Associations/institutions carrying out rural development programmes Guidelines for approval under section 35CCA of the Income-tax Act, 1961 - Income Tax - 244/1978

Associations/institutions carrying out rural development programmes Guidelines for approval under section 35CCA of the Income-tax Act, 1961. Circular No. 244 Dated 13/7/1978 With a view to encouraging companies and co-operative societies to involve themselves in the work of rural development, the Finance (No.2) Act, 1977, had introduced a new section 35CC in the Income-tax Act, under which companies and co-operative societies are entitled to a deduction in the computation of the taxable profits of the expenditure incurred by them on any approved programme of rural development. 2. With a view to giving a further impetus to the programme of rural development, section 35CCA has been inserted in the Income-tax Act, 1961, through the Finance Act, 1978. Section 35CCA provides for the deduction, in the computation of the taxable profits, of expenditure incurred by a taxpayer engaged in a business or profession by way of payment of any sum, to an association or institution having the object of undertaking any programme of rural development, to be used for the purposes of carrying out such programme. The deduction will, however, be admissible only in cases where the association or institution, as also the programme of rural development for which such sums are paid, have been approved by the "prescribed authority" notified by the Central Board of Direct Taxes. 3. [******] 4. The programme of rural development for the purpose of this section has the same meaning as is assigned to it in section 35CC. The expression "programme of rural development" has been defined in the Explanation below sub-section (1) of section 35CC to include any programme for promoting the social and economic welfare of, or the uplift of, the public in any rural area. Areas falling outside local limits of specified municipalities and cantonment boards, which will not be regarded as "Rural Area" have been specified in notification issued by the Central Government on 29th September, 1977 (Annex.I). 5. Keeping in view the objective underlying this incentive and the requirements of the statutory provisions, the prescribed authority would consider according approval under section 35CCA to associations/institutions which satisfy the following requirements: (i) The association/institution should have as its object the undertaking of any programme of rural development. (ii) The association/institution is- (a) constituted as a public charitable trust, or (b) registered under the Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India, or (c) registered under section 25 of the Companies Act, 1956, or (d) a corporation established by or under a Central, State or Provincial Act. (iii) The activities of the association/institution are open to citizens of India without distinction of religion, caste, creed, race, lingual group, etc., and are not expressed to be for the benefit of any particular individual or community. (iv) The association or institution maintains regular accounts of its receipts and expenditure. (v) The instrument under which the association or institution is constituted does not, or the rules governing the association or institution do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the association or institution for any purpose other than a charitable purpose. (vi) The association/institution has the necessary expertise and personnel for the efficient implementation of the programme of rural development. (vii) The association/institution maintains a bank account. 6. Having regard to the objective underlying the tax incentive and the statutory requirements, the prescribed authority has evolved an illustrative list of categories of projects of rural development which would be considered by it for approval for the purposes of section 35CCA of the Income-tax Act, 1961 (Annex. II). It may be pointed out that this list is merely illustrative and not exhaustive and the items mentioned therein may be modified or supplemented in due course in the light of the different types of cases which come up for approval. 7. Some of the more important points which the applicants should keep in view while formulating schemes for rural development for approval under section 35CCA are given in Annex.III. 8. The prescribed authority would consider for approval applications of the associations or institutions and their programme of rural development either separately or simultaneously. Therefore, two separate forms of application have been devised. Form at Annexure IV(A) is to be used for seeking approval of the association/institution and form at Annexure IV(B) for seeking approval of the specific programme of rural development. 9. It would facilitate prompt disposal of applications for approval under section 35CCA if three copies of the application giving information on the points indicated in Annex. IV (A B), duly signed and certified to be correct by a person authorised to sign the return of income of the applicant, are furnished together with three copies of a note setting out details of the programme of rural development for approval by the prescribed authority. 10. Applications for approval under section 35CCA along with relevant enclosures as stated above may be addressed to the Secretary, Central Board of Direct Taxes, Room No. 52, North Block, New Delhi - 110 001. One copy of the application along with the relevant enclosures should also be forwarded to the Chief Secretary of the concerned State or the Officer nominated by him in this behalf. (Sd.) A.C. Mathur, Deputy Secretary to the Government of India.