of the annual accounts of the institution, fund, trust or society every year by a qualified accountant as specified in clause (f) of sub-rule (2) of rule 218 wherever applicable.

(b) where the institution, fund or society is registered under the Societies Registration Act, 1860 (XXI of 1860), the Voluntary Social Welfare (Registration Control) Ordinance, 1961 (XLVI of 1961), or any other law in substitution thereof, for the quorum of a meeting of the members of the body in which the control of the affairs of the institution vest, being not less than four or one-third of the total number of the members of such body, whichever is greater;

(c) where the institution is a Trust as defined in the Trust Act, 1882 (II of 1882), for the quorum of a meeting of the members of the body in which the control of the affairs of the trust vests, being not less than three or one-third of the total number of the members of such a body, whichever is greater;

(d) for the transfer of its assets, in the event of its dissolution, after meeting all liabilities, if any, to another institution, fund, trust, society or organisation which is an approved non-profit organisation, intimation of such transfer to be given to the Commissioner within three months of the dissolution;

(e) for the utilisation of its money, property or income or any part thereof solely for promoting its objects;

(f) for prohibiting any portion of its money, property or income being paid or transferred directly by way of dividend bonus or profit to any of its members or the relative or relatives of a member or members;

(g) for the accounts of the institution being kept in a scheduled bank or in a post office or national savings organisation, National Bank of Pakistan or National Commercialised Banks.

(h) for prohibiting the making of any changes in the constitution, memorandum or articles of association, rules, regulations, or by-laws, or trust deed, as the case may be, without the prior approval of the Commissioner; or

(i) for restricting the money validly set a part or not utilised to 25 per cent of the income including surplus worked out of amount donations made to it. In case, accounting period closes within three months of the commencement of activities, the Commissioner can relax this condition upto 50% of the amount, provided that certificate that the amounts so in excess of the said limit have been invested in Government securities or in the financial institutions including NIT Units or any mutual funds registered with State Bank of Pakistan or Securities Exchange Commission of Pakistan subject to the condition, that such deposit/ investment in or through the financial institution(s) shall not exceed 1/3^rd of the surplus at the end of the year as mentioned.

(2) The Commissioner may refuse to approve the institution, fund, trust, society or organisation if the Commissioner is satisfied that the institution, fund, trust or society -

(a) has been or is being used for personal gain of any particular person or a group of persons;

(b) has been propagating the view of a particular political party;

(d) has not or will not be able to achieve its declared aims and objects in view of its set up, administrative or otherwise as evaluated and certified by an independent rating agency.

(3) The Commissioner shall notify the applicant, in writing, of the Commissioner’s decision to refuse the approval.

(4) The notice referred to in sub-rule (2) shall include a statement of reasons for the refusal.

214. Renewal of approval.- (1) An institution, fund, trust, society or organisation that has been approved as a non-profit organisation may renew the approval by application in the following in the following form, namely:-

APPLICATION FOR RENEWAL OF APPROVAL FOR THE PURPOSES OF CLAUSE (37) OF SECTION 2 OF THE INCOME TAX ORDINANCE, 2001

The Secretary

Central Board of Revenue

Islamabad.

I, the undersigned, hereby apply for the renewal of approval ___________ name of institution/ fund/ trust/ society/ organization) for the year ending 31^st December, 20 ____.

The ____________________ (name of institution/ fund/ trust/ society/ organization) was ruled a non-profit organization by the Commissioner vide Notification No _______________ dated _____________.

It is hereby certified that --

(a) the Constitution/Trust Deed/Rules and Regulations/Memorandum and Articles of Association, previously filed with the Commissioner, have remained unchanged.

(2) An application for renewal of approval under sub-rule (1) shall be furnished within six months after the expiry of the validity of the ruling last issued and such application shall be accompanied by such documents and instruments as are specified in sub-rule (2) of rule 211.

(3) The Commissioner shall grant an application for renewal of approval where the Commissioner is satisfied that the institution, fund, trust or society –

(a) complied with the provisions of clause (h) of sub-rule (1) of rule 213;

(b) did not suffer any one or more of the disqualification specified in sub-rule (2) of rule 213;

(d) otherwise satisfied the requirements for certification as a non-profit organisation in the preceding three years.

