I-T Department issues show-cause notice to National Herald Trust, asks it to explain ‘unauthorised' use of funds

NEW DELHI: The Income-Tax Department has issued a show-cause notice to the trust that owns National Herald, asking it to explain use of funds for ‘unauthorized purposes’.

"A notice has been issued to the trust, asking it to explain unauthorised use of funds…It’s a routine notice," said an official with the department. It has not been issued to any individual, the official added. Congress president Sonia Gandhi and vice-president Rahul Gandhi are among the trustees.

The department sends notices to entities claiming exemption from tax to ensure funds have been used for charitable purposes only and not any other activity not eligible under the facility. Non-profit entities, or Section 25 companies, enjoy income-tax exemption but subject to fulfillment of certain conditions. These conconditions include registration of the organisation under Section 12AA of the tax act, application of at least 85per cent of its income towards charitable activity.

Shortfall in the application of 85per cent of the income is permitted to be accumulated or set-apart for 5 years and invested in specified modes for future application for charitable purpose in India.

The provisions were amended in 2009-10 to prevent rampant misuse of the provision by entities operating on commercial lines. A definition for ‘charitable purpose’ was introduced to check the facility’s abuse. The Section 2 (15) of the Income-Tax Act defines "charitable purpose" to include relief for poor, education, medical relief, and the advancement of any other object of general public utility.