DALIT ONLINE

Bi – weekly
Editor: Nagaraja.M.R.. Vol.16.....Issue.18..........01/03/2020

Editorial : Scams , Illegalities in Trusts , CSR Funds

- RTI Appel to Honourable Chief Justice of India

- Ref : JUSTC/R/E/20/00717

Four years ago We have filed PIL before Honourable Supreme Court of
India regarding illegal activities by trusts, charitable organizations and illegal
diversion of CSR funds. Hereby I want information about the status of our
PIL , action taken by SCI.

Trusts , Associations are ideally formed , funded by noble persons to work

for achieving certain noble social objectives like education to deprived , health
care to poor , etc. Ideally these trusts enjoy the faith , confidence of public and
collect donations from them to achieve their stated objectives.

Of late , many NGOs , Trusts are formed by rich cunning people , corporate
bodies solely to divert the black money. They lack accountability to the public ,
donors. Religious , charitable trusts which are formed to propagate religious
preaching indulge in business of establishing hi fi medical , engineering
colleges earning donations to the tune of millions of rupees every year. Most
of the financial transactions of these trusts takes place by cash payments
without proper documentation to by pass legal scrutiny.

Many office bearers / founders of these trusts treat their trusts as their
personal fiefdoms and spend the resources of trust for their personal hi fi
lifestyles. Administrative expenses of these trusts are much more than the
expenses made towards the objectives of these trusts. There are also
possibilities of siphoning off money to illegal activities.

The tax exemptions given to these trusts by government are in essence a

donation made by public exchequer to the very same trust to the tune of tax
amount if enforced. Government also gives land at concessional rates to
these trusts , that subsidy amount is also a donation by public exchequer to
the trust. So , naturally functioning of all religious , charitable , educational ,
political trusts must be brought under the ambit of RTI. A cap on
administrative expenses of trusts must be enforced. Office bearers of
trusts who violate the stated objectives of trusts must be charged for public
cheating & money must be recovered from them. Such trusts should be
superseded and brought under the control of government.

Jai Hind. Vande Mataram.

Your’s

Nagaraja.M.R.

PIL – Scams in Public Trusts

An Appeal to Honourable Supreme Court of India

IN THE SUPREME COURT OF INDIA ORIGINAL JURISDICTION

CRIMINAL WRIT PETITION NO. OF 2016

IN THE MATTER OF

NAGARAJA . M.R

editor , SOS e Clarion of Dalit & SOS e Voice for Justice

# LIG 2 , No 761 ,, HUDCO First Stage , Laxmikantanagar ,
Hebbal , Mysore – 570017 , Karnataka State
.
....Petitioner

Versus

Honourable Chief Secretary , Government of Karnataka & Others

....Respondents

PETITION UNDER ARTICLE 12 to ARTICLE 35 & ARTICLE 51A OF THE

CONSTITUTION OF INDIA FOR ISSUANCE OF A WRIT IN THE NATURE OF
MANDAMUS UNDER ARTICLE 32 & ARTICLE 226 OF THE CONSTITUTION OF
INDIA.

To ,
Hon'ble The Chief Justice of India and His Lordship's Companion Justices of the
Supreme Court of India.
The Humble petition of the Petitioner above named.

MOST RESPECTFULLY SHOWETH :

1. Facts of the case:

Trusts , Associations are ideally formed , funded by noble persons to work

for achieving certain noble social objectives like education to deprived , health
care to poor , etc. Ideally these trusts enjoy the faith , confidence of public and
collect donations from them to achieve their stated objectives.

Of late , many NGOs , Trusts are formed by rich cunning people , corporate
bodies solely to divert the black money. They lack accountability to the public ,
donors. Religious , charitable trusts which are formed to propagate religious
preaching indulge in business of establishing hi fi medical , engineering
colleges earning donations to the tune of millions of rupees every year. Most
of the financial transactions of these trusts takes place by cash payments
without proper documentation to by pass legal scrutiny.

Many office bearers / founders of these trusts treat their trusts as their
personal fiefdoms and spend the resources of trust for their personal hi fi
lifestyles. Administrative expenses of these trusts are much more than the
expenses made towards the objectives of these trusts. There are also
possibilities of siphoning off money to illegal activities.