(4) The Commissioner shall refuse an application for renewal of a approval for any year if the institution, fund, trust or society did not enjoy approval for the calendar year immediately preceding the year in which the renewal application is made under this rule.

(5) The renewal of approval shall be valid up to the 31st December of the second calendar year following the calendar year in which the approval is granted, provided that subsequent renewals will be for a period extending upto three years depending on the rating agency’s report and audit results.

(6) The renewal of approval of an institution, fund, trust, society or organisation shall be –

(a) notified in the Official Gazette; and

(b) subject to such conditions as the Commissioner may specify in the renewal of approval..

(7) The Commissioner shall notify the applicant, in writing, of the Commissioner’s decision to refuse an application to renew the approval.

(8) The notice referred to in sub-rule (7) shall include a statement of reasons for the refusal.

215. Finalisation of applications.- The Commissioner shall finalise applications under rules 211 and 214 within two months of receipt of the application.

216. Annual accounts.- An institution, fund, trust or society that has been approved under rule 212 or whose approval has been renewed under rule 214 shall, by the 30th of January each year, submit to the Commissioner, in respect of the preceding calendar year:-

(a) a copy of the statement of audited accounts, as mentioned in clause (a) of sub-rule (1) of rule 214;

(b) a statement of income and donations received and moneys paid;

(d) a statement showing the money set apart or kept un-utilised with reasons thereof.

217. Power to withdraw approval.- (1) The Commissioner may, at any time, withdraw an approval granted earlier, if the institution, fund, trust society or organisation fails to comply with the provisions of rule 216 or 219 and is satisfied that

(a) the said institution, fund, trust or society has failed to fully utilise its income and the donations received by it for achieving the purpose for which it was established;

(b) the reason for setting apart, or for not utilising, the money referred to in clause (c) of rule 216 is not valid; or

(2) No approval shall be withdrawn under sub-rule (1) unless the institution, fund, trust, society or organisation has had an opportunity to show cause against the action proposed to be taken.

(3) Where the Commissioner decides to withdraw an approval under sub-rule (1), the Commissioner shall give the institution, fund, trust or society notice, in writing, of the decision including a statement of reasons for the decision.

218. Appeal against a decision made under this rule.- An institution, fund, trust or society dissatisfied with –

(a) a decision to refuse an application made under rule 211 or 214; or

(b) a decision to withdraw an approval,

may lodge an appeal in the following form with the Commissioner (Appeals), namely:-

GROUNDS OF APPEAL

We/I_________ the petitioner(s) named in the above petition do declare that what is stated therein is true to the best of our/my information and belief.

Date………200

Signature_______________________

Name ___________________________ Address _________________________

PARTICULARS

Name of the Institution/ Fund/ Trust/ Society (in block letters).

1. Full address of the Institution/ Fund/ Trust/ Society (in block letters)

2. Date of establishment of the Institution/ Fund/ Trust/ Society.

3. Its aims and objects

(a)

(b)

(c)

(d)

4. Whether the Institution/Fund/Trust/Society has been registered under the Societies Registration Act, 1860, or under the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961, or any other law in substitution thereof or established in pursuance of a Trust Deed. Please give its number and date.

6. Whether the Trust Deed/Constitution/Rules and Regulations/ Memorandum of Association contain the provisions of sub-rule (3) of rule 41. If so, please give the number of Article/ Clause/ Rule for each provision.

7. Whether the Trust Deed/ Constitution/ Fund/ Trust ensures for the benefit of the general public or a particular community or class or persons only (give full details).

8. The number of members of the institution on the date of application.

Signature _______________________

Name __________________________

(Block Letter)

Designation ______________________

219. Institution granted approval before commencement of these rules.- The approval granted prior to the commencement of these rules to an institution, fund, trust or society shall be deemed to have been withdrawn unless an application in the manner laid down in rule 221 is made on behalf of such institution, fund, trust or society for calendar year 2002 within the time specified before June 2003.

