It is mandatory for all charitable institutions and trusts such as Shaukat Khanum Memorial Cancer Hospital and Research Centre (SKMCH&RC), Ittefaq Hospital, Edhi Foundation and Ansar Burney Trust to submit their Audited Accounts to the tax department at the time of filing of annual income tax returns.
Experts told Business Recorder here on Friday that the same income tax laws apply on all charitable institutions and trusts as far as submission of audited accounts is concerned. However, there is no law that makes it compulsory for these institutions to disclose information about annual audited accounts on their website for general public as neither the Companies Ordinance 1984 nor Income Tax Ordinance 2001 requires it.
Shaukat Khanum Hospital gives details of its accounts on its website while Ittefaq Hospital does not. Sources said that irrespective of the registration status of non-profit organisations (NPOs) under local/provisional/Federal laws, independent registration under the provisions of Income Tax Ordinance, 2001 is mandatory for all trusts/non-profit organisation "NPO"/welfare societies etc.
As the law prescribed mandatory filing of annual tax return under section 114 for all types of NPOs therefore, under section 181 read with section 2(66) of the Ordinance, Taxpayer's Registration under the Income Tax Ordinance, for all types of NPOs is a must. However, donations/Zakat collected by any charitable institution or trust requires the recipient entity to claim an income tax exemption certificate from the concerned commissioner and approval under section 2(36) of the Income Tax Ordinance is necessary.
There is also no mandatory requirement for trusts/non-profit organisation/ welfare societies, charitable institutions etc to obtain registration with the Securities and Exchange Commission of Pakistan (SECP). Most of the charitable institutions such as Shaukat Khanum Memorial Cancer Hospital, Ittefaq Hospital and Ansar Burney Trust have been registered as trusts/NPO with the provincial/local governments. However, Edhi Foundation has been registered as charitable foundation which is a non-profit organisation. These trusts/organisations have been registered under the Societies Registration Act or Trust Act or Social Security Ordinance 1962, etc, and are not regulated under the Companies Ordinance 1984.
Under the provisions of Income Tax Ordinance, 2001 (Ordinance) all trusts/non-profit organisation "NPO"/welfare societies etc are treated as Companies under section 80 of the Ordinance; the Ordinance specifically requires mandatory filing of annual income tax return u/s 114 read with section 2(36) of the Ordinance, for all types of NPOs. Under section 80 of the Income Tax Ordinance 2001, company" means a trust, a co-operative society or a finance society or any other society.
Sources further elaborated that in light of Rule 34 of the Income Tax Rules, 2002 even for NPO it is one of the mandatory requirements under the law to submit Audited Accounts at the time of filing of annual income tax returns. Sources said the Income Tax Ordinance 2001 considers these charitable institutions as companies. The SECP and the FBR laws are entirely different and have to be seen in their own context and cannot be correlated. The SECP law does not grant charitable institutions and trusts a status of company, however, the Income Tax Ordinance 2001 clearly defines a trust or a society as a company for all purposes under the Income Tax Ordinance 2001.
Sources further stated under the provisions of Income Tax Ordinance, 2001 all trusts/non-profit organisation "NPO"/welfare societies etc shall be treated as companies under section 80 of the Income Tax Ordinance. While Ordinance specifically requires mandatory filing of annual income tax return under section 114 read with section 2(36) of the Income Tax Ordinance, for all types of NPOs.
Sources further said in light of Rule 34 of the Income Tax Rules, 2002 even for NPO it is one of the mandatory requirements under the law to submit Audited Accounts at the time of filing of annual income tax returns. These kinds of trusts usually file their income tax returns to comply with the requirements of law. As these trusts are being treated as companies under the Income Tax Ordinance 2001, they have to comply with all the provisions of the company and they have to submit the audited accounts along with returns to the concerned commissioner of income tax.
The Companies Ordinance 1984 of the SECP has made it mandatory for the public-listed companies to maintain their annual accounts which should be thoroughly checked and verified by the chartered accountants. At the provincial level, it is comparatively easy to maintain documentation under the Societies Registration Act or Trust Act etc. It is easy for the trusts to operate under the provincial laws as compared to strict supervisory and monitoring mechanism under the SECP rules and regulations.
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