Congress Denied Tax Exemption Of Rs 199.15 Crore, Tribunal Cites Lapses, Donor Rule Violations
The Income Tax Appellate Tribunal rejected the argument that late returns should be treated like charitable trusts, stressing political parties must strictly file within deadline
In a significant legal setback for the Congress, its tax exemption claim for Rs 199.15 crore was denied due to procedural lapses and violation of donation rules.
The Income Tax Appellate Tribunal (ITAT) on Tuesday dismissed the appeal made by the Congress and upheld an income‑tax demand of Rs 199.15 crore. It also rejected the party's argument that late returns should be treated like charitable trusts under Section 12A, stressing that political parties must strictly file within the statutory deadline.
The ITAT found that the Congress violated two critical conditions under Section 13A, which governs tax exemptions for political parties. It noted that the Congress filed its income tax return on February 2, 2019, missing the mandatory extended deadline of December 31, 2018, as specified under Section 139(4B).
The Congress received cash contributions of a total of Rs 14.49 lakh from various donors, with individual donations exceeding the permissible limit of Rs 2,000 under Section 13A provisions. While the party provided donor names and PAN details – mostly from its own elected MLAs and MPs – the tribunal ruled that the cash payment method itself violated the law.
The bench, comprising judicial member Satbeer Singh Godara and accountant member M Balaganesh, stated that Section 13A represents a special exemption that must be applied with strict adherence to all conditions, with any breach rendering the entire exemption invalid.
The tribunal dismissed an attempt by the Congress to distinguish between 'voluntary contributions" and 'donations," noting that the party itself made no such differentiation in its records or Election Commission filings.
Additionally, the ITAT rejected the party's plea that only surplus funds after expenses should be taxed, instead ruling that once Section 13A exemption is denied, all voluntary contributions become taxable income.
Beyond the primary tax demand, the tribunal also upheld additional financial penalties including interest charges under sections 234A, 234B, and 234C totaling over R 35 crore, plus a Rs 10,000 fee under Section 234F for delayed filing.
This brings the total financial liability to approximately Rs 234 crore, representing a substantial burden for the opposition party.
The Congress had previously appealed to the CIT (appeals) but was unsuccessful, with that appeal being dismissed in March 2023.
(With ANI inputs)
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