The tax exemptions given to these trusts by government are in essence a

donation made by public exchequer to the very same trust to the tune of tax
amount if enforced. Government also gives land at concessional rates to
these trusts , that subsidy amount is also a donation by public exchequer to
the trust. So , naturally functioning of all religious , charitable , educational ,
political trusts must be brought under the ambit of RTI. A cap on
administrative expenses of trusts must be enforced. Office bearers of
trusts who violate the stated objectives of trusts must be charged for public
cheating & money must be recovered from them. Such trusts should be
superseded and brought under the control of government.

2. Question(s) of Law:

Why political trusts , religious trusts lack public accountability ? are they above law ?

3. Grounds:
Requests for equitable justice.

4. Averment:

Hereby , I do request the honorable supreme court of India to consider this as a PIL
for : “writ of Mandamus” and to issue instructions to the concerned public servants in
the following cases to perform their duties.

That the present petitioner has not filed any other petition (which are admitted by
courts) in any High Court or the Supreme Court of India on the subject matter of the
present petition.

PRAYER:
In the above premises, it is prayed that this Hon'ble Court may be pleased:

a . Hereby , I do request the honorable supreme court of India to consider this as a

PIL for : “writ of Mandamus” and to issue instructions to the chief secretaries of all
stae governments , the concerned public servants in the present case , to perform
their duties.

b . to pass such other orders and further orders as may be deemed necessary on the
facts and in the circumstances of the case.

c. to order all type of trusts to conduct their financial transactions through banks
only.

d. to order all type of trusts to make their functioning public and to disclose their
activities under RTI.

e. to order trusts not to indulge in activities other than the stated objectives of trust
and not to spend trust money for the puroses other than mentioned in the
objectives.

f. to put a cap on the administarative expenses , office bearers expenses of trusts.

g. to initiate criminal charges against the office bearers of trusts who have misused ,
diverted trust resources and recover such money from them with penal interest.

h. to supersede all the trusts which violate law and to bring thm under the control of
government.

FOR WHICH ACT OF KINDNESS, THE PETITIONER SHALL BE DUTY BOUND,

EVER PRAY.
Dated : 13th July 2016 …………………….FILED BY: NAGARAJA.M.R.

Place : Mysuru , India……………………. PETITIONER-IN-PERSON

Donations Scam In Educational Trusts

- I-T Department Exposes scam worth crores

According to I-T officials, the operations were conducted mainly in Karnataka and
Maharashtra (including Pune and Mumbai) that have clusters of universities and
professional colleges.

Educational trusts that run professional colleges, primarily medical and engineering
colleges, by collecting donations as high as Rs 1 crore have come under the
Income-Tax (I-T) department's scanner. The I-T department has raised Rs 100 crore
in tax demand from some trusts in Mumbai, Pune, Hyderabad and Bengaluru for
irregularities and misusing tax benefits meant for charitable trusts. According to I-T
sleuths, several institutions were surveyed in the last two months, and, in a few
cases, searches were conducted as well. The findings of the survey have been sent
to the Special Investigation Team (SIT) on black money. "The total amount of the
scam is not yet quantified," said an official directly involved with the operation. A
large chunk of unaccounted money, accepted as donations, is used for personal
benefits, and, of course, do not get declared. This results in the generation of black
money," said the official.

According to I-T officials, the operations were conducted mainly in Karnataka and
Maharashtra (including Pune and Mumbai) that have clusters of universities and
professional colleges. The action follows the government's move to curb black
money generation within the country. The finance ministry is of the view that the bulk
of black money is still within India. A senior I-T official said, "Investigations have
revealed that several trust-run educational institutions accept donations for
admissions and deposit them in multiple bank accounts. In some cases, demand
draft/bank challans were purchased in favour of the trust president, and they used
multiple challans to keep the amounts low."

"Nobody can object to charity or donations, but, at the same time, when large sums
get donated, it rings an alarm bell unless the payments are made by account payee
cheques with the donor's name and Permanent Account Number," a former DGIT
told dna. "Some of these institutions are owned by big corporates and industrialists.
In certain instances, it was found that trusts were created to divert funds," said
another official.

Discreet investigations have revealed that there were 3-4 intermediaries, and, quite
often, office-bearers of these colleges accepted donations in cash. Admissions to
under-graduate and post-graduate programmes were the main focal points for such
acceptance of cash donations and done with the knowledge of the president of the
trusts.

