On March 28, 2020, the Prime Minister of India Narendra Modi announced the creation of a fund called Prime Minister’s Citizen’s Assistance and Relief in Emergency Situations (hereinafter ‘PM CARES’) to fight COVID 19 which has been declared as a pandemic by the WHO. As on May 20, 2020, around INR 9,677.9 Crores were received from various sources into the PM CARES. Putting the Fund into action, the Government allocated INR 3,100 crores to aid the migrant labourers, assist the development of vaccine and purchase of ventilators. In this article, the author attempts to analyze the need for the PM CARES and unravel the grey areas associated with it.
SCHEME OF PM CARES
PM CARES was incorporated as a ‘public trust’ with the stated objective of ‘dealing with any kind of public health emergency or other distress situations, like the one posed by COVID-19 pandemic’, ‘to render financial assistance to those affected by it’ and ‘to undertake any other activity not inconsistent with the above two objectives’. According to the official website of PM CARES:
- The Trust will include the PM as the ex-officio Chairman of the PM CARES; and the Minister of Home Affairs, Minister of Finance and the Minister of Defence will act as its ex-officio trustees. Besides, the PM who will be the Chairperson of the Board of Trustees is empowered to nominate three eminent persons to the Board.
- PM CARES Fund will entirely comprise of voluntary contributions from any person or entity with INR 10 being the least permissible amount of contribution. It shall not have any budgetary outlay for itself.
- Individuals and organizations based abroad are allowed to contribute to PM CARES. To receive foreign donations, the Fund will have a separate account exempt from the application of Foreign Contribution (Regulation) Act, 2010.
- Lastly, the contributions made to the Fund can be apportioned towards the mandatory 2% Corporate Social Responsibility (hereinafter ‘CSR’) expenditure to be incurred by a company in India, as per the Companies Act 2013. Most importantly, contribution to the Fund shall be allowed 100% deduction to calculate taxable income for the year 2019-2020, provided the contribution is made before June 30, 2020. For this purpose, Section 80(G) and Section 10 of the Income Tax Act 1961 was amended by way of an ordinance.
IS A NOVEL FUND NECESSARY TO COMBAT NOVEL CORONAVIRUS?
The PM CARES is slammed on the ground that a similar fund namely the Prime Minister’s National Relief Fund (hereinafter ‘PMNRF’) already exists to achieve the purposes cited for an institution of PM CARES. Just like PM CARES, PMNRF was created in 1948 by way of an appeal by the then PM Pt. Jawaharlal Nehru. It was intended to rehabilitate the persons who came from Pakistan at the time of partition. Lately, it is used to provide assistance to victims of natural disaster, riots, etc. and to defray medical expenses inter alia of acid attack victims and cancer patients. Notably, COVID-19 pandemic has been declared as a natural disaster by the Central Government and hence, PMNRF could be deployed to fund relief measures, rendering the PM CARES redundant.
To justify PM CARES, the Government of India claimed that people wish to contribute solely for the fight against COVID-19; since PMNRF can be used for all kinds of natural disasters, it will be difficult to ensure that the funds therein are used for COVID-19 only. Thus, the creation of a separate fund was necessary. Some experts supported PM CARES on the grounds that PMNRF has acquired the shape of an investment vehicle rather than fulfilling its primary objective of providing relief. Over the years, the contributions received by it have dwindled and currently, it has a meagre INR 3,800 crores in its corpus (only 15% of which is available as liquid funds).
These defences are wobbly: firstly, COVID-19 is not the only distress situation which PM CARES addresses; in fact, it has much wider objectives like the PMNRF. Secondly, insufficiency of funds could be resolved by requesting voluntary contribution in PMNRF with an assurance that they will be channelized to fight COVID-19. Besides, since the PMNRF is solely within the discretion of the PMO, restrictions can be imposed on future investments from it to rejuvenate it as a relief fund. Summarily, it can be said that the PMNRF and PM CARES are metaphorically the Siamese twins.