220 Relaxation of requirements or conditions.- The Commissioner, as the case may be, may relax or modify any of the requirements or conditions of this rule, in any individual case, if it is satisfied that the requirements or conditions could not be fulfilled by the applicant for reasonable cause.

220B. Approval and appointment of certification agencies. – (1) Whereas rules 211 to 220A, both inclusive, provide for performance evaluation of non-profit organizations with regard to their aims and objectives during the last three years by approved independent certification agencies, the procedure given in the following sub-rules shall apply in respect of approval and appointment of such certification agencies.

(2) The Chairman, Central Board of Revenue, shall, in his discretion, constitute a Committee for approval and appointment of certification agencies, hereinafter referred to as the Committee, comprising of not less than three members. The Chairman, Central Board of Revenue shall also designate a member of the Committee to serve as its Chairman. All nominations to the Committee shall be ex-officio. One third of the membership or two members of the Committee, whichever is larger, shall constitute the quorum for meetings of the Committee.

(3) An application for approval and appointment as a certification agency shall be placed before the Committee.

(4) The Committee shall consider the application on its own merit and decide through a majority vote. The Chairman of the Committee shall caste a vote only in case of a tie.

(5) In its deliberations on the application, the Committee shall consider, inter alia, the following criteria, for approval and appointment of certification agency, namely:-

(a) Demonstrated and established eminence, credibility and stature of the governing body of such organization that brings respect and credibility to the organization and its work;

(b) understanding of the organization, essentially the senior management and program staff, of the parameters of evaluation as approved by the Central Board of Revenue;

(c) human resource, quantity as well as quality, available with the organization to conduct professional, objective and transparent evaluations of non-profit organizations;

(d) financial resources available with the organization for meeting the costs incurred on such evaluations;

(e) organizational understanding and experience of working with the non-profit organizations;

(f) experience of evaluating non-profit organizations or social programs;

(g) systems put in place by the organization to conduct evaluation and award of certification; and

(h) monitoring mechanisms to ensure transparency and objectivity.

(6) The Committee may call for any document, report and statement from the organization concerned to assess the capacity of the organization to undertake professional, objective and transparent evaluation as per the criteria specified in sub-rule (5). The Committee may also interview the managerial and program staff of the organization to assess their level of experience, understanding and professionalism.

(7) In no case, however, the committee shall decide to authorize an organization which --

(a) is not registered in Pakistan under any of the relevant laws;

(b) does not specifically prohibit distribution of profit, if any, to its members or staff;

(c) is controlled in part or wholly by the Federal Government, Provincial Government or a local Government; and

(d) in its other programmes create a conflict of interest in evaluating non-profit organizations.

Explanation: - A grant-making organization would have a conflict of interest if it undertakes evaluation and certification of its grant-recipient or potential-recipient organizations. Similarly, a capacity building organization, evaluating non-profit organizations whose capacity it has built or may build in future, would be in a conflict of interest situation.

(8) An application received by the Committee may be decided upon within a period of three months from the date of the receipt of such application.

(9) An applicant adversely affected by any decision of the Committee may file an appeal before the Member (Direct Taxes), Central Board of Revenue, within thirty days of the service of the decision upon the application.

(10) The approval and appointment of an organization as a certification agency shall be notified in the official Gazette.

(11) An approval and appointment granted under this rule shall be for a period of three years and thereafter the Committee shall re-assess the capacity and evaluate the performance of such organization to function as a certification agency. The Committee shall complete such re-evaluation and its decision within three months, during which the certification agency shall continue to function as a legitimate certification agency.

(12) In case of any change in the status of an approved and appointed certification agency that may adversely affect its functioning as such an agency or in case of any violation of the standards of professionalism, transparency, integrity or objectivity coming to the knowledge of the Committee, the Committee may, after due inquiry and after providing proper opportunity of being heard to the agency, withdraw such approval and appointment at any time.”

220B. Inserted By SRO No. 745(I)/2004 Dated 30th August 2004.

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