"There are at 3-4 intermediaries in the entire process – right from office-bearers to
trustee owners. The main concern is that, in all cases, co-operative banks are being
used to channelise donations. Henceforth, involvement of banks will also be
investigated," said an investigating officer. It has also been observed that many
institutions do not specify the sources of income in their income statement and
balance sheets.

In many cases, permissions were not taken from the appropriate authority for leasing
out property for educational programmes. No plot or land can be leased out for any
other purpose than education and without special permission from the leasing
authority.

"In a few instances, the trustees have shown demand drafts received as donation
from parents but we found that these drafts were from the same bank branch,
indicating that they were breaking up cash into smaller drafts and depositing part of
the donations back to the accounts maintained by the trust," said I-T officials.

According to I-T sleuths, trustees created 'proxy students' who would take
admissions under the government quota, only to be auctioned by the college to the
highest bidder. This practice is rampant in private medical institutions. The income of
a charitable trust is exempt from I-T, according to the provisions of Section 11, 12
and 13 of the I-T Act. However, to avail of this exemption, the activities of such
trust/society should fall within the definition of 'charitable purpose'.

It is often a topic of dispute among tax authorities whether high-end educational

institutions, providing modern and state-of-the-art educational aid, should be allowed
to undertake activities that are charitable or commercial in nature

Government seeks to tighten regulations for charitable trusts

The proposal will have implications for the way trusts claim tax exemptions and
receive anonymous donations

Budget proposals to tighten the regulation of charitable trusts and institutions will
have major implications for the way trusts currently claim tax exemptions and receive
anonymous donations, experts said.

Aiming to prevent the abuse of tax exemptions, finance minister Arun Jaitley’s
budget last week introduced provisions that seek to end the practice of trusts
claiming double tax benefits, or tax exemption even when the income is not being
used for charitable purposes. The budget also sought to make it easier for the tax
department to cancel the registration of such trusts. And in an attempt to check
money laundering, the government changed the tax treatment to discourage
anonymous donations received by charitable institutions and trusts.
In December, the income tax department was hauled up by the Comptroller and
Auditor General (CAG) of India over the alleged misuse of tax exemptions by trusts,
pointing to lapses in the registration process, allowance of exemptions during
assessment, non-monitoring of surplus income accumulations and foreign
contributions received by trusts. The national auditor had also named a number of
trusts who it said were misusing tax exemption provisions.

Rahul Garg, leader, direct taxes at consulting firm PwC, said the budget proposals
are aimed at enhancing the compliance and reporting requirements by these trusts
and plug some of the loopholes in the current laws.

“There was a perception that the charitable institutions are able to indulge in tax
evasion due to the varied interpretation of the existing laws. The amendments clearly
spell out what the law is. It will also help in reducing litigation,” he said.

He added that the changes will also address fears of money laundering raised by the
home ministry because of the way foreign funds were coming into some charitable
institutions. According to the memorandum explaining provisions under the Finance
Bill 2014, a registered trust or institution which avails the benefit of exemptions under
a specific exemption provision in Section 11 of the Income Tax Act meant for
charitable purposes, cannot simultaneously take benefit of the exemption provided
under any other provision of the Act.

Also, provisions have been introduced to ensure that a trust which uses tax-exempt
income for acquisition of assets, cannot claim double benefit by using a notional
depreciation of such assets.

To be sure, Parliament has to pass the Finance Bill 2014 for it to become an Act.

Law firm Khaitan and Co. in a post-budget note, said the changes in regulations
around charitable trusts and institutions are aimed at rationalizing the taxation
regime and eliminating certain loopholes and ambiguities. The note pointed out that
the powers of the commissioner of income tax to cancel the tax exemption certificate
of an institution have also been widened.

A commissioner can cancel the registration certificate if the trust does not use funds
to benefit the general public; or uses them for a particular religious community or
caste; or if the income of the trust is used for the benefit of any trustees.
The government has also moved to amend provisions to discourage anonymous
donations to universities, hospitals and other charitable organisations. At present,
though only that portion of anonymous donation that exceeds 5% of the total
donations is taxed at 30%, the trust or society gets the benefit of reducing its total
income by the entire amount that has been anonymously donated.

