Income tax tribunal upholds Rs 199 crore tax demand against Congress
The case originated when the Deputy Commissioner of Income Tax, Central Circle-19, assessed the INC's income at Rs 199 crore, despite the party declaring "Nil" income. This assessment was subsequently upheld by the Commissioner of Income Tax (Appeals).
A key contention was the timing of the INC's tax return. For Assessment Year 2018-19, the due date for filing income tax returns for political parties was initially September 30, 2018, later extended to December 31, 2018. However, the Indian National Congress filed its return on February 2, 2019, which the tax authorities deemed to be beyond the prescribed due date under Section 139(4B) of the Act. Section 13A's second proviso specifically mandates that a political party must furnish its return of income by the due date under Section 139(4B) to avail tax exemption.
The second major point of contention was the receipt of cash donations. The Assessing Officer found that the INC had received Rs 14.49 lakh in cash from various persons, with each donation exceeding Rs 2,000. Section 13A(d) of the Act strictly prohibits political parties from receiving donations exceeding Rs 2,000 in cash, mandating transactions through account payee cheque, bank draft, electronic clearing system, or electoral bond. The tax department argued that the party's own balance sheet recorded these as "donations".
The INC argued that its return, filed on February 2, 2019, was within the extended time limit available under Section 139(4) of the Act, and that a belated return should not lead to the disallowance of exemption under Section 13A. The party also attempted to differentiate between "voluntary contributions" and "donations," stating that the cash receipts were voluntary contributions and not donations, an argument rejected by the tax authorities.
However, the ITAT's order sided with the revenue department, reinforcing the strict compliance required by political parties to claim tax exemptions under Section 13A. The tribunal's decision underlines the importance of adhering to both timely filing requirements and the prescribed modes for receiving donations to qualify for tax exemptions. The appeal of the Indian National Congress was dismissed, confirming the disallowance of the claimed Rs 199.15 crore exemption.
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