congress-denied-tax-relief-on-199-cr-donations

In a setback for the Congress party, the Income Tax Appellate Tribunal (ITAT) has upheld a tax demand against it, ruling that the party must pay income tax on donations amounting to over ₹199 crore received during the 2017-18 financial year.

The tribunal dismissed the party’s appeal challenging the Income Tax Department’s notice, which asked it to pay tax on the donations. Congress had claimed the amount was received as donations and should be exempt under Section 13A of the Income Tax Act.

However, the ITAT observed that the party failed to file its tax returns by the due date. Congress filed its income tax return on February 2, 2019, declaring nil income after claiming an exemption of ₹199.15 crore under Section 13A.

But the return was filed after the extended deadline of December 31, 2018, set under Section 139 for the relevant assessment year.

During scrutiny back in September 2019, the Assessing Officer found that Congress had accepted ₹14.49 lakh in cash donations exceeding ₹2,000 per donor, violating Section 13A(d). The Finance Act 2017 amendment mandates that such donations must be received through banking channels.

While the party reported total receipts of ₹199.15 crore and expenses of ₹197.43 crore, the surplus of ₹1.71 crore did not save it from tax liability. The assessment that was ordered, dated July 6, 2021, denied the exemption entirely, rendering the full amount taxable.

The Commissioner of Income Tax (Appeals) upheld this decision on March 28, 2023. Congress then approached the ITAT but was denied interim relief in 2024. In its latest ruling, the tribunal said exemption provisions must be interpreted strictly.

It ruled that Section 139(4B) requires political parties to file returns within the due date prescribed under Section 139(1), unlike charitable trusts under Section 12A, which enjoy more flexibility. The tribunal also rejected Congress’ argument that late filing under Section 139(4) should be allowed.

Finding a clear breach of Section 13A(d), the tribunal said accepting cash donations above Rs 2,000 violated the mandatory condition for claiming exemption. Congress’ alternative plea to allow expense deductions from gross receipts was also dismissed.

Citing a 2016 Delhi High Court ruling in a similar case involving the party, the tribunal said that violation of the third proviso of Section 13A bars such relief entirely.