Section 35CCA. EXPENDITURE BY WAY OF PAYMENT TO ASSOCIATIONS AND INSTITUTIONS FOR CARRYING OUT RURAL DEVELOPMENT PROGRAMMES.

(1) Where an assessee incurs any expenditure by way of payment of any sum - (a) To an association or institution, which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved by the prescribed authority 560 ; or (b) To an association or institution, which has as its object the training of persons for implementing programmes of rural development; (c) To a rural development fund set up and notified 563 by the Central Government in this behalf; (d) To the National Urban Poverty Eradication Fund set up and notified by the Central Government in this behalf, the assessee shall, subject to the provisions of sub-section (2) be allowed a deduction of the amount of such expenditure incurred during the previous year. (2) The deduction under clause (a) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution referred to in the said clause unless the assessee furnishes a certificate from such association or institution to the effect that - (a) The programme of rural development had been approved by the prescribed authority before the 1st day of March, 1983; and (b) Where such payment is made after the 28th day of February, 1983, such programme involves work by way of construction of any building or other structure (whether for use as a dispensary, school, training or welfare centre, workshop or for any other purpose) or the laying of any road or the construction or boring of a well or tube-well or the installation of any plant or machinery, and such work has commenced before the 1st day of March, 1983. (2A) The deduction under clause (b) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution unless the assessee furnishes a certificate from such association or institution to the effect that - (a) The prescribed authority had approved the association or institution before the 1st day of March, 1983; and (b) The training of persons for implementing any programme of rural development had been started by the association or institution before the 1st day of March, 1983. (2B) No certificate of the nature referred to in sub-section (2) or sub-section (2A) shall be issued by any association or institution unless such association or institution has obtained from the prescribed authority authorisation in writing to issue certificates of such nature. Explanation : For the purposes of this section, "programme of rural development" shall have the meaning assigned to it in the Explanation to sub-section (1) of section 35CC 565a . (3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under section 35C or section 35CC or section 80G or any other provision of this Act for the same or any other assessment year. Section 35CCB. EXPENDITURE BY WAY OF PAYMENT TO ASSOCIATIONS AND INSTITUTIONS FOR CARRYING OUT PROGRAMMES OF CONSERVATION OF NATURAL RESOURCES. (1) Where an assessee incurs any expenditure by way of payment of any sum - (a) To an association or institution, which has as its object the undertaking of any programme of conservation of natural resources or of afforestation, to be used for carrying out any programme of conservation of natural resources or afforestation approved by the prescribed authority; or (b) To such fund for afforestation as may be notified by the Central Government, the assessee shall, subject to the provisions of sub-section (2), be allowed a deduction of the amount of such expenditure incurred during the previous year. (2) The deduction under clause (a) of sub-section (1) shall not be allowed with respect to expenditure by way of payment of any sum to any association or institution, unless such association or institution is for the time being approved in this behalf by the prescribed authority 568 : Provided that the prescribed authority shall not grant such approval for more than three years at a time.

(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year.