REASONS WHY WE MUST BE CAREFUL WITH THE PM CARES
PM CARES has been referred to as a ‘black hole’ signifying that it sucks in funds leaving no trace of their utilization. Several other concerns have been raised about its legitimacy and challenges posed by it:
Lack of transparency and accountability
The Government has refused to divulge details of the donors and their corresponding contribution into the PM CARES. This opacity was a feature of the PMNRF too. In Aseem Takyar v. Prime Minister National Relief Fund (2016), the Delhi High Court declared PMNRF as a ‘public authority’ under the Right to Information Act 2005 (hereinafter ‘RTI Act’). However, the Government filed letters patent appeal against it claiming that since PMNRF was created on PM’s personal appeal, without a formal resolution of the Cabinet, it does not fall within the scope of ‘public authority’ and thus, it is not obliged to make public the contributions received into it. The Court’s Division Bench was divided on the issue, thus, no finality was reached. Including these public charitable trusts within the scope of the RTI Act can be the first step in ensuring transparency in the administration of the PM CARES.
Further, the PM CARES will be audited by independent auditors appointed by its Board of Trustees. Activists are demanding an audit by Comptroller and Auditor General (hereinafter ‘CAG’) or his nominee; this is because the CAG exuberates public confidence as the Constitution ensures that CAG is free from political influence. CAG will ensure fair and independent scrutiny of the transactions from the PM CARES. This view was also affirmed by the Gujarat High Court in Bipinchandra J. Divan v. State of Gujarat (2001).
Defeats the purpose of CSR Obligations
Donations in PMNRF by corporations were not counted as CSR expenditure. This was a conscious policy decision to prevent companies from availing double tax exemption under the Income Tax Act, 1961. Further, CSR is imposed on corporations to ensure that they invest a part of their profits for the development of the society as repayment for the resources provided by it. If mandatory CSR obligations are met by contribution to public accounts such as PM CARES, the society will be deprived of the quality, efficiency and innovative value-added by the private sector to any developmental project that it undertakes.
Diversion of Funds from social welfare
All donations to PM CARES get 100% tax exemption as opposed to only 30% tax exemption on funds donated to social welfare organizations such as non-government organizations (hereinafter ‘NGOs’). Resultantly, the funds received by NGOs will shrink as most companies will now donate to PM CARES to claim tax benefits as well as CSR credits. Companies such as Tata, Reliance, Larsen & Toubro etc. were quick to pledge their contribution to PM CARES within hours after its announcement reflecting the desperateness with which these corporations wish to portray themselves as pro-government. Defying all logic, companies such as IndiaBulls and Curefit have laid off their employees, slashed their salaries to raise their contribution to PM CARES.
Potential legal deficiencies
A petition was filed in the Apex Court challenging the constitutionality of PM CARES but it was rejected as ‘misconceived’ in the case titled Manohar Lal Sharma v. Narendra Damodardas Modi (2020). The petition raised an important issue: Article 266(2) of the Constitution states that any money received by or on behalf of the Government (other than Consolidated Fund or Contingency Fund of India) shall be entitled to the Public Account of India. Since the PM CARES is not created under Article 266, any contribution into it is not deposited into the Public Account of India. This argument of the petitioner requires reconsideration.
Additionally, the Fund appears to be devoid of a trust deed. Although PM CARES is deemed to be a ‘trust’ under the Income Tax Act, the exemption under Section 80G cannot be claimed unless the trust is registered under the Indian Trusts Act and requisite details of the registration are furnished to the IT Department. Exemptions granted without following this procedure will be prima facie illegal.
PM CARES appears to be a needless replication of the PMNRF. The Opposition has called for the transfer of all the contributions in the PM CARES to PMNRF, however, both these funds are equally opaque. If true accountability is desired, the Government must address the fears of the civil society about the utilization of the public finances, whether those accumulated in PM CARES or PMNRF. To build public trust in the administration of the PM CARES, at least two members of the Opposition should be included on the Board of Trustees. It should also be clarified whether both ex-officio and nominated trustees will have a vote on the disbursement of the Fund. Lastly, the Government should take steps to prevent greedy contributions by corporations to avail tax exemptions at the cost of their employees’ livelihood.
BY- Rupal Jaiswal | Symbiosis Law School, Pune