However, as per the amendment, only that portion of the anonymous donation that is
taxed is eligible for reduction from the total income.

Dirty Money in Trusts

Money "laundering"

Only a fool holds dirty money in his own name. The world's financial system offers
safer and friendlier ways to hide the proceeds of crime. Shell companies--those with
no real operations--are one, phoney trusts and foundations are another (see "Trusts:
The weak link").

Belatedly, life is getting a bit more difficult for tax evaders, money launderers and
those who abet them. One big move--now backed by the British government--is to
oblige limitedliability companies to give details of their real owners. This newspaper
has argued in favour of such a duty: limited-liability status is a kind of public subsidy
(if the firm goes bust, the shareholders are not responsible for its debts). It was never
meant to be a means of concealing ownership. Yet in many places it is just that: only
six of 69 jurisdictions surveyed last year by Eurodad, an anti-corruption network,
required all types of firm to record beneficial-ownership information.

Spurred by complaints from the police, pressure from campaigners and public
distaste for tax-dodgers, the British government wants not only to set up a proper
registry of beneficial ownership, but also to make its contents public. If the detailed
regime matches the promise, this will be an important breakthrough. But Britain
should also coax its offshore dependencies into greater openness. Some are
conscientious, others less so. Even official investigators can find it hard to get the
information they need. America can do more to help, too: states such as Nevada
apply scandalously little scrutiny to the identity of those forming companies.
European governments are keen to collect more tax, but many have been less eager
to make corporate ownership transparent.

Cleaning up corporate ownership will increase public confidence in the financial

system. But it is only the start. The misuse of trusts and other non-corporate entities
is also a big problem. These have proper purposes, such as managing charitable
donations, ring-fencing employee pension plans, safeguarding assets for children or
organising wills and bequests. But they too enjoy a legal advantage: they are a way
of parking assets. That seems fine as long as the trusts pay tax on profits (just as
companies do) and their beneficiaries pay tax on any disbursement or benefit (just
as shareholders do).

Instead, trust law has become a murky world. In many places there is no rule that
trusts must disclose their existence, let alone pay tax on their earnings. "Orphan
assets", no longer legally owned by the person who put the money into the trust but
not yet belonging to the trust's potential beneficiaries, offer plenty of room for abuse.
Some trusts, revealingly, even have flee clauses, where the trustees are obliged to
try to change the domicile of the trust if the tax police start asking questions. A
structure that was set up to protect the wives of medieval crusaders has ended up
being used by the sort of businesspeople who greet the Russian leader as
"Vladimir".

Swiss knives

Far better to concentrate on two simple rules. First, all trusts and foundations should
be registered, just as companies are, and their beneficiaries, both actual and
potential, should be disclosed. Second, the trustees and the beneficiaries should be
legally responsible for reporting any disbursements or benefits, and for making sure
the tax is paid on them. Both the European Union and America are tiptoeing in this
direction, but Luxembourg, Switzerland and some micro-states are resisting. It would
be much better if they worked together. Trusts are a useful vehicle--but not for dodgy
goods.

How Indian companies are misusing public trusts to launder their CSR spending

The statutory corporate social responsibility (CSR) norms introduced two years ago
were expected to revolutionise funding of social causes, but some sections of India
Inc may now be abusing these for laundering of black money, according to sources
privy to such transactions.

Some companies are using onhire charitable trusts to fabricate CSR spending, at
least two sources who have helped craft and execute such transactions said. They
spoke to ET on the condition of anonymity.

India is the first and only country to have statutorily mandated corporate social
responsibility for certain class of companies but the law allows a lot of leeway. CSR
spends disclosed by companies need not be vetted by statutory auditors unlike other
spending. Moreover, financials of charitable trusts also come under little statutory
scrutiny. This combination of factors has left the new CSR norms wide open for
abuse.

"Such abuse in unlikely in trusts floated by companies themselves. But it is possible

where they use external trusts," says Rusen Kumar, founder director of IndiaCSR, a
portal that collates information and developments on CSR from across the country.

According to one person, the modus operandi is simple. If a company is obligated to

spend, say, Rs 10 crore on CSR, it writes out a cheque in favour of a trust that works
in education, healthcare, environment protection or any of the activities specified by
the government. The trust, after deducting its commission, discreetly returns the
money in cash to the officials or promoters, instantly turning Rs 10 crore of white
money into black. The middleman gets a cut as well.