SECTION 35CCA1 EXPENDITURE BY WAY OF PAYMENT TO ASSOCIATIONS/INSTITUTIONS FOR CARRYING OUT RURAL DEVELOPMENT PROGRAMMES 303. Guideline for approval of programme of rural development required to be obtained for the purposes of deduction of expenditure by way of payment to associations/institutions for carrying out such programme 1. 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, under which companies and cooperative 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 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. 2[** ** ** **] 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 subsection (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 the notification issued by the Central Government on September 29, 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 : 1. The association/institution should have as its object the undertaking of any programme of rural development. 2. 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. 3. 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. 4. The association or institution maintains regular accounts of its receipts and expenditure. 5. 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. 6. The association/institution has the necessary expertise and personnel for the efficient implementation of the programme of rural development. 7. 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 [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 Annex IV(A) is to be used for seeking approval of the association/institution and form at Annex 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 six 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-110001. 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. Circular : No. 244 [F. No. 203/48/77-IT(A-II)], dated 13-7-1978. ANNEX I - NOTIFICATION ISSUED UNDER CLAUSE (b)(ii) OF EXPLANATION TO SECTION 35CC(1) [Not printed here; see independent entry at Sl. No.302.] ANNEX II - ILLUSTRATIVE LIST OF CATEGORIES OF PROJECTS FOR RURAL DEVELOPMENT TO BE CONSIDERED FOR APPROVAL BY PRESCRIBED AUTHORITY 1. Assistance in the setting up of rural industries in selected areas by the rural weak to provide them self-employment. 2. (a) Establishment, and (b) running of dispensaries, maternity and child welfare centres and family welfare centres. 3. Nutrition programmes for school children. 4. (a) Establishment, and (b) running of educational and vocational training centres. 5. (a) Construction, and (b) maintenance of rural link roads, village streets, pavements and drainage. 6. (a) Construction, and (b) maintenance of drinking water projects such as wells, tubewells, etc., and cleaning of wells and ponds. 7. Rural electrification, i.e., provision of street lighting in villages and electrification of Harijan/tribal homes. 8. Assistance to the weaker sections in constructing houses on sites provided in rural areas by Government, village panchayats, etc. 9. Minor irrigation schemes, including boring of tubewells and installation of pumping sets for the benefits of groups of small/marginal farmers. 10. Supply of improved varieties of seeds and provision of facilities for seed testing to groups of small/marginal farmers and assistance to such farmers for establishing seed farms. 11. Supply of fertilisers and insecticides to groups of small/marginal farmers and giving guidance and training to such farmers in the use of fertilisers, insecticides, etc. 12. Supply of plant protection equipment, sprayers, farm machinery, implements, etc., to the village panchayats for the use of groups of small/marginal farmers. 13. Animal husbandryassisting the farmers in cattle improvement through establishment of veterinary dispensaries, artificial insemination centres, etc., dairy products processing and marketing, 14. Assistance to groups of small/marginal farmers, landless labourers, etc., in poultry farming, horticulture, pisciculture, etc. 15. Establishment of workshops for servicing and repair of farm machinery and training of artisans, mechanics, etc. ANNEX III - IMPORTANT POINTS TO BE KEPT IN VIEW IN FORMULATING PROGRAMME OF RURAL DEVELOPMENT

1. The benefit of the programme of rural development should flow to the public in general (as against individuals) in the rural area and not to the donor/association/institution. 2. The projects or schemes which the applicants may like to execute in the rural areas should be formulated keeping in view the local needs, resources of the community and the plans and programmes of the State Government for that area. 3. Ordinarily the approval of the association/institution and/or the programme to be executed will be for an initial period of one accounting year. In case the programme extends beyond one accounting year, it may, in principle, be approved for the successive two years but a formal approval order will, however, be passed for each year separately if the prescribed authority is satisfied that the programme has been implemented properly. For this purpose, the prescribed authority may monitor the implementation of the programme. In no case approval will be granted for more than three years at a time. 4. The application for approval of the programme of rural development should contain complete details of the programme and indicate the rural area where the programme is to be executed. The application should, in particular provide information in respect of the following : Particulars of the rural area (where programme is to be carried out) indicating the names of the villages, tehsil, district and State and evidence to show that it qualifies as rural area within the meaning of the expression as defined in clause (b) of the Explanation to sub-section (1) of section 35CC. The total period during which the programme is expected to be completed and the total monetary outlay involved. Year-wise break-up of capital as well as revenue expenditure and the sources from which funds will be raised for the programme. If the programme is to be executed in different phases, the monetary outlay of each phase and its coverage. If the whole or part of the programme is to be executed on behalf of the applicant by any agent or contractor appointed by it, the name/address of such agent or contractor may be furnished indicating the nature of work to be executed by them and the remuneration to be paid to them. If the expenditure results in the acquisition or the creation of a capital asset, whether and, if so, at what stage and in what manner the applicant proposes to divest itself of the ownership of such assets? Whether proper arrangements have been made for the continued maintenance of such assets? In regard to programmes which have to be executed on a long-term basis, like establishment of school or dispensary, what arrangements are proposed to be made for ensuring their continued maintenance? In case it is proposed to hand over the said establishments to the Central Government, State Government or any other agency, then a letter from the said Government/agency confirming that it would take over their programme should be furnished along with the application. Where the programme involves co-ordination and/or assistance by the State Government or any other agency, a letter from the State Government or, the agency to this effect should accompany the application. If a programme involves more than one activity, for instance, the programme of health services include running of dispensaries and child nutrition programmes, details of each such activity, mode of its execution and the budgetary provisions should be furnished separately. Where approval is sought for more than one programme, then the application should clearly bring out this fact and also indicate the full particulars of each of the programmes and the rural areas where such programmes are proposed to be implemented. 5. The approval of the prescribed authority for implementing the approved programme of rural development would be governed, inter alia, by the following conditions : The funds will be utilised for the purpose approved by the prescribed authority and that these would not be diverted for any other purpose. The representative of the prescribed authority has the right to visit the places where the approved programme is being carried out. The association/institution should maintain proper accounts of the receipts and payment, income and expenditure and the balance-sheet. These accounts should be audited by a Chartered Accountant. The association/institution shall maintain proper records of all the assets created for the project and that these shall not be transferred or disposed of or mortgaged or utilised for purposes other than those for which these are purchased. The association/institution shall maintain a bank account.

