National Committee for Promotion of Social and Economic Welfare

National Committee

Section 35AC of the Income Tax Act, 1961 (‘Act’ for short) provides that where an assessee incurs any expenditure by way of payment of any sum to a public sector company or a local authority or to an association or institution approved by the National Committee (‘Committee’ for short) for carrying out any eligible project or scheme, the assessee shall, subject to the provisions of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year.

“National Committee” means the Committee constituted by the Central Government, from amongst persons of eminence in public life, in accordance with the rules made under this Act.  The Central Government constituted the National Committee vide Notification No. S.O. 654(E), dated 04.03.2014.  The headquarters of the Committee shall be at New Delhi.   Secretariat to the Committee was provided by the Department of Revenue, Ministry of Finance, Government of India and a Joint Secretary to the Government of India, in the Department of Revenue shall act as Secretary to the Committee.

The phrase ‘eligible project of scheme’ is defined as such project or scheme for promoting the social and economic welfare of, or the uplift of, the public as the Central Government may, by notification in the Official Gazette, specify in this behalf on the recommendations of the Committee.

Composition of the Committee

• The Committee shall consist of fourteen members appointed by the Central Government from amongst persons of eminence in public life.
• One of the members of the Committee shall be appointed as Chairman by the Central Government. 
• The members of the Committee shall not be entitled to any remuneration.
• Sitting fee of ₹ 6000] per day for attending a meeting of the Committee or any Subordinate Committee set up by the Chairman of the Committee.

Tenure

The term of office of a member shall be for three years.

Functions of the Committee

The following are the functions of the Committee-

• to approve associations and institutions for the purpose of carrying out any eligible project or scheme; and
• to recommend to the Central Government projects and schemes of any company including a public sector company, a local authority or an approved association or institution, for being notified as eligible projects or schemes for the purposes of section 35AC.

Approval of associations and institutions

• An application, in duplicate,for approval of an association or institution or for recommendation of a project or scheme by the Committee for the purposes of section 35AC may be made to the Secretary to the National Committee for Promotion of Social and Economic Welfare, Department of Revenue, Government of India, North Block, New Delhi - 110 001.
• The application for recommendation of a project or scheme should contain the required particulars and be accompanied with relevant documents.
• All applications under rule 11L should be circulated by the Secretary to the Committee to all the members of the Committee and will be considered by the Committee at its sitting held at least seven days after the date on which the application is circulated. In exceptional cases, the Chairman may curtail the period of notice and may also direct consideration of the application by circulation only.
• The Committee may call for such other information from the applicant as it deems necessary for taking a decision on the application and may also direct its Secretary to make or cause to be made enquiries on any matter relating to the application.
• In according approval to any association or institution, theCommittee shall satisfy itself that-

• the association or institution is-

• constituted as a public charitable trust; or
• registered under the Societies Registration Act, 1860 or under any law corresponding to that Act in force in any part of India; or
• registered under section 25 of the Companies Act, 1956 or under section 8 of the Companies Act, 2013;

• persons managing the affairs of the association or institution are persons of proven integrity;
• he activities of the association or institution are open to citizens of India without any distinction of religion, race, caste, sex, place of birth or any of them and are not expressed to be for the benefit of any individual or community;
• the association or institution maintains regular accounts of its receipts and expenditure; and
• the instrument under which the association or institution is constituted does not or the rules or regulations 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.

• Approval of an association or institution shall be for such period as the Committee may decide, generally not exceeding a period of three years at a time.
• Subsequent approvals, if required, for a further period, can be granted only if the Committee is satisfied about the activities of the association or institution during the preceding period of approval.

Withdrawal of approval

Where an association or institution is approved by the Committee and subsequently the Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted; or such association or institution, to which approval has been granted, has not furnished to the Committee, after the end of each financial year, a report in such form and setting forth such particulars and within such time as may be prescribed, the Committee may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, withdraw the approval.  A copy of the order withdrawing the approval shall be forwarded by the Committee to the Assessing Officer having jurisdiction over the concerned association or institution.

Where any project or scheme has been notified as an eligible project or scheme and subsequently the Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which such project or scheme was notified; or a report in respect of such eligible project or scheme has not been furnished after the end of each financial year, in such form and setting forth such particulars and within such time as may be prescribed, such notification may be withdrawn in the same manner in which it was issued after giving a reasonable opportunity of  being heard.

Immediately on completion of an eligible project/scheme, the company shall furnish details of the execution thereof to the Committee. The Committee shall satisfy itself that the project/scheme has been completed in accordance with the approval granted and that the company has divested itself of the assets in the manner prescribed by the Committee. If the Committee is not so satisfied, it may, after giving an opportunity of being heard on the proposed action, order withdrawal of the approval which shall then be deemed never to have been granted

Deduction of expenditure

A company may, for claiming the deduction under Section 35AC, incur expenditure either by way of payment of any sum on the eligible project or scheme.  The shall not be allowed unless the assessee furnishes along with his return of income a certificate-

• where the payment is to a public sector company or a local authority or an association or institution, from such public sector company or local authority or, as the case may be, association or institution;
•  in any other case, from an accountant, as defined in the Explanation below sub-section (2) of section 288,

in such form, manner and containing such particulars (including particulars relating to the progress in the work relating to the eligible project or scheme during the previous year) as may be prescribed.

No deduction under this section shall be allowed in respect of any assessment year commencing on or after the 1st day of April, 2018

On withdrawal of the approval, the a company has claimed deduction in respect of any expenditure incurred directly on the eligible project or scheme shall be deemed to be the income of such company or authority or association or institution, as the case may be, for the previous year in which such approval or notification is withdrawn and tax shall be charged on such income at the maximum marginal rate in force for that year.