"Often the promoter pockets the money," says a chartered accountant who has also
helped clients with such deals. Often set up by politicians or rich individuals, these
trusts also serve as laundering mechanism for unaccounted money. For example, a
politician would set up a trust to build an educational institution. CSR funds would
flow into the trust through legitimate banking channels. These funds are returned to
the promoters in cash and the actual expenditure on the institution is met with the
politician's illicit hoard. The expenditure is then inflated helping launder the black
money.

At the end of the year, the trust gives a report to the company which it duly
incorporates in its CSR reporting form called AOC-4. "Though the financials are part
of the directors' report which is audited by external auditors, the AOC-4 itself is not
subject to external audit. It is a lacuna," says Bhaskar Chatterjee, director general
and CEO, Indian Institute of Corporate Affairs (IICA).

ET met a middleman who had just concluded two deals—one for a well-known listed
company and another for a smaller firm. He said he had already done cash-back
deals worth about Rs 40 crore this year.

This is the first year that the CSR norms have come into play. Rules under Section
135 of the Companies Act, 2013, mandate that any company with a net worth of over
Rs 500 crore or annual revenue of Rs 1,000 crore or net profit of Rs 5 crore has to
spend 2 per cent of the average profit of the previous three years on CSR activities.

Public trusts are a favoured route to launder money because they are not adequately
governed or monitored. Though some states such as Maharashtra have their own
law such as the Bombay Public Trusts Act, 1950, trusts are not governed by a
nationwide law. If a state law doesn't exist such as in Delhi, these trusts are
governed by the Indian Trusts Act of 1882 that applies to private trusts. There is no
centralized repository— like the registrar of companies for corporates—of
information on public trusts.
They file annual accounts with the charity commissioner in states where it exists.
Elsewhere, like Delhi, the only annual filing is income tax returns. An income tax
official told ET that unless there is specific information, these are rarely scrutinized.
In short, operations of public trusts remain opaque IICA's Chatterjee, who was
instrumental in drafting the CSR law, says that there is no real system to track these
trusts. "The law should be tightened to ensure that money reaches the people it is
intended to. If there is any leakage it should be plugged."

Finance minister Arun Jaitley recently wrote in a Facebook post that bulk of the black
money is within the country. He is probably right, but it would take tremendous
political will and legislative imagination to choke the black money pipelines.

Who funds India's political parties? Report says most donors anonymous

It is the best known secret of Indian politics. And it comes as no surprise that India's
national, state and regional parties earned Rs.4,662 crore in the last seven years,
mostly in form of donations and contributions, but there is a huge cover of secrecy
and lack of transparency in who gave the money to them, a report released by two
NGOs has claimed.

The report shows that the Congress has earned the most, Rs. 2,008 crore, between
2004 and 2011 and its annual income has gone up steadily. At number two is the
BJP, which in the same period made Rs. 994 crore. Its finances too improved
steadily in the same period.

The report analyses income tax returns of political parties and donation documents
made available to the Election Commission. The NGOs, Association for Democratic
Reforms (ADR) and National Election Watch (NEW), campaign for transparency in
the finances and funding of political parties.

The NGOs say that there is no standardised format for political parties to declare
their incomes. A major source of income for all parties is the sale of "coupons"
instead of receipts. Voluntary contributions and donations are also on top of the list
of sources of income. None of these, the NGOs' report says, are transparent ways to
making and declaring money.

To bring some transparency into political funding, the Representation of People Act
of 1951 says that political parties must declare details of contributions of more
than Rs. 20,000. This report though points out major loopholes, like parties declaring
every single contribution ofRs. 20,000 made by any person at one time. But if
several donations totalling to more than Rs.20,000 are made by one person or
company in one year, then parties interpret it differently. That leaves them the option
of breaking up donations into amounts less than Rs. 20,000.

The BSP (which is third on the list in terms of income) for instance, has shown an
income ofRs. 172 crore in between 2009 and 2011 but not declared a single
contribution of more than Rs.20,000. The CPM, which made almost Rs. 150 crore in
that period, has shown only 1.39 per cent of contributions of more than Rs. 20,000.
For the same period, Congress has shown 11.89 per cent and BJP 22.76 per cent.