ANNEX IV(A) - PROFORMA OF APPLICATION FOR SEEKING APPROVAL OF THE ASSOCIATION/INSTITUTION 1. Name and address of the applicant 2. Status - public trust/society/company, etc. (enclose a certified copy of the trusts deed/certificate of registration and memorandum of association and any other document giving the object of the association/institution) 3. Residential status (whether resident/non-resident) 4. Name of District/Ward/Circle where assessed to income-tax and Permanent Account Number 5. Whether the applicant has been assessed to tax in the past? if so, copy of the latest assessment order may please be furnished 6. Whether the institution has been notified by the Central Government under section 10(23C)(iv) of the Income-tax Act? (Certified copy to be enclosed) 7. Whether the institution has been granted certificate under section 80G of the Income-tax Act by the Commissioner of Income-tax? (Certified copy to be enclosed) 8. Nature of programmes and activities which have been implemented in the past by the applicant in the rural areas, indicating their locationvillage, block, district (enclose a copy of the annual report/ notes on the work done during the last year) 9. A list of main office bearers of the association/institution (enclose a copy of the statement giving names and addresses of the members of the Managing Committee/Board of Governors, etc.) 10. Yearly recurring expenditure of the organisation on rural development/welfare activities (enclose a copy of the certified statement of accounts including balance-sheet for the last year) ....................................................................... Signature of the person authorised to sign the return of income

Place .............................. Date ...............................

Note : A copy of the application should be sent to the Chief Secretary or the officer authorised on his behalf (dealing with rural development) in the State in which the proposed project is going to be located and this fact should be indicated in the letter forwarding this application. ANNEX IV(B) - PROFORMA OF APPLICATION FOR SEEKING APPROVAL OF PROGRAMME OF RURAL DEVELOPMENT UNDER SECTION 35CCA 1. Name and address of the applicant 2. Whether approved as an association/institution under section 35CCA? If so, quote number and date of the letter of the prescribed authority in this regard. If not, whether a separate application for approval of the association/institution has been made to the prescribed authority ? (Give particulars). 3. Description of the rural area in which programme of rural development is proposed to be executed, indicating name of the village, block, tehsil/taluk, district and its distance from the nearest town/cantonment and whether the location of the programme is in rural areas as defined in the notification of September 28, 1977 (Annex I of the guidelines). 4. Details of the rural development programme proposed to be implemented by the applicant (Please annex a separate note). 5. Details of the facilities/resources available with the applicant, by way of necessary expertise, personnel, equipment, etc. for the efficient implementation of the programme. 6. Whether the applicant is in a position to execute the programme on its own or it would require assistance or coordination with some other private, public or government agency? In the latter case, full particulars of agency and the scope of activities proposed to be assigned to it may be given. 7. The break-up of the expenditure on different items of the programme indicating the total outlay for a specified period.

