Think Tank CPR’s FCRA Suspended, Gets I-T Notice On Tax Exemptions

Centre for Policy Research (CPR), one of the leading public policy think tanks, said last week that it has been “intimated” by India’s Ministry of Home Affairs that its registration under the FCRA had been “suspended for a period of 180 days.”

Weeks before it was informed that its registration under the Foreign Contribution (Regulation) Act (FCRA) had been suspended, the Centre for Policy Research (CPR) received a show cause notice from the Income Tax Department, asking why the registration granting it tax exemptions should not be cancelled.

The CPR had been granted tax exemption status until 2027 under Section 12A of the Income Tax Act. That status has now been questioned by the I-T officials, who collected huge amounts of documents and data during a survey on September 7, 2022 and followed it up by dispatching over a dozen summons to its staff — from its senior researchers to the office peon.

The I-T Department challenged the tax exemptions with a 33-page show cause notice, sent on December 22, 2022 alleging that the CPR was in violation of being involved in activities which were “not in accordance with the objects and the conditions subject to which it was registered”.

The I-T Department included in the show cause notice several observations and allegations not directly related to its operations as an entity.

For instance, there is a list of 19 persons, described as “non-filers” – mostly members of its staff who have either not filed or filed their I-T returns irregularly. The office peon has been included in the list of “non-filers” and the CPR asked to explain how the Rs 2.49 crore given to these individuals collectively (mostly remunerations paid between 2017 and 2021) were payments related to the objectives of the CPR.

The I-T has described the “non-filers” as “persons whose “genuineness is questionable” or not as per the mandate of the CPR.  After scrutinizing accounts, the I-T Department has also questioned activities of the think tank such as bearing the cost of publishing books of its employees.

The show cause notice contains a list of seven authors and observed that while CPR has subsidized the publication of their books, it does not draw any financial benefit from it.

The CPR has been asked to explain how publication of books could be categorized as a “charitable” activity, and told to submit all expenses incurred during the book launches.  The CPR has been challenging the allegations contained in the post-survey summons and notices received.

On the issues raised by the I-T in its show cause notice, Yamini Aiyar, President and Chief Executive of CPR, told The Indian Express, “There is no question of our having undertaken any activity that is beyond our objects of association and compliance mandated by law.”

“Our work and institutional purpose is to advance our Constitutional goals and protect Constitutional guarantees. We are absolutely confident that the matter will be resolved speedily, in fairness and in the spirit of our Constitutional values.”

Some of the ineligible “activities” listed by the I-T Department include:

* Funds to the tune of Rs 10.19 crore (since 2016) from the Namati-Environmental Justice Program. These funds, according to the I-T Department, “are used to file litigation and complaints instead of carrying out any research or educational activity”. The CPR has been asked to provide details of how funds received under the Namati project were used and how they relate to the objectives of the CPR.

* The I-T has show caused CPR for being “involved” in the Hasdeo movement (launched by activists against coal mining in the Hasdeo forests of Chhattisgarh) through the Jan Abhivyakti Samajik Vikas Sanstha (JASVS). The I-T has shown calculations that in the past four years, the JASVS received between 87%-98% of its donations from the CPR and, according to them, this too, “was not in pursuance of its approved objectives”.

* There are a whole bunch of allegations which have been conveyed to the CPR in the show cause notice on how they were in violation of provisions of the FCRA.

The show cause lists alleged “sub-grants” by the CPR and states that financials provided by the CPR show that its FCRA funds have got “mixed up” with its core funds. The observation, “CPR appears to be crediting the commercial receipts and foreign contribution in FCRA designated accounts and thus, there is an intermingling of funds, which is in violation of provisions of FCRA”.

Calculations have been provided to the CPR on how there was wide discrepancy between its annual receipts of funds as per their Income Tax filings and the funds received as per their account books. The “discrepancy” has been, for instance, calculated at Rs 1.43 crore for the year 2017-2018 to Rs 81.45 lakh for the year 2021-2022.

Yamini Aiyar told The Indian Express that replies to specific allegations could not be made by CPR since it would be outside the remit of the process and would undermine its objectivity and confidentiality.

“As an academic institution, whose primary objective is to produce high quality education and training related work, we enjoy tax exemption status accorded to us under Section 12 (A) of the Income Tax Act. Our work, including books written by our faculty, and research related partnerships are in pursuit of these objectives. We are in complete compliance with the law and are routinely scrutinised and audited by government authorities including the Comptroller Auditor General of India and the Ministry of Home Affairs, FCRA division. We have annual statutory audits and all our annual audited balance sheets are in the public domain,” she said. (The Indian Express)

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