The parties with highest "donations" are the Telengana Rashtra Samiti at 99.98 per
cent and Lok Janshakti Party at 89.88 per cent.

The other major source of income for the major parties is also donations from
corporate houses. The report has a list of which corporate house made how much
donation and to which party. Most of them contribute to both the major national
parties, the Congress and the BJP. For instance, the General Electoral Trust made a
donation of Rs. 36.41 crore to Congress and Rs. Rs. 26.07 crore to BJP between
2004 and 2011. Torrent Power similarly gaveRs. 14.15 crore to Congress and Rs. 13
crore to BJP. And a lot of the companies are new ones involved in infrastructure like
power, steel and construction, beating the traditional firms of Tatas and Birlas.

Why are political parties not under RTI ambit: Supreme Court asks Centre, EC

The Supreme Court on Tuesday sought responses from the Centre, the Election
Commission and six political parties, including Congress and BJP, on a plea to
declare all national and regional political parties "public authorities" to bring them
under the ambit of the Right to Information (RTI) Act.

"Issue notice," a bench comprising Chief Justice HL Dattu and justices Arun Kumar
Mishra and Amitava Roy said.

The Association for Democratic Reforms, an NGO, has also sought a direction that
the political parties be asked to declare all donations, including those below Rs
20,000 also.

Lawyer Prashant Bhushan, appearing for the NGO, contended that political parties
were public authorities and hence amenable to the RTI Act.
The Central Information Commission, in its detailed order, had held that political
parties were public authorities and hence should disclose the information under RTI
Act.

"Political parties do not have to pay the income tax on the donations and, moreover,
the donations below Rs 20,000 are not to be disclosed under the law by them," the
lawyer said, adding that these parties also controlled the legislature and the law-
making process.

Earlier, the NGO had approached SC seeking transparency and accountability in

functioning of recognised national and regional political parties.

It had claimed that the political parties received huge sums of money in form of
donations and contributions from corporates, trusts and individuals but do not
disclose complete information about the source of such donations.

In its plea, the NGO had urged the apex court to direct all national and regional
parties to mandatorily disclose details about their income as well as expenditure.

It had also sought declaration of entire details of donations and funding received by
the political parties, irrespective of the amount donated and details of donors making
donations to them and to electoral trusts.

The petition had claimed that political parties enjoyed a stronghold over their elected
MPs and MLAs under Schedule 10 of the Constitution that makes it compulsory for
members of either Houses of Parliament or state legislatures to abide by the
directions of their parties, failing which they stand to be disqualified.

RTI applicable to Trusts, institutions indirectly funded by govt

In a recent judgement, the State Information Commissioner Vijay Kuvalekar has said
that Trusts or institutions that are not directly substantially funded by the
government, but still indirectly receive funds to run schools, courses, colleges, come
under the Right to Information (RTI), Act.

Kuvalekar, in his judgement said that indirectly, since the parent institute is getting
the funds for institutes run by them, the RTI is applicable.
The judgement came in the wake of former member of Shikshan Prasarak Mandali
(SPM), B B Jambhulkar who raised an RTI query with the SPM to get details on
admission having cited corruption.

Jambhulkar said, "The SPM, however, denied to reveal the information as the SPM
Trust was not funded by the government. Besides, I asked the Trust to give me
details of the appointment of over 400 members of the Trust."

The information commissioner, however, said that, "It is clear that the Trust is
receiving funds to run other institutes as seen in the books of accounts. In such a
case, it is liable to reveal any information as sought by the RTI applicant."

Incidentally, the Income Tax department recently cancelled the registration of

SPM as a charitable trust'. Jambhular had asked the query regarding a list of
names of the students who have sought admission at Ramnarian Ruia college
and R A Poddar college of Commerce and Economics, Mumbai.

Edited, printed , published owned by NAGARAJA.M.R. @ # LIG-2 No 761,

HUDCO FIRST STAGE , OPP WATER WORKS , LAXMIKANTANAGAR , HEBBAL
,MYSURU – 570017 KARNATAKA INDIA Cell : 91 8970318202
WhatsApp 91 8970318202

Home page :
http://eclarionofdalit.dalitonline.in ,
https://dalit-online.blogspot.com

Contact : editor@dalitonline.in , editor.dalitonline@gmail.com