8. If the applicant has received offers of donations of sums to be used for carrying out any approved programme of rural development, the names and addresses of such donors and the sums proposed to be contributed by them should be indicated. 9. Date on which a copy of the application along with relevant enclosures was forwarded to the Chief Secretary of the concerned State or the officer nominated by him. 10. Any other information to be given by the applicant. .............................................................................. Place ....................... Signature of the person authorised Date ....................... to sign the return of income 304. National fund for rural development notified under clause (c) of sub-section (1) - Scheme for deduction of contributions/donations thereto explained 1. Rural development through tax concessions.The Government of India accords the highest priority to the programmes of rural development for attaining the objectives of increasing agricultural production, creating employment, eradicating poverty and bringing out all-round improvement in the rural economy. The Government has already initiated massive programmes of Integrated Rural Development, National Rural Employment Programme, Rural Landless Employment Guarantee Programme in addition to the other programmes for developing desert and drought prone areas and those initiated by the Ministry of Agriculture for increasing the agricultural production. Since the tackling of the problem of rural poverty needs a national effort, the Government would like to encourage individuals, corporate and non-corporate bodies to participate in this venture. 2. Directly by the companies - With a view to providing an incentive to companies and co-operative societies a provision had already been made under section 35CC that expenditure incurred by them directly on approved programmes of rural development would be deductible in computing taxable profits. So that the tax concession is allowed only in respect of rural development programmes of requisite priority, the Central Government has specified the following classes and categories of programmes of rural development which can be taken up in accordance with the amended provisions of the Act vide Ministry of Finance Notification No. GSR 47(E), dated 28-1-1984 [Annex I] : - Construction and maintenance of rural link roads, village streets, pavements, drainage and sanitary latrines. - Construction and maintenance of drinking water projects including installation of pump-sets, digging of wells, tubewells and laying of pipes for supply of drinking water. - Construction and maintenance of hospitals, dispensaries and family planning centres. - Development of community pastures or community forests on community land, that is to say, land belonging to Government of Gram Panchayat. - Construction of minor irrigation tanks, installation of pump-sets as also digging and commissioning of irrigation tubewells for community use. - Establishment of veterinary dispensaries and artificial insemination centres. - Establishment and running of educational and vocational training centres. 3. Through the national fund for rural development - The National Fund for Rural Development has been set up vide Resolution of the Government of India, Cabinet Secretariat, dated 10-2-1984 [Annex II] and notified by the Central Government under clause (c) of sub-section (1) of section 35CCA by the Ministry of Finance vide their Notification No. GSR 84(E), dated 28-2-1984 [Annex III]. Contributions or donations made by all categories of taxpayers to the National Fund for Rural Development will be deductible in computing the taxable income in accordance with the amendments made through the Finance Act, 1983 to sections 35CCA and 80GGA. The Fund will be managed by a committee under the chairmanship of the Prime Minister with Minister of Finance, Minister of Planning and Minister in-charge of the Ministry of Rural Development as members and Principal Secretary to the Prime Minister as Secretary. 4. All categories of taxpayers interested in joining the national effort of eradicating poverty, increasing agricultural production, creating employment and bringing about improvement in the rural life can make contributions in the name of the National Fund for Rural Development. The contributions can be sent to the Secretary, National Fund for Rural Development, Prime Ministers Office, South Block, New Delhi. The donors to the said Fund could indicate their preference for area or locality and the rural development programme for which the donation is to be used as also the voluntary agency through which the programme may be implemented. The wishes of the donors in this regard will be respected as far as possible.

ANNEX I - NOTIFICATION NO. GSR 47(E), DATED 28-1-1984 ISSUED UNDER SECOND PROVISO TO SECTION 35CC(1) [Not printed here; see independent entry at Sl. No. 301.] ANNEX II - RESOLUTION DATED 10-2-1984 1. The Government accords the highest priority to programmes of rural development for attaining the objectives of increasing agricultural production, creating employment, eradicating poverty and bringing about an all-round improvement in the rural company. This has to be a national effort and Government would like to encourage individuals and corporate and non-corporate bodies to participate in this venture. In order to provide an incentive to companies and co-operative societies a provision had already been made in section 35CC of the Income-tax Act, 1961 that expenditure incurred by them directly on approved programmes of rural development would be deductible in computing taxable profits. By amendments made through the Finance Act, 1983 to sections 35CCA and 8OGGA of the Income-tax Act, 1961 contributions or donations made by all categories of taxpayers to a rural development fund set up and notified by the Central Government will be deductible in computing the taxable income. It has accordingly been decided to set up a National Fund for Rural Development. 2. The Fund will be managed by a committee, composed as follows : 1. Prime Minister .. . Chairman 2. Minister of Finance .. Member . 3. Minister of Planning .. Member . 4. Minister in charge of the Ministry of Rural Development .. Member . 5. Principal Secretary to the Prime Minister .. Secretary . The Committee of Management may co-opt other Union Ministers or other persons, as Members. 3. The Committee may prescribe its own rules for the conduct and regulation of its business and issue guidelines for the administration of the Fund. 4. The Fund shall be notified under clause (c) of sub-section (1) of section 35CCA by the Ministry of Finance. 5. The Fund shall be subject to the audit by the Comptroller and Auditor-General of India. ANNEX III - NOTIFICATION NO. GSR 84(E), DATED 28-2-1984 ISSUED UNDER CLAUSE (c) OF SECTION 35CCA(1) [Not printed here; see independent entry at Sl. No. 305 below.] 305. Rural development fund notified under clause (c) of sub-section (1) for the purposes of deduction of expenditure by way of contribution thereto In exercise of the powers conferred by clause (c) of sub-section (1) of section 35CCA of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the National Fund for Rural Development set up under the Resolution of the Government of India in the Cabinet Secretariat No. 82/1/4/83-Clab., dated February 10, 1984, for the purposes of the said section. Notification : No. GSR 84(E), dated 28